Metcash executive appeared before a parliamentary enquiry into supermarket prices and made a call to stop land banking. Supermarket chains purchase land despite having no plans to develop the sites as a way to stop competitors building at a location, this locks competitors out of the market and reduces the level of competition. The majors are big enough to have strong negotiating power with developers, landlords and the state government and they also have the funds to make land acquisitions.
The chief executive of Aldi also appeared at the hearing and advocated for making the grocery code of conduct mandatory (it is currently voluntary) and strengthening measures against the fear of retribution for suppliers. Aldi ruled out opening stores in Tasmania due to supply chain complexities.
With the current cost of living crisis and Senate enquiry, the grocery industry level of market concentration has led to criticism, especially as we are now seeing decreased world commodity prices and global bulk agricultural product prices are coming down, however we have not seen this being passed through as food prices at the retail level. There are also producers who feel angry at the gap between farmgate prices and retail prices.
Coles and Woolworths control approximately 65% of the grocery market, a situation that has been evolving for over a century. Initially, most Australians shopped at small, local grocery stores, but as larger grocery chains developed, they brought about efficiencies of scale and gradually phased out the smaller stores.
Coles and Woolworths began as general merchandise stores in the early 20th century but pivoted to selling food in the 1950s. This shift included adopting a self-service model, which was a significant change from the previous service-oriented approach where shop workers would select and wrap the products for customers. The two companies aggressively expanded by buying out many competitors, leading to their current market dominance.
SOURCES:
https://www.huntervalleynews.net.au/story/8588572/iga-head-urges-end-to-supermarket-land-grab/
https://www.abc.net.au/news/2024-02-23/a-history-of-the-duopoly-coles-woolworths/103494070
