Supermarket CEOs to face second grilling as grocery prices rise 20% in 5 years

Australians are paying 20 per cent more for groceries than they were five years ago, with fresh fruit and vegie suppliers squeezed the most by the major supermarket chains, the competition watchdog said in a new report that described the supermarket sector as an oligopoly.

After a week of intense scrutiny and political criticism, the bosses of Australia’s major grocery outlets, including Coles and Woolworths, will be called to front public hearings for a second time to face questions about profit margins, promotions, and power dynamics with suppliers.

Woolworths chief executive Amanda Bardwell, ACCC deputy chair Mick Keogh and Coles chief executive Leah Weckert. Credit: Dominic Lorrimer, Peter Rae, Louie Douvis

“Pricing policies, who sets the prices, how ranging decisions are made; all those sorts of issues are ones that have been raised by consumers, and we will be teasing out to the extent we can in those hearings,” Australian Competition and Consumer Commission deputy chair Mick Keogh said.

Keogh confirmed the chief executives of Woolworths, Coles, Aldi, and IGA operator Metcash would be issued summons to appear before an ACCC inquiry panel for questioning due to begin in early November.

The ACCC has mandatory information gathering powers that the Senate inquiry, held earlier this year, did not have. More than 60,000 documents and a “huge volume of pricing data” have already been provided to the regulator.

“The difference between our inquiry and the Senate inquiry will be that our questions in relation to the executives will be based on the documents and the data we have available,” Keogh said.

“It’s quite, in some ways, a judicial process that gives us considerable powers and requirements for them to answer questions.”

In the interim report of its inquiry into supermarket prices released on Friday, the ACCC found the price of a basket of groceries has risen by 20 per cent in the past five years.

In a consumer survey that garnered nearly 21,500 responses, more than any other survey it has ever conducted, Australians raised concerns about prices they felt were excessive, and that they were being taken advantage of by supermarkets.

The majority (76 per cent) of respondents in the lowest household income bracket, earning less than $449 a week, said they were spending at least a fifth of their pay on groceries.

The regulator is also examining concerns that supermarket specials and promotions are making it harder to compare prices, “member-only” pricing introduced in the past year that makes some shoppers feel punished for not being part of a loyalty program, and concerns around shrinkflation.

“We are examining whether supermarkets are exercising market power to increase prices more than is necessary to accommodate these cost increases,” the ACCC said in its report. “We are also examining whether supermarkets are otherwise engaging in business practices that cause detriment to consumers.”

People in the lowest-earning income bracket reported feeling limited in their ability to buy in bulk or multipacks to save money because of short-term cash constraints, the report found.

More shoppers are starting their grocery trips at Aldi before moving to Coles or Woolworths for a broader range, stated the report. It has taken Aldi, which entered the market in 2001, two decades to grow its market share from 1 per cent to 8.1 per cent. Woolworths and Coles collectively hold market share of 67 per cent.

“We’re keen on teasing out issues around barriers to further competition. And of course, land banking is an issue that is often raised with us about the extent to which, particularly the two majors, hold significant numbers of sites that they haven’t developed supermarkets on, but that could potentially be sites for competitors. So we want to get to the bottom of that as well,” said Keogh.

The power dynamic between supermarkets and their suppliers will also be examined, with fresh fruit and vegetable suppliers raising the greatest concerns, the ACCC report found.

“Many grocery suppliers to supermarkets have told us they consider that they are being exploited, receiving unsustainably low prices for the goods they supply and having little choice but to agree to highly unfavourable terms. We are considering these claims and are analysing whether supermarkets are contributing to, or taking advantage of, information asymmetries, resulting in suppliers lacking the information they need to make efficient business decisions,” it stated.

“There is an inherent tension between the claims of suppliers that they are receiving unsustainably low prices for their products and claims of consumers that they are paying excessively high prices for their groceries. In exploring these claims, we are taking into account cost increases in the economy broadly and, to the extent possible, distinguishing outcomes for grocery prices that are not explained by those cost increases.”

The ACCC inquiry’s final report is due at the end of February next year.

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