AUS
NZ
UK
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Highlights
- ACCC report raises alarm over pricing power of dominant grocers
- Coles (ASX:COL) and Woolworths (ASX:WOW) control nearly 70% of the mark
- Suppliers face pressure in an increasingly unbalanced ecosystem
Australia’s supermarket landscape has come under fresh scrutiny following a comprehensive review by the Australian Competition and Consumer Commission (ACCC), which has raised concerns about market concentration, pricing practices, and supplier dynamics. The regulator’s findings spotlight the dominant positions of Coles (ASX:COL) and Woolworths (ASX:WOW), revealing a highly concentrated grocery sector that offers limited competitive pressure on pricing.
The ACCC found that Woolworths accounts for 38% of supermarket grocery sales, with Coles holding 29%, together commanding nearly 70% of the national market. While stopping short of labeling the market a formal duopoly, the regulator described the sector as "oligopolistic", citing limited price competition and significant pricing power among the top players.
The report was initiated in response to rising cost-of-living pressures and allegations of excessive pricing practices during the pandemic. It concluded that both Coles and Woolworths have maintained robust earnings margins and increased their product margins—particularly on branded goods—over the past five years, even as broader retail sector costs rose.
By contrast, Metcash (ASX:MTS), the wholesaler behind IGA stores, was the only major supermarket operator that did not raise its product margins during the same period. The report indicated that suppliers, especially those in fresh produce, face a disadvantageous position in negotiating with major retailers. Contracts often lack clarity on pricing or volume, and many suppliers reported fears of retaliation when voicing concerns.
Former ACCC chair Graeme Samuel called out the major chains for what he described as opaque pricing strategies and confusing loyalty programs. He also raised doubts about the effectiveness of proposed new recommendations regarding supplier relations, pointing to earlier reforms that had already been introduced.
While German discount chain Aldi continues to inject some pricing pressure with its exclusive home-brand model, the ACCC noted its market share remains too small to disrupt the existing power dynamics significantly.
The report outlined 20 recommendations aimed at improving transparency, including a review of loyalty programs, enhanced oversight of supplier rebates, and support for independent supermarket models. The federal government welcomed the findings and allocated A$2.9 million to assist suppliers but did not commit to any structural changes to the current market setup.
Following the report’s release, both Coles and Woolworths responded by emphasizing their efforts to deliver value and support for customers amid ongoing inflation. Interestingly, despite the critical nature of the report, shares in both companies edged higher—Woolworths (ASX:WOW) rose 4.5% to $29.4, while Coles (ASX:COL) gained 2.3% to $19.
