Woolies, Coles warning before showdown

A stern warning has been issued to Coles and Woolworths as the chief executives of both major supermarkets gear up to front allegations of price gouging and inflated price hikes.

Experts and key business leaders will appear at a Greens-led inquiry into supermarket prices this week.

Both Woolworths chief executive Brad Banducci and Coles chief executive Leah Weckert will give evidence on Tuesday after both companies were accused of land banking and muscling out local suppliers during this month’s hearings.

Greens senator Nick McKim, who is pushing to break up the big supermarkets, said both players will have a lot of answer for when they step into the spotlight.

“We have some interesting evidence coming up over the next couple of days. That will speak for itself,” Senator McKim said on Monday.

“We’ve heard evidence from workers and workers representatives, we’ve heard from shoppers, and ultimately, all of these things flow from the market dominance of Coles and Woolworths.”

Woolies, Coles warning before showdown

Former ACCC head Allan Fels told Monday’s hearing that it would be sensible for Australia to adopt divestiture laws similar to the US to reduce harms to consumers and smaller businesses.

A separate review on supermarkets rubbished calls for divestiture powers, which would force supermarkets to sell stores if they had too much market share.

In his interim report, former Labor minister Craig Emerson argued that divestiture powers would trigger job losses and intensify market concentration.

Professor Fels blasted Dr Craig Emerson’s interim report as “lacking depth” and said deregulation would rather expand markets and employment figures, but said he supported a mandatory code of conduct.

“In Australia we’ve broken up gas and electricity and some other public enterprises and that’s led to an expansion,” he said.

“I was surprised at him (Dr Emerson) commenting on divestiture – I don’t know if he did any study on it whatsoever. He just picked up sort of line one of the standard big retailer response without really going into it with any depth.”

Professor Fels said a separate commission should be set up to investigate rises in grocery prices to allow the competition watchdog to focus on its crackdown on bad business practices.

The ACCC is conducting an inquiry into high supermarket prices and will hand down an interim report in August.

Professor Fels argued that an independent commission would encourage a deeper look into the way prices were being determined by the larger chains and push food costs down in the long term.

“It’s better to start with the real problem, the prices, and work backwards to restriction and competition,” he said.

“That links with my idea to have a competition and prices, and perhaps regulation, commissioner because apart from looking at restriction on competition, brought about by government laws and actions, you should also look at the many areas in the private sector where they are questions about pricing behaviour.”

Later, the Retail and Fast Food Workers Union will testify after alleging Coles and Woolworths operated in a “duopoly”, or a market dominated by two giant players, and its members have suffered as a result.

“They (union supermarket workers) feel the effect of price gouging every day in two critical ways,” the union stated in its submission to the inquiry.

“Firstly, they simply cannot afford the food and groceries they sell in their workplaces.

“Secondly, they are the public face to irate consumers who exact their disquiet onto workers.

“When an aggrieved consumer decides to give a spray to Coles or Woolworths for gouging them at the checkout, it is not the CEO, CFO, hardened executive or managing director who is being abused.

“It is a mum, dad, child, sibling, young worker, older worker, poverty wage worker, insecure worker who is facing the brunt of the abuse.”

Mr Banducci will appear before the committee on Tuesday morning and refute allegations Woolworths has engaged in price gouging practices.

“We are part of a highly competitive and innovative grocery sector,” the company said in its submission to the inquiry.

“In 2008, the Australian Competition and Consumer Commission determined that the industry was ‘workably competitive’ and now it is much more so.

“With the arrival of three of the world’s biggest and most competitive retailers (Aldi, Costco and Amazon) in Australia, consumers have even more choice.

“Being price competitive is critical in trying to win our customers’ shopping basket.”

Woolworths said food inflation had been driven by cost increases “from our supplier partners and cyclical impacts in fresh food markets.”

Coles Group will also appear on Tuesday, with the retailer expected to argue grocery price increases have flowed from increasing supplier and input costs.

“A key driver of supermarket price increases has been cost price increase requests from our suppliers and farmers,” the company said in its submissions.

“Coles received an average of over 70 requests per week from suppliers and farmers in Financial Year 2022 and Financial Year 2023, almost double the level of Financial Year 2021 requests.

“Coles is also impacted by the increased cost of doing business with increases in energy, labour, logistics, packaging, interest and tax costs.”

Bunnings, a star business of retail conglomerate Wesfarmers, will appear on Monday afternoon and deny allegations it exploits its position in the market to gouge prices.

Community anger over rising grocery bills has escalated in recent months as shoppers navigate a tightening cost-of-living squeeze.

A Finder survey from February suggested some 42 per cent of households, or an estimated 3.9 million, said their grocery bill was one of their chief financial stressors, a 26 per cent increase, or a bump of 1.5 million new households from just two years ago.

Moreover, nearly all Australians are now pursuing strategies to save money at the checkout, with 92 per cent of Australians altering their shopping habits, according to a survey of 1002 respondents.

More than half of shoppers now bulk buy kitchen staples to cut costs and 61 per cent, or some 5.1 million households, visit multiple grocery stores to secure the best prices.

The average weekly spend on groceries is now about $188.

The issue has stormed to the centre of Australian politics, with Nationals Leader David Littleproud and the Greens flagging the possibility of breaking up the major supermarkets to reduce overall market power.

Next to the supermarkets at the centre of the storm, the Senate will also hear from the Australian Food and Grocery Council, The Australian Dairy Products Federation, the ACCC, the Treasury Department and the Department of Agriculture, Fisheries and Forestry on Monday.

More to come