Coles, Woolworths profits leave sour taste for struggling consumers, Oxfam Australia says
Shareholders in Coles and Woolworths are licking their lips, but the public is still stretching every dollar further at the checkout.
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Struggling Australians are fed up with the Woolworths and Coles duopoly as the grocery giants continue to bank huge earnings, Oxfam Australia says.
Coles posted an annual $1.1bn profit this week (up 10 per cent), making 2.56 cents for every dollar a customer spends.
Woolworths, which makes 2.5 cents off every dollar spent, announced an initial net profit of $1.7 billion, down 0.6 per cent from the year before.
But the profit reported was slashed to just $108 million because of a $1.5 billion impairment to its New Zealand business.
Woolworths’ overall profit was slashed because of business impairments. Woolworths’ food division makes 2.5 cents on every dollar customers spend, and as a whole the Woolworths Group posted a net profit of $108m because of business difficulties in New Zealand.
Chief executives of both companies faced repeated questions about copping political heat, and lowering prices, as they delivered the financial results this week.
And the scrutiny will surely continue as an ACCC supermarket inquiry interim report is set to be made public in September.
The inquiry is probing pricing the supermarkets set and the relationship between wholesale, farmgate and retail prices.
Coles and Woolworths control 65 per cent of Australia’s grocery markets.
“It’s unacceptable that while everyday Australians are struggling to put food on the table, Woolworths and Coles continue to report staggering profits,” Oxfam Australia chief executive Lyn Morgain said.
“It’s clear the Australian people are fed up with it.
“We need the government to step in and directly address the failures in the system that allow this toxic situation to continue.”
As well as the ACCC inquiry, ordered by federal Treasurer Jim Chalmers, the Queensland government put together its own quickfire inquiry earlier this year, establishing a one-time supermarket pricing select committee.
“As the inquiry unfolded, it became clear that Queensland farmers do not feel empowered or protected to speak out against the dominant retailers and to navigate the complex and imbalanced complaints system that rests under the lacking oversight of the Australian Competition and Consumer Commission,” Labor MP for Bundaberg and committee chair Tom Smith found.
The Queensland probe was more focused on the price farmers and producers were paid than checkout prices.
But it did point to the duopoly’s two-thirds market share as a key factor in how the corporate behemoths set prices at every stage of the supply chain.
In Canberra, a senate committee ran the ruler over the supermarkets in April.
The Oxfam Australia boss argued the huge profits Coles and Woolworths made during the Covid-19 pandemic should be taxed as “crisis profits”.
“While this year Coles and Woolworths did not generate the crisis profits spikes we saw in 2021 and 2022, they still raked in huge profits that many in the community are deeply concerned by with food prices so high,” Ms Morgain said.
Oxfam assessed that in 2021 and 2022, Woolworths made $5.6bn in “crisis profits” at the same time as inflation soared and the pandemic and Ukraine war was at its peak.
Woolworths investors will receive a fully franked final dividend of $1.04 per share for the year, the same as last year. But there was also room in the kitty for a $0.40 fully franked special dividend this year.
Shareholders in Coles get 68 cents per share, up from 66 cents last year.
“This high profit situation has moderated slightly but not fundamentally changed, which is unacceptable, ” Ms Morgain said.
“A tax on the excessive profits of big supermarkets like Woolworths and Coles would not only discourage price gouging but also help boost the budget during tough times and provide much-needed funds to address inequality and ease cost-of-living pressures.”
NewsWire understands the Treasury is not considering a crisis profit tax.
The latest data shows Coles and Woolworths’ supermarket inflation is falling. At Coles, total supermarket inflation has gone from 2.2 per cent to 1.5 in the past six months.
Woolworths reported average prices in food retail in the March quarter and the June quarter were down 0.2 per cent and 0.6 per cent respectively in the past year.
Food and non-alcoholic beverages inflation is at 3.3 per cent in the year, down from 5.9 per cent in May 2022.
Treasury points to the ACCC inquiry and the commissioning of Choice to do quarterly price monitoring reports as its main efforts against the rising cost of food.
“This is all about getting a fair go for families and a fair go for farmers,” a Treasury spokesman said.
“Our efforts will help to ensure our supermarkets are as competitive as they can be so Australians get the best prices possible.”
Both Woolworths and Coles declined to respond directly to Oxfam’s comments.
A Coles spokesman acknowledged NewsWire’s reporting on comments the Coles chief executive made during the week about its own inflationary pressures and pointed to the company’s sustainability report.
Coles donated the equivalent of 39.8 million meals to people in need last financial year, assisting with disaster relief, hospital campaigns and medical research campaigns.
Chief executive Leah Weckert noted the “increased external scrutiny” as she delivered the results on Tuesday.
Ms Weckert was grilled with essentially the same question at least six times: “How will the public stomach a $1.1bn profit when everyone’s grocery shop feels so expensive?”
Coles reduced prices on “hundreds” of essential and popular items and expanded how and when people collected Flybuys points, Ms Weckert said.
If Coles made no profit, grocery prices would come down 3 per cent, she offered. Coles has also saved $80m by beefing up antitheft technology.
Many Australians’ superannuation funds have a stake in the two supermarkets. Coles was unable to say how many people benefited via their super fund stakes. But the people Coles deems “mum-and-dad investors” (less than 5000 shares) own 20.5 per cent of the company.
A Woolworths spokesman said as the largest private sector employer in Australia, the company needed to balance delivering value for customers, “taking care” of staff and “treating suppliers fairly”.
The company’s sprawling supply chain network had been invested in heavily so it stood up during natural disasters and the Covid-19 pandemic, the spokesman said.
Last year, Woolworths gave $143m in direct community contributions, 36 million meals to people in need and $15m to food relief charities.
Speaking on Wednesday morning, chief executive Brad Banducci was asked how he could claim “with a straight face” that supermarkets were not driving inflation when the public sees the company’s $1.7bn profit – the overlying profit before business writedowns in New Zealand.
“Big numbers can be deceiving,” Mr Banducci said, pointing to the superannuation windfalls.
The interim ACCC report was handed to the government on Friday. It will be made public, most likely in mid-to-late September.
Originally published as Coles, Woolworths profits leave sour taste for struggling consumers, Oxfam Australia says
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