Landmark ACCC supermarket probe calls for shrinkflation warning on all products

Woolworths and Coles could be forced to issue new warnings on all products to alert shoppers to a sneaky supermarket practice.

Supermarkets could be forced to clearly alert shoppers when the size of products such as chips, biscuits or laundry power are reduced in size but the price is either hiked or kept the same.

The call to name and shame the practice, also known as shrinkflation, is one of the 20 recommendations handed down following the consumer watchdog’s probe into supermarkets.

The Australian Consumer Competition Commission final 441-page landmark report into the country’s increasingly expensive and unfair grocery sector will be made public on Friday.

In response to complaints about shrinkflation, the ACCC says “supermarkets should be required to publish notifications when package size changes occur in a manner adverse to consumers”.

At the bare minimum, the alerts should be published “in proximity to the product ticket on shelves” and online, and remain for one to two months to “enable consumers to become aware of the unit price change”, it said.

The ACCC has recommended supermarkets be forced to clearly indicate when grocery items have been reduced in size but stay the same price or dearer. Picture: NewsWire

The ACCC said the requirement could be modelled off laws already in place in France, with the country calling for the rules to be expanded across countries in the European Union.

ACCC deputy chair Mick Keogh said the easy to read measures would help shoppers make more informed decisions.

“By giving consumers this transparency over what are effectively price increases, consumers would be better able to ‘vote with their feet’ and switch to cheaper alternatives if that is their preference,” he said.

It’s understood the government is now looking to implement the recommendations, however will need to assess the details and implementation of the strategy.

Simpler and more uniform unit pricing codes, which help customers easily compare the cost of a product with similar products were also needed, with a 21,481-person survey finding that 80 per cent found the information usually or sometimes effective.

The ACCC said there were concerns related to the readability, prominence and differences in how different retailers relayed the pricing.

The ACCC has made 20 recommendations to improve competition in the supermarket sector Picture: NewsWire

Coles and Woolworths have been accused of price gouging and pushing competitors out of the market. Picture: NewsWire/ Gaye Gerard

Inconsistent measurements were also an issue, especially for loose fruit and veggies.

A CHOICE submission found instances of Coles using a price per 100 grams and a price per item measurement for a pack of tea bags, leading to frustration and confusion for shoppers.

While the ACCC acknowledged the Albanese government was taking its own review into the Unit Pricing Code, it urged the government either to allow the watchdog to do its own audit or bring forward its probe.

“We consider the use of inconsistent units of measure makes it more difficult for consumers to compare competing products and brands in-store,” the report said.

“We therefore consider there is room to mandate more consistency with units of measure, similar to the approach taken by the UK and Quebec.”

The ACCC also targeted Coles’ Flybuys and Woolworths’ Everyday Rewards loyalty program to be more transparent around their benefits and reward structures.

It said while the programs have the supermarket giants “a wealth of consumer and transaction data” and boosted customer spend and shopping frequency, the benefits were murky.

The report said on average shoppers needed to spend $2000 to receive a $10 discount, which equalled to half a cent for every dollar spent.

In order to make the programs more beneficial, it said members should receive disclosure summaries on the amount spent by customers and the points and benefits earned and redeemed over a specific period.

Treasurer Jim Chalmers said the ACCC was not the only way the government was addressing the issue. Picture: NewsWire / Glenn Campbell

Jim Chalmers, who will hand down Labor’s fourth budget next Tuesday, said Labor would continue its “supermarket crackdown” to ensure “more competition, better prices and better deals for Australians”.

The government has given in-principle support to all 20 recommendations, however has not committed to maintaining all the measures.

“We are taking action to get a fair go for families at the checkout and a fair go for farmers at the gate,” the Treasurer said.

“This is about ensuring Australians aren’t treated like mugs by the supermarkets.”

The budget will include $2.9m in funding for the recommendation to develop targeted education programs so that suppliers can understand and ensure their rights are met under the Food and Grocery Code.

Agriculture, Fisheries and Forestry Minister Julie Collins said this would “help level the playing field for Australia’s farmers and producers”.

“Our farmers produce exceptional, high quality food and deserve a fair go when working with the supermarkets,” she said.

The recommendations also targeted strategies to stop landbanking, in which supermarkets purchase land to stop other grocers from opening stores in certain areas, and increase choice in remote areas.

Half the recommendations also included measures to ensure suppliers, farmers and producers are fairly treated by supermarkets when negotiating sale volumes and prices.

Coles said the company ‘welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs’. Picture: NewsWire/ Liam Kidston

​Coles said the company “welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs”.

In a statement, Coles said the company held less than 30 per cent of the market share and was increasingly competing with other supermarkets and retail chains who had evolved their range, meaning “Coles must compete vigorously for a share of consumers’ grocery baskets”.

Responding to the increased cost of grocery prices, the supermarket giant said they, as well as suppliers, were facing “significant increases” in a number of costs including wages, electricity and rent.

​“We do not control these inflationary costs in the economy – but they contribute to higher grocery prices for Australian households,” Coles said.

“Coles has worked hard to keep grocery prices low, with grocery inflation of just 1 per cent – excluding tobacco – for the first half of this financial year.

“While of no comfort to households and families, the ACCC’s own analysis shows grocery price inflation in Australia has been lower than in countries like Canada, the UK, US and New Zealand.”

The company’s Net Profit After Tax (NPAT) is comparable to “global peers”, including Canada, the US and UK, according to the statement.

Coles said their NPAT remained about 2.6 per cent over the last five years, meaning the company earned about $2.60 for every $100 a customer spends.

“We will review all of the recommendations in detail,” the statement said.

“We have listened intently and have already made changes such as simplifying our promotional tickets, providing additional information to customers about promotions and are working to make it easier for customers to compare products through clearer unit pricing.”

Woolworths Group said the company also welcomed the recommendations in a statement to the ASX.

“We have worked constructively with the ACCC to help it understand our business, the sectors in which we operate, our suppliers and supply chains, and the considerable competition we face,” Woolworths chief executive Amanda Bardwell said.

She said the ACCC report showed supplier costs to supermarkets had increased dramatically post-Covid, while acknowledging the cost-of-living pressures on households.

“We fully understand that customers want us to make it easier to find value, especially as the cost of living remains their major concern,” Ms Bardwell said.

“We recognise they have experienced several years of significant inflation, with an escalation in the cost of mortgages, rent, transport, insurance, energy, food and many other household essentials.”

Woolworths Group said it had already implemented a variety of measures in the past 18 months including committing to improving price transparency in the horticultural sector, simplifying promotional programs and making in-store offers clearer, and delivering increased value to customers through lower prices and deeper promotions.