Ritchies disappointed no action on supermarket ‘land banking’

Australia’s largest independent grocery chain has only opened two new stores in the past decade, and hoped the ACCC supermarkets report would focus more on the contentious issue.

Ritchies supermarkets chief executive Fred Harrison at their store in Carrum Downs, Victoria. Pictures: Aaron Francis

Ritchies supermarkets boss Fred Harrison has only been able to open two new stores in the past 10 years, with hopes of radically expanding the footprint of the nation’s largest independent grocery chain dashed after the competition regulator ruled out any action on the contentious issue of ‘‘land banking’’.

He says acquiring undeveloped ‘‘greenfield’’ sites is almost impossible for smaller independent supermarket chains. He points to a recent deal to open a new store in Victoria which fell over after one of the major supermarkets “white-anted” the proposal.

Mr Harrison expressed his severe disappointment over missed opportunities in the Australian Competition & Consumer Commission’s year-long inquiry into the $120bn supermarket sector. He said the recommendations were strong on price and supplier transparency but weak on removing obstacles for smaller retailers to open new stores in direct competition to Woolworths and Coles.

“I think the piece that’s disappointing to me is that they haven’t addressed land banking,” Mr Harrison told The Australian following the release of the ACCC’s final report to the Albanese government. Land banking is the buying of land before keeping it empty for years just to prevent competitors from taking the site.

“They’re talking about removing red tape to make it easier for supermarkets to come in. What does that mean; to make it easier for Woolies and Coles to even get more stores in?

“I’m just disappointed that they didn’t say that before Woolworths and Coles automatically open new sites there should be some work done on the marketplace — what their presence in that marketplace is.

“And if it’s just another Woolworths and just another Coles and there’s one or two just five minutes away in the other direction, that’s what hasn’t been addressed. It is just carte blanche for Coles and Woolworths to open up a bunch of new stores.”

The 441-page ACCC supermarket report offers a string of recommendations around better price transparency for shoppers and improvements in contracts with suppliers, especially growers of fresh produce, to give them greater negotiating power with the major chains.

Recommendation 3 pushed for governments to adopt measures to address planning and zoning issues.

Mr Harrison said the ACCC report was strong on price transparency, but not on land banking.

“We recommend all levels of government adopt measures to simplify, streamline and harmonise planning and zoning laws across jurisdictions, to the extent possible. Doing so would reduce barriers to entry and expansion for all competitors,” the ACCC report states.

“There is nothing in it on land banking,” said Mr Harrison.

“So it’s OK for Woolworths or Coles to buy a block of land and just hover there and potentially take out any competition. And it is hard for an independent supermarket to open a greenfield site if they feel a Woolworths or Coles can open next door in a few years’ time.”

Mr Harrison said his Ritchies chain has only been able to open two greenfield sites in the past decade — such is the difficulty for a smaller player to get hold of a new property for a supermarket.

“That says a lot,” he said.

Both Woolworths and Coles have consistently denied they are involved in land banking, although last year’s Senate inquiry and ACCC hearings did hear arguments saying land banking was taking place.

The ACCC final report found Coles and Woolworths currently hold more than 150 undeveloped and unused sites intended for future supermarket use, but there are a number of reasons a supermarket chain might hold a site for a lengthy period without developing it.

“Determining whether an acquisition of a retail site is anticompetitive is a complex assessment requiring detailed analysis on a case-by-case basis which was outside the scope of this inquiry.

“For example, it would depend on the distance to the nearest rival supermarkets, the nature of consumer demand in the area, the rate of population growth, and the availability of alternative sites nearby.”

However, these concerns highlighted the importance of enhancing the ACCC’s ability to scrutinise acquisitions by Coles and Woolworths, the regulator argued.

Since 2019, Coles and Woolworths have acquired about 260 sites.