Supermarkets

Woolworths and Coles are big companies that plan to stay around for a long time. Could not one or both of them commit to a policy of truthful advertising and stand by it long enough to establish a reputation that customers could trust?

This hasn’t happened – with supermarkets, or telecoms, or banks or anywhere else, at least in the absence of comprehensive public shaming driven by government action. But why not?

One explanation, apparent from the evidence in the Coles case, is that no one wants to be the first to move. Given the short-term pressure that decision-makers are under, it’s easy to imagine that any proposal of this kind will be put in the too-hard basket and left there.

Another possibility is that distrust is so widespread that no single company can break the pattern. The era of neoliberalism has certainly strengthened this distrust. There was a time when used car dealers were famously untrustworthy but financial institutions were pillars of probity. Today, when buying a second-hand car, the biggest risk is not that the speedo will be wound back but that you will be sold a loan with deceptively high interest. In this context, you just assume everyone is lying.

Last week, the German-owned supermarket chain took another step into the Australian mainstream, trialling a grocery delivery service with DoorDash in Canberra ahead of a potential expansion around the country.

Aldi has long resisted offering deliveries, given the service would make a basket of groceries more expensive, undercutting its price advantage over Coles and Woolworths.

[…]

Aldi tried a similar service with a third-party delivery provider in the UK, but it didn’t last. The chain is also hesitant to build its own delivery system because that would add significant costs to the business, which would either result in higher grocery prices or less profits for its German owners.

Prof Gary Mortimer, a retail expert at the Queensland University of Technology, says Aldi has had to respond to the delivery trend.

“Online food and groceries now represent anywhere between 10 to 12% of supermarket revenue,” Mortimer says.

“As Aldi enters into that space, even using a third-party provider like DoorDash, Coles and Woolworths will be looking at how they go about defending that market share.”

Retail expert Bronwyn Thompson says Aldi considers the competitive advantage of a delivery service to be worth the additional expense.

“If they’re trying to be more of a ‘whole shop’ destination, this is part of that,” Thompson says.

Guardian Australia has spoken with several young workers and families who feel their teenagers were pressured to join the Shop, Distributive and Allied Employees’ Association (SDA) in their first days on the job, including a 14-year-old who was recruited in mid-2024 on her first shift at Hungry Jack’s.

[…]

Lachlan, said he got a text from the union around the time his daughter Sarah was signed up, but he did not believe that was sufficient. Lachlan is a union member himself, but in his view the SDA organiser’s manner left no room for his daughter to say no.

He said it was not the right approach for a 14-year-old first-time worker: “I support the unions, but I don’t support predatory tactics.”

He said Sarah is now a member of the Retail and Fast Food Workers Union (RAFFWU), an upstart union that formed in 2016 in opposition to the SDA.

[…]

In the mid-2010s, a series of reports in the Age detailed how part-time workers at McDonald’s, Coles and other retail employers were being underpaid due to deals negotiated by the union, leading to accusations of a “cosy” relationship between the SDA and employers. “[The SDA] has always bargained in the best interests of workers within the industrial relations framework at the time,” the union said at the time.

A number of SDA-brokered deals between workers and employers came under scrutiny at the time. Its 2015 deal with Coles, for example, had to be remedied after the Fair Work Commission decided it failed the “Better-Off Overall Test” (BOOT) because a cut in penalty rates had left a substantial number of workers worse off.

The ban will prohibit very large retailers from charging prices that are excessive when compared to the cost of the supply plus a reasonable margin.

The new ban on excessive pricing of groceries for consumers in the Food and Grocery Code is now law and will come into effect on 1 July 2026.

This will fix a key gap in Australia’s competition and consumer protection framework and provide a safeguard for consumers.

The Australian Competition and Consumer Commission (ACCC) found in its Supermarkets inquiry that Coles and Woolworths have limited incentive to compete vigorously with each other on price and that their dominance of the sector seems set to continue.

If Coles and Woolworths breach these new price gouging laws, the maximum penalty per contravention is the greater of: $10 million; three times the value of the benefit derived, or, if that value cannot be determined; 10 per cent of the company’s turnover during the preceding 12 months.

The ACCC will be responsible for policing the excessive pricing regime.

Couldn't have put it better myself:

While reform on this front could be effective, the tendency of smaller retailers to align their pricing strategies with dominant supermarket chains – known as “price leadership dynamics” – may undermine any downward pressure on retail prices.

In essence, any slight reshuffling will recalibrate the balance of power between suppliers, wholesalers and retailers. But consumers may see little direct benefit.

One solution that might work, however, is a publicly owned grocery chain, tasked explicitly with stimulating genuine competition. For the sake of argument let’s call it a “community provisioning enterprise”.

