Tom Elliott: Woolworths, Coles should shelve high prices

AUSSIE shoppers often pay too much for family basics due to low competition. It’s time the ACCC focused on the big supermarkets’ quest for higher profits, writes Tom Elliott.

’DOWN, down, prices are down” goes the catchy Coles ad. “Shop cheaply here” is the implicit message.

Yet due to low competition in the grocery space, Australian shoppers often pay far too much for family basics.

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It’s time the Australian Competition and Consumer Commission focused on the big supermarkets’ quest for ever-expanding profits.

Over the past two weeks, my family and I holidayed in the United Kingdom and shopped frequently at local British supermarkets. The prices we paid over there shocked us — in a good way. They were so cheap.

Historically, Britain was always an expensive place for Australians to visit. The pound was often hideously strong against the perennially weak Aussie dollar.

UK restaurants employed indifferent waiters who served up tasteless food at sky-high prices. Expensive London property meant that accommodation hurt the hip-pocket. And due to exorbitant British government taxes, petrol sold for a 60 to 70 per cent premium.

Yet something has clearly changed over the past decade. Take a recent shop we did at Tesco, Britain’s largest supermarket chain. Unlike, say, Aldi, Tesco doesn’t market itself as the destination for ultra-low grocery prices. Yet even at one of their convenience stores (more akin to a 7-Eleven than a full-scale supermarket), the average family can shop very cheaply.

Supermarket prices on many items are more expensive in Australia compared to the UK. Picture: Stuart McEvoy

For breakfast, I purchased half-a-dozen eggs, some wholemeal bread, Lurpak butter, Marmite (the far superior Vegemite being unavailable), Rice Bubbles, milk, tea bags and tomatoes. And while the cereal, milk and tea were marginally more expensive than their Australian counterparts, everything else retailed for substantially less.

Take the eggs. Even though there’s an alleged price war between Coles and Woolies for this brekky basic, a packet of six free-range googies at Tesco was just £1.25. This equates to $2.06, far less than the Coles online price here of $4.35.

Bread is also a lot more expensive here. In Britain, an 800g “granary” (aka wholemeal) sliced loaf costs just $2.29. My supermarket here charges 40 per cent more for a similar item.

A 500g tub of Lurpak butter there was just over $4, whereas here a container half the size sells for a whopping $6. And truss tomatoes in Tesco are almost half the price per kilogram here.

Fruit was no better — both the apples (Royal Gala, from New Zealand, no less) and bananas were cheaper in the UK than here. And chocolates such as Mars Bars and Kit Kats retail for about $1 a piece in Tesco, whereas here you pay $2.20 for the same treats. Bad luck if you have a sweet tooth in Australia.

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The average family can shop very cheaply at Tesco in the UK. Picture: AFP

Even a sandwich staple such as sliced ham costs British consumers far less than it does Australians — 125g for $1.65 there, versus the $3.63 sought here.

Clearly this analysis is far from scientific. For a start, it consists solely of grocery items we purchased during a short stay overseas. Also, I’ve only compared Tesco (where we shopped while in the UK) with Coles (which my family uses here). No attempt has been made to consider the offerings of other British supermarkets such as Sainsbury’s, or indeed compare these with Coles’s bitter rival, Woolworths.

But anecdotally, it’s clear that Australia is becoming a more expensive place than Britain for average people to inhabit.

Several times during our visit, potential English migrants to our fair shores complained that they’d love to shift countries, but felt they couldn’t bear the higher cost of living here.

So why are local groceries pricier? Why can I shop more cheaply in a global city such as London than at a suburban Coles?

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Due to low competition in the grocery space, Australian shoppers often pay far too much for family basics. Picture: Toby Zerna

Competition — or lack thereof — is the key. In Britain, four major supermarket chains (Tesco, Sainsbury’s, Asda and Morrison’s) control about 70 per cent of the grocery market. By way of contrast, just two companies — Coles and Woolies — possess the same share locally.

In addition, the UK has many smaller supermarket chains such as Aldi, Lidl, Morrison’s, SPAR and Waitrose nipping at the heels of the “big four” there. In Australia, Aldi performs a similar function, but after it and IGA, the local rivalry falls off dramatically.

Britain’s competition regulator would never permit a grocery duopoly to develop so much power. Unfortunately, the ACCC has been asleep at the wheel for decades when it comes to these behemoths’ market penetration. Local shoppers, farmers and suppliers are all paying the price for the dominance — and resultant profits that Coles and Woolworths together extract.

It’s time we took a leaf from the Poms’ book and encouraged — nay demanded — more competition in the retail sector. Otherwise, the land of warm beer, cool summers and cheap groceries may permanently beckon.

Tom Elliott is 3AW drivetime host, weekdays from 3pm to 6pm

@TomElliott3AW

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