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competition + supermarkets « Previous | |Next »
August 6, 2008

So we have The competitiveness of retail prices for standard groceries report by the ACCC dumped on us. Its about a rogue industry which is not solely responsible for the soaring food prices over the past five years. The ACCC found that grocery prices have risen by 21% since 2003, but only one twentieth of that was directly attributable to expanding profit margins ar supermarket chains:

The relationship between the farm gate and the check-out is quite direct for fresh products, such as meat, fresh fruit and vegetables. Coles and Woolworths often purchase directly from farmers, bypassing wholesalers, and then organise any necessary further processing themselves. The ACCC has not found any evidence to suggest that the major supermarket chains are acting in an anti-competitive way in their dealings with suppliers of fresh products. In particular, there is no across-the-board evidence to suggest that retail prices for fresh products are going up by a greater percentage than farm-gate prices. The gross margins of Coles, Woolworths and Metcash in fresh products have as a whole not increased significantly in recent years.

The ACC says that there are some examples of relatively minor increases, as well as examples of falls. It is certainly the case that the large price increases in many fresh items over recent years cannot simply be attributed to the retailers. What then is the analysis of supermarket competitiveness?

The core argument was that competition in the grocery sector was "workably competitive"---there was competition but itwas not as strong as it could be.

| Posted by Gary Sauer-Thompson at 7:50 PM |