This could be designed as a conglomerate of wholesale centres, distribution networks and retail outlets. By leveraging state-of-the-art logistics and retail technologies, it could achieve significant efficiency gains.

Potentially, that could see gross profit margins driven down into the 4–7% range, compared with margins of 55% or more on individual items enjoyed by major retailers.

The main priority of such an enterprise would be to move commodities efficiently from producers to consumers. It would have a competitive edge because of operational efficiency, minimal marketing spend, streamlined supplier contracts and capped executive salaries.

Competition led to Coles shortening the amount of time it established a higher price before it was discounted — down to four weeks under its internal policies known as "guardrails".

The guardrails were designed to ensure shoppers weren't misled by prices rising and falling too quickly.

But Coles was desperate to move quicker because it was watching arch-rival Woolworths do exactly that and feared being left behind.

During the trial, Coles admitted it had broken its guardrails on pricing for at least two products — Arnotts Shapes biscuits and the Nature's Gift dog food.

It also downplayed the significance, saying it was due to mistakes and errors — not any "planned" campaign.

The ACCC hit back, saying 62 of the 245 products were sold at the higher price for less than 28 days before being discounted, and it wasn't just one or two "outliers."

Er… Nothing.

Entry into Australia's supermarket sector isn't so simple, according to retail expert Lisa Asher from the University of Sydney.

Aldi entered the market in 2001 and it had taken the company 24 years to get to 600 stores, which was a market share of slightly less than 10 per cent, she said.

"So this idea that it's easy to get market share when Aldi is one of the most innovative grocery retailing models that we have at the moment in the world," she said.

[…]

Ms Asher [highlighted] that divesture powers existed in places such as the United Kingdom and United States.

Without these powers in Australia, she said retailers such as Coles and Woolworths had minimal competition.

In 2000, Franklins had about 12.3 per cent of Australia's market share.

Now, no single retailer outside of Coles and Woolworths has more than 8 per cent.

"There are no disincentives for entrenching market concentration and dominance," she said.

The focus should be less on large foreign chains entering Australia's grocery market, and more about empowering local entrepreneurship, she said.

The ABC used data analysis tools to investigate about 11,000 food products listed on the Woolworths website, and looked at the percentage changes for the main or “characterising” ingredient — like raspberries in raspberry jam — across a 15-month period.

Of these, the ABC then selected 47 products where the main ingredient appeared to decrease in proportion, according to the label.

These products include ice cream, meat, dips, jams, cereal and packaged meals, with some brands represented more than others.

[…]

While some manufacturers said their changes were to improve the recipe, others said they were due to supply chain cost increases and wanting to keep the price of the product low.

Similar changes, where the quality of the product decreases but the weight and price stay the same, have been labelled as “skimpflation” in overseas media.

Supermarket giants Coles and Woolworths expect to spend hundreds of millions of dollars more to repay staff the companies underpaid, following a legal judgement experts say could have wide-reaching implications.

Woolworths has flagged potential additional costs topping $500 million after tax, while Coles has put its preliminary estimate at up to $250 million.

The development could see the total cost of the underpayment scandal soar past $1 billion, with Woolworths having already repaid $330 million to thousands of staff, while Coles has repaid $31 million so far, and had set aside a further $19 million before Monday's extra provision.

On Friday, the Federal Court handed down a judgement on the historical underpayments of employees at the two major supermarkets, affecting nearly 30,000 employees.

The dispute centred on annual salary arrangements, where the employees were paid above the award rate over the year, in place of calculating actual entitlements — under what was known as a "set-off" arrangement.

Fifteen years ago, the biggest challenge that faced the Tablelands food bowl was water security.

Now, it’s how far farmers have to send their produce to market, because they have to cover the freight costs to the metro distribution hubs.

“That central point has been moved to further and further away, to a location where there is a lot of consumption, but … regional areas [suffer] because it takes time to get all the way back,” Mr Keevers says.

“We can all grow crops, there’s no fear of that, and we’ve got big producers, and we’ve got small producers.

“But the key is they have to have a home for their goods.

“If they don’t have a home for it, they’ll go broke.”

[…]

Griffith University’s Kimberley Reis, who researches local supply chains and how to make them more resilient, says the current model needs to improve.

“We don’t have a food system model that is based on supporting local and regional economies,” Dr Reis says.

She wants the big supermarkets to bring in local food procurement requirements, where food isn’t just grown locally, it’s also sorted in the region where it is grown.

In other words, “the produce doesn’t leave” the area at any stage.

“So that they [the big supermarkets] are showing good corporate responsibility to support the self-reliance and the resilience of that region,” she says.

But a Coles spokesperson says central distribution points and a national supply chain “is the most effective way for us to deliver value and quality for our customers”, with the same prices for shoppers in the supermarket giant’s city and regional stores.