A SENATE inquiry into supermarket food pricing has been welcomed by Australia’s peak farmer bodies, but Victorian farmers have called for analysis of how the grocers use their power to dominate farmers.
Meanwhile major supermarkets are claiming lower margins and a slew of product price drops.
The Greens has said it will spearhead a select Senate inquiry into the price gouging of major supermarkets amid Australia’s cost of living crisis.
The inquiry will scrutinise the impact of market concentration on food prices and the pattern of pricing strategies employed by the supermarket duopoly, The Greens said.
The political party has not yet responded to Sheep Central questions on whether the inquiry will investigate the process of transferring saleyard livestock prices to retail prices, but has published the inquiries terms of reference.
The Greens said the inquiry will look at the price setting practices and market power of major supermarkets, with particular reference to:
The effect of market concentration and the exercise of corporate power on the price of food and groceries;
The pattern of price setting between the two major supermarket chains;
Rising supermarket profits and the large increase in price of essential items;
The prevalence of opportunistic pricing, price mark-ups and discounts that aren’t discounts;
The contribution of home brand products to the concentration of corporate power;
The use of technology and automation to extract cost-savings from consumers and employees;
Improvements to the regulatory framework to deliver lower prices for food and groceries;
Frameworks to protect suppliers when interacting with the major supermarkets, and;
Any other related matters.
It will also assess the rise in essential item prices, the validity of discounts offered, and the inflation of profits during economic hardship.
Greens Economic Justice spokesperson Senator Nick McKim said Coles and Woolworths are making billions in profits by price gouging in a cost of living crisis.
“For too long the big supermarkets have had too much market power.
“This allows them to dictate prices and terms that are hitting people hard,” he said.
“It’s time to smash the duopoly.”
Senator McKim said the inquiry is a critical step toward dismantling the market concentration that’s led to unfair pricing and stifled competition.
“We’ll find a way to dismantle their power and bring grocery prices down.”
“It is about ensuring that Australians can afford to eat without being exploited, and that suppliers are treated fairly,” he said.
Imbalance in market power is hurting farmers – NFF
National Farmers Federation president David Jochinke said the Senate inquiry was an opportunity to ensure small to medium farming businesses were being treated fairly by larger players.
“Australia has one of the most concentrated food supply chains in the world and this imbalance in market power is hurting both farmers and consumers.
“We know what Australians are paying at the checkout, and we know what we’re receiving as farmers – but who clips the ticket in the middle is shrouded in secrecy,” Mr Jochinke said.
“We’d like to see a lot more transparency.”
Mr Jochinke said competition is a major issue in our supply chains and “a drag” on productivity for the broader economy.
“Shining a light on how supermarkets use their market power is a positive step.
“But it can’t become a reason to delay action on broader competition policy reform.”
The NFF is continuing to call for a suite of measures to level the playing field for farmers, including:
- Mandatory price reporting and disclosure in the supply chain;
- price reporting platforms, like the USDA’s Agricultural Marketing Service which provides free, unbiased price and sales information assist in the marketing and distribution of farm commodities;
- increased Australian Competition and Consumer Commission powers to access data from supply chain companies, allowing the ACCC to compel companies to provide information without a Section 95 referral from the Minister;
- increased resourcing for the ACCC to actively monitor markets and supply chains;
- investigate the use of agency agreements as a form of retail price maintenance;
- mandatory codes of conduct across agricultural supply chains with significant market concentration e.g. poultry meat and the Food and Grocery Code; and,
- clearer anonymous complaints processes so that farmers can report issues without fear of commercial retribution.
Need to examine government impact and farmer relationships – VFF
Victorian Farmers Federation president Emma Germano said while supermarket power and competition should be examined, so to should the impact of government decisions on the cost of producing food.
“It is hard not to be cynical in thinking politicians are wanting to use the supermarkets as a smokescreen for their policies that are driving up costs for farmers and consumers.
“Parliament must be looking at how government is directly contributing to peoples’ grocery bills through policies that increase the cost of production and doing business across the supply chain,” she said.
“Government policies are leading to ever increasing energy, water and labour costs, whilst the failure to invest in infrastructure is driving down productivity.
“The last thing farmers want to see is another political sideshow that doesn’t solve the real issues,” Ms Germano said.
Ms Germano said investigating supermarket prices would have little benefit as governments won’t step in and regulate. Examining how supermarkets use their power to dominate their relationships with farmers would be more useful, she said.
“The idea that government will come in and start regulating food prices is nonsense and any move to do so would not be supported by the VFF.
“The most important thing this inquiry can do is to focus on how supermarkets use their power to manipulate markets and create unfair trading terms for suppliers.”
Ms Germano said there’s no denying that having two retailers controlling two-thirds of the market hurts competition and farmers and consumers pay the price.
“Unwinding this system however is very complicated and could see a raft of unintended consequences.
“We should focus on the things that we can actually fix,” she said.
“That’s why the VFF is keen to talk to the supermarkets directly about how efficiencies can be found, whilst also ensuring everyone agrees to a set of rules that are fair and transparent,” Ms Germano said.
Coles is exploring ways to reduce prices
A Coles spokesperson said Coles’ rate of inflation has been progressively moderating, particularly in key staple areas. Total supermarkets price inflation declined to 3.1 percent for the 1Q24 from 5.8pc in 4Q23. It’s net profit margin is 2.6pc.
“At Coles, we believe all Australians should be able to put quality food on the table for their families, at a good price – particularly as they face high cost of living with rising interest rates, and household expenses like energy and fuel.
“Having a profitable business means Coles can continue to serve Australians, invest in our stores, employ the 120,000 team members we employ, pay taxes in Australia, pay dividends to our hundreds of thousands of mum and dad shareholders and ensure long-term sustainable relationships with our suppliers,” the spokesperson said.
The spokesperson said Coles is also not immune to the increased cost of doing business – construction costs, energy prices, the cost of logistics and packaging have all risen.
“Our suppliers are also challenged with many of the same increases and, rightly so, we have experienced a greater volume of supplier price increase requests which we have to balance.
“We are always exploring ways to reduce prices on the products we sell.”
Margins are lower at Woolworths
A Woolworths spokesperson said the company knew Australians were feeling the strain of cost of living “and we are working to deliver relief in their weekly grocery shop.”
“As we start to see the rate of inflation ease, we will continue to focus on delivering savings to our customers.
“We are committed to offering our customers value, while working with our suppliers to sensitively manage economy-wide inflationary pressures.”
The group said its margins are lower today than ten years ago, with its EBIT margin down from 6.2pc in 2014 to 4.8pc today, the company said. The group has dropped the price of all its standard lamb cuts by 20pc, as well as the prices of 400 products for Summer and its fruit, vegetable and meat categories are in deflation.
The supermarkets said they are co-operating with the various competition and pricing reviews.