Grocery competition – just how competitive is our grocery sector?

ANRA supports an open, competitive retail market in Australia and believes there is no evidence that the structure of the retail market, or the conduct of participants, inhibits vigorous competition. The grocery retail sector continues to grow in Australia. Big box American retailer Costco opened its first store in Melbourne in August 2009 and plans to open more. German retailer Aldi will have 700 stores in Australia. More competition means lower prices for consumers.

The 2008 ACCC inquiry into grocery competitiveness supports ANRA’s public arguments that the retail grocery sector is competitive. 

The ACCC found that food price inflation has been overwhelmingly due to other factors than any (alleged) weakening of competition or increase in retailers’ gross margins. There is no evidence of “anything that is fundamentally wrong with the grocery supply chain” nor of a widening gap between retail and farm-gate prices.

The report also found the independent sector does not provide significant price competition to the major retailers, in part because of the pricing strategy of Metcash.  The main competitive obstacles are the barriers to entry facing new retailers.

The ACCC recommended:

There is a disjunction between some of the ACCC’s findings and their policy recommendations. The ACCC finds no strong evidence that farmers are being unfairly treated by retailers, and no evidence that creeping acquisitions are occurring.  Yet the ACCC recommends changes to address these “problems”.   

In its preliminary response, the Federal Government announced it will introduce a nationally consistent, mandatory scheme of unit pricing, amend the Horticulture Code of Conduct and develop legislation to counter creeping acquisitions.