Metcash boss labels PM’s profit gouging accusation inflammatory, dumbed-down and wrong

The boss of Metcash has savaged the Albanese government for its latest attack on supermarkets and says the accusation of profit gouging is inflammatory language designed to win votes.

Metcash CEO Doug Jones has savaged the Albanese government for its attack on the supermarket sector and repeating the unfounded accusation that grocers are profit gouging, which he describes as “inflammatory language” designed to win votes, and a “gross oversimplification” of how the business works.

Mr Jones said comments by Anthony Albanese last weekend that Labor would impose heavy fines on supermarkets found to be profiteering was a dumbing down of the issue, and particularly insulting to family-owned stores that battled through the Queensland floods and Covid-19 pandemic to stay open and keep communities fed.

The chief executive of the supermarket wholesaler that services 2450 independent supermarkets under banners such as IGA, as well as 80,000 independent convenience stores and food outlets, said the almost 10 reviews and inquiries into the sector had found no evidence of profit gouging. Those reviews included the most recent inquiry by the competition regulator.

“I think it must be remembered that in all of the inquiries and hearings, we’ve not heard any evidence and any facts that would support that there is price gouging. And no one seems to be very clear what price gouging actually is, which is frustrating, because it seems to be a sort of an inflammatory catchphrase that’s helpful for politicians,” Mr Jones told The Australian.

“To dumb it down to allegations of price gouging does an ­incredible disservice and demonstrates a lack of understanding.”

IGA supermarkets are often family owned and operate modest profit margins, and sometimes sell products at a loss. Picture: Stuart McEvoy

The bulk of Metcash’s independent supermarkets are owned by families, are run as small businesses, and often are situated in small regional and rural areas. For such owners to be tainted with the slur of “profit gouging” was an ­insult, Mr Jones added, and stirred up divisions within communities.

“Going back as far as Covid, which feels like ancient history, but as recently as the floods in Queensland too, you’ve got supermarkets, and particularly independent supermarkets, working hard not only to clean up in their community and their homes, but their stores as well, and get their doors open,” Mr Jones said.

“And we know that independent supermarkets traded when many other stores were closed, and frankly, the rest of society stayed at home.

“Those stores are for and of the communities that they operate in. In many instances, they are the only supermarket in the community and yet, they’re being accused and, frankly, insulted in the accusation of price gouging and it feels that someone wants to set them up in opposition to the communities that they serve, when, in fact, the opposite is true.”

Metcash chief Doug Jones.

Mr Jones called for a more sophisticated debate and policy approach, especially as the inquiry by the Australian Competition & Consumer Commission found no evidence of profit gouging or illegal behaviour by the major supermarket chains.

“There needs to be a little bit more nuance and sophistication given to the way that if we approach the industries that are competed in by those family-owned businesses,” Mr Jones said.

“ And we’ve just done that pricing inquiry with the ACCC and a 441-page report and to come over the top of that with gross oversimplifications, frankly I find it very surprising.”

Mr Jones mirrored the frustration and anger displayed this week by the CEO of independent supermarket chain Ritchies, Fred Harrison, who called the Prime Minister’s use of the term “profit gouging” a slur against the whole supermarket sector.

“I have been working in the supermarket industry for 50 years and the company I work for, Ritchies, we work our backsides off to try to be as competitive as we possibly can, we make a modest return on our investment and profitability,” Mr Harrison told The Australian this week.

“To label the supermarkets as price gougers and continue with that language after the ACCC report … it is inflaming the stress and angst against our industry, and it is not the truth.”

Ritchies Supermarkets chief executive Fred Harrison is frustrated by allegations of supermarket profit gouging. Picture: Aaron Francis

When Mr Albanese was pushed at a media conference last weekend to define price gouging he said it “was when supermarkets are taking the piss of Australian consumers”. This served to further inflame supermarket bosses, since the ACCC only a week earlier made no recommendations to the government addressing price gouging.

Coles and Woolworths on Sunday said the ACCC’s findings validated that there was no evidence of price gouging in the supermarket sector.

Mr Jones said the internal economics of a supermarket, especially the smaller independent chains under the Metcash banner, often saw retailers selling groceries for a loss or at best very modest profit margins. He said this ­nuance was lost when politicians resorted to insulting language.

“Our job is to provide competition to the majors [Woolworths and Coles], and we do it beyond just price,” he said.

“We do it with tailored ranges and service offerings. There are also many products that are sold at a loss and sometimes that means they’re sold below the cost paid for them. But in many instances, they’re sold below the total cost of running the business plus the cost of a product.

“And that’s a deliberate choice. And what it means is that there isn’t a uniform margin attached to every product. And again, it’s much more sophisticated than that. And I think it’s worth remembering that these folks with the support and the sophistication and the scale of Metcash are running highly evolved, complex pricing strategies and pricing programs that are obviously designed to offer value to a customer, because if they don’t, our customers will go somewhere else. And so yes, you will have different levels of margin across different products, and if that’s evidence of gouging, then I wouldn’t know what to say, it just demonstrates a lack of understanding.”

The ACCC report conceded there was “no silver bullet” to address the market power of Coles and Woolworths, but recommended clearer pricing practices, greater transparency for suppliers and reforms to planning and zoning laws. It made no divestiture recommendations nor adverse findings against the giants.

Originally published as Metcash boss labels PM’s profit gouging accusation inflammatory, dumbed-down and wrong