Australia’s supermarket giants—Coles, Woolworths, and ALDI—are facing scrutiny. The Australian Competition and Consumer Commission (ACCC) has released the findings of its year-long inquiry, which reveals that the market is dominated by a few big players, hurting both consumers and suppliers.
After analyzing thousands of consumer responses and examining billions of data points, the ACCC has outlined 20 recommendations aimed at improving competition, increasing transparency, and creating a more level playing field. According to the ACCC, ALDI, Coles, and Woolworths are among the most profitable supermarket chains globally, with profit margins increasing in recent years. Together, Coles and Woolworths control nearly two-thirds of the market, while ALDI has slowly expanded to 9% market share over the past two decades. This market dominance results in higher prices, misleading practices like shrinkflation (smaller products at the same price), and suppliers facing tough conditions.
ACCC Deputy Chair Mick Keogh stated, “Aspects of Australia’s supermarket sector are not working well,” calling for reforms that would allow consumers and suppliers to benefit from a more competitive environment.“There is no ‘silver bullet’ that will address all the issues we have identified in the supermarket sector. The recently passed merger reform laws, and a potential Ministerial instrument that would introduce further notification requirements for supermarkets, will give the ACCC greater power to scrutinise supermarket acquisitions and guard against any substantial lessening of competition within the supermarket sector through such acquisitions,” Mr Keogh said.
Key Recommendations
The ACCC’s 20 recommendations focus on three core areas: consumers, competition, and suppliers. Here’s a breakdown of the proposed changes and their potential impact.
Increasing transparency for shoppers
Supermarkets should publish prices online, notify shoppers when products shrink in size, and make discounts and loyalty programs clearer. Coles and Woolworths will also provide real-time pricing data to third-party comparison tools. Online price listings and APIs will make it easier for consumers to compare prices. Additionally, more transparency around shrinkflation will help shoppers make informed choices, leading to better value for money.
Boosting competition
Simplify planning and zoning laws to help new supermarkets enter the market and use new merger laws to prevent Coles and Woolworths from acquiring key retail sites. The current barriers make it difficult for new competitors to enter the market. While large-scale entries like ALDI’s may take decades, local independent supermarkets could benefit from looser zoning laws, increasing competition at the community level.
Giving suppliers more power
Supermarkets must provide greater transparency in their tendering processes and not unilaterally change prices or volumes agreed upon with suppliers. The Food and Grocery Code should be strengthened to prevent supermarkets from bypassing protections for suppliers. Suppliers, particularly fresh produce growers, often lack crucial information, making it difficult for them to plan and negotiate. More transparency will allow them to make more informed decisions and negotiate fairer deals.
Addressing issues in remote areas
Ensure all supermarkets in remote areas display pricing on shelves, improve complaints handling, and explore community-run stores where competition is limited. Shoppers in rural and remote areas often face higher prices and fewer choices. These reforms could lead to fairer pricing and more options for regional Australians.
While the ACCC’s recommendations are a step in the right direction, the real challenge will be implementation. The changes could reshape the grocery landscape, but it remains to be seen if governments and the ACCC can push them through effectively. The push for tech-driven transparency, particularly with price APIs, is a strong step toward improving consumer experiences, but there’s potential for even more advanced solutions. Technology could play a key role in helping consumers easily compare prices across supermarkets, taking into account factors such as travel time and loyalty rewards. However, while increased transparency is essential, it may not be enough to change consumer behavior on its own.
To truly shift habits, additional initiatives like public awareness campaigns could encourage shoppers to make more value-conscious decisions. Looking globally, competition between supermarkets in the UK—such as Tesco and Lidl—helps keep prices competitive, and similar benefits could arise in Australia if the reforms foster more local competition. However, attracting a major discount chain like Lidl might take time. The ACCC has a history of holding supermarkets accountable for misleading practices, which bodes well for the enforcement of these new rules, but strong follow-through will be critical to ensuring supermarkets comply. These changes could improve the shopping experience for consumers by making pricing clearer and reducing practices like shrinkflation, allowing for more informed decisions at the checkout. The loosening of zoning laws could also lead to more local stores opening, providing unique products and better service. Furthermore, if suppliers gain more stability through these reforms, the quality and consistency of fresh produce could improve, as suppliers would have the confidence to invest in better products.
In conclusion, while the ACCC’s proposed reforms are not a complete solution, they represent a promising start to improving the supermarket sector in Australia. Though Coles and Woolworths are likely to remain dominant players, these changes could foster more competition, better transparency, and fairer treatment for consumers and suppliers alike. The success of these reforms will depend on strong implementation and whether shoppers and suppliers alike demand better conditions moving forward.
A factsheet with the key findings and recommendations can be found at: Supermarkets inquiry summary
More information about the final report can be found at: Supermarkets inquiry 2024-25
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ACCC reveals how supermarket practices impact grocery bills and suppliers, proposes reforms for fairer pricing and increased competition News, Accc Dynamic Business
