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ColesWorth’s profit margins and market share are growing.
The Australian consumer watchdog has called for the country’s largest supermarkets to be transparent about ‘shrinkflation’ and the strategy of rotating prices to create the impression of savings.
The findings from a year-long investigation conducted by the Australian Competition & Consumer Commission (ACCC), released this week, revealed that both supermarkets have expanded their profit margins over recent years, with Woolworths seeing particularly significant increases.
The ACCC stated that one major issue highlighted by customers during their investigation was insufficient notification about price hikes. Specifically, they pointed out cases of ‘shrinkflation,’ wherein the quantity of products gets reduced even as prices stay constant or climb higher.
The ACCC suggests that supermarkets should be obligated to post announcements whenever ‘shrinkflation’ or price increases take place.
‘It stated that this information should minimally be displayed close to the product ticket on store shelves and also available on the product’s webpage.’
‘By offering customers such clarity about these essentially higher prices, they would be more capable of making informed decisions and choosing less expensive options if that aligns with their preferences.’
The investigation revealed that the special offers provided by the supermarkets were components of a ‘high-low’ pricing approach, which created an impression of substantial savings instead of maintaining consistently low prices.
The study revealed that the two main supermarkets seemed to be communicating with each other instead of competing directly—when an item was marked down at one location, it had a higher price at the other, and vice versa.
‘Our analysis has revealed a pattern where specific products regularly alternate their promotional cycles between Coles and Woolworths.’
Coles
and
Woolworths
rank as some of the most lucrative supermarkets globally, the consumer watchdog’s findings revealed.
The average profit margins increased to around 43 percent for potatoes, 38 percent for cucumbers, and 35 percent for bananas, leaving suppliers in a vulnerable negotiating stance.
The report published on Friday revealed that there is significantly less competition in Australia compared to international markets, resulting in the supermarket industry being characterized as ‘oligopolistic.’
‘It stated that Coles and Woolworths have little motivation to strongly compete with one another on pricing.’
We haven’t seen Coles and Woolworths trying to significantly undercut each other’s prices overall.
It added that ‘
Aldi
Coles and Woolworths seem to rank as some of the most lucrative supermarket enterprises worldwide.
‘The market shares of Coles and Woolworths are growing, with no competitors of similar size and breadth to challenge them.’
However, the ACCC did not declare that Coles and Woolworths held a duopoly, and refrained from labeling grocery prices as ‘exorbitant.’
It also did not place the blame on anyone.
cost of living
a crisis at the supermarket’s doorstep.
Politicians such as Anthony Albanese criticized supermarkets amid rising inflation following the pandemic.
However, the ACCC discovered that although grocery prices have climbed by 24 percent over the last five years, other products and services have similarly gone up by 22 percent.
There was no concrete evidence found to support claims of price gouging; rather, the report indicated that increased competition within the sector could be beneficial.
‘If the market share and related market influence of Coles and Woolworths keep expanding in the coming years, their profit margins as a proportion of food prices may well rise further.’
The oversight body proposed 20 recommendations, such as publishing price information and increasing examination of discount assertions.
In Australia’s grocery market, Woolworths leads with 38 percent of sales, followed by Coles at 20 percent, Aldi with 9 percent, and Metcash-associated stores like Foodland and IGA making up 7 percent.
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