Latest news with #supermarketcompetition
ABC News
5 days ago
- Business
- ABC News
Esperance residents worry new links between IGA stores could lead to higher prices
The sale of a small supermarket on Western Australia's south coast has residents concerned that grocery prices will rise. Esperance, 700 kilometres east of Perth, has one Woolworths store and three IGA supermarkets. While it seems like a competitive market, the three smaller supermarkets appear to share more than branding. Australian Securities and Investments Commission (ASIC) records show that, although all IGA stores are now owned by different companies with different directors, they have connections. Esperance Shire President Ron Chambers and his wife Carolyn sold the Pink Lake IGA to Perth-based Guru Merchants on Wednesday, after 16 years of ownership. The town's other two IGA stores are owned by Air Voice Supermarkets and Esperance Fresh Food. Records show Prashant Kariya, 38, owns businesses with the same registered addresses as Guru Merchants and Esperance Fresh Foods. He is a former director of Air Voice Supermarket Group, which has the same contact address as Air Voice Supermarkets. None of the listed company directors, nor Mr Kariya, could be contacted for comment. It is understood that some may be out of the country. Esperance Chamber of Commerce and Industry executive officer Jennifer Obourne said there were potential pros and cons to the recent sale but noted concerns about reduced competition between the town's supermarkets. "There's essentially only Woolies versus IGA," Ms Obourne said. Cheryl Green, president of the town's Senior Citizens Association, was worried grocery prices would go up if the three stores worked together. "This would impact greatly on the elderly, who already live on a limited budget." Experts told the ABC that, while inflated prices were possible, the model could also help regional businesses survive. Raymond Da Silva Rosa, a professor of finance at the University of Western Australia, said higher grocery prices were a possibility for Esperance shoppers. He said if the supermarkets worked together, they would have more bargaining power with suppliers and the costs of running each store would fall. But Professor Da Silva Rosa said those savings would only be passed on to consumers if there was competition. "The issue comes where you have one company or one person … dominate a particular town or sector and have all of the shops," he said. Professor Da Silva Rosa said communities across Australia should look for ways to promote competition between businesses to benefit consumers, like reviewing onerous building codes or revising limits on shopping hours. Ms Obourne, from the Esperance Chamber of Commerce, said it was ramping up efforts to attract a third supermarket to town or encourage an existing IGA to change its model to compete with the major supermarket. Elizabeth Jackson, an associate professor of logistics and supply chain management at Curtin University, said small businesses were increasingly difficult to run, especially in regional Australia. She said that, without group models to collaborate and share costs, small supermarkets might fold in remote places. "This business model is allowing food retailers to stay in the regions," she said. Jo Aberle, executive officer of Esperance support service ESCARE, said it was a relief the town still had three IGAs in different areas, ensuring they were accessible to those with limited transport and outside standard retail hours. The only Food Works in Ravensthorpe, 187km west, closed this year. IGA stands for Independent Grocers of Australia. But ASIC records show Mr Kariya, who has connections to all three Esperance IGA stores, directs more than 40 companies, many of which are IGA stores. Yet Esperance is far from the only place where local stores are falling into fewer hands. Across South Australia and New South Wales, for example, the Romeo family owns more than 40 IGAs and Foodland stores, according to their website. Metcash, a large corporation that owns the IGA brand, said it was not unusual for one person or group to own a series of stores. "As a wholesaler and banner operator, we do not have oversight, nor do we control, the way independent retailers structure their business entities." Asked whether a concentration of ownership could harm IGAs "independent" reputation, Ms Jackson did not think so. "What it's very careful to talk about is independence from the big players," she said. "It's still a lot smaller than the Coles, Woolworths, Aldis of this world." In 2023, Metcash said Coles and Woolworths accounted for 65 per cent of grocery sales in Australia, while it held 6.5 per cent of market share.
The Guardian
13-05-2025
- Business
- The Guardian
Woolworths is cutting prices from today. Expect more supermarket competition – but not an all-out price war
Woolworths is cutting prices on hundreds of products from Wednesday, raising hopes the supermarket sector is entering a new period of intensifying competition, colloquially known as a price war. But after a bruising period for the supermarket sector, marked by allegations of price-gouging during a cost-of-living crisis, shoppers may be sceptical of seeing any relief. Is the era of fast-rising grocery prices and supercharged supermarket profits really coming to an end? Australia's major supermarkets, Coles and Woolworths, suffered dramatic hits to their reputation over the past 18 months, as public anger over grocery prices and concerns over the treatment of agricultural suppliers sparked government and regulatory inquiries. Research house Roy Morgan noted earlier this year that the supermarket giants had become some of the most distrusted brands in Australia amid 'allegations of price hikes and profit-driven strategies'. Woolworths, the country's biggest chain, fared worse than Coles – in public perception and then sales – due to a particularly combative appearance before a parliamentary inquiry and a high-profile industrial strike at some of its warehouses that left shelves empty in the lead-up to Christmas. While the major supermarkets offer mirror-like products and pricing, there was also a perception that Coles, utilising its 'down down' campaign, was cheaper than Woolworths – a great advantage in a cost-of-living crisis. 'Trading momentum in terms of sales is very important, and that momentum is very hard to get,' says Hailey Kim, an investment analyst at Wilson Asset Management. Sign up for Guardian Australia's breaking news email 'Once you have it, it lasts many quarters. If you look at the last few quarters, Coles has been a leader in terms of that trading momentum.' In response, the Woolworths chief executive, Amanda Bardwell, announced a $400m cost-cutting program in February, with some of those savings earmarked to pay for price cuts of about 400 products. 'The decision to cut prices on this many items is a bit of a signal that they commit to regain some customers,' Kim says. After a year-long review, the competition regulator found in March that the major chains are among the most profitable supermarket businesses in the world, and that they increased prices during a cost-of-living crisis to boost profits. The supermarket sector is one of the most concentrated among comparable economies, described by the Australian Competition and Consumer Commission as an 'oligopoly'. The University of Sydney supermarket researcher Lisa Asher says there is not enough competitive pressure in Australia to have a genuine price war. 'It would be lovely if there was one but the market conditions do not mean that we will see one,' Asher says. 'We do not have enough competition in the market to create a price war.' Many of the announced savings are modest. For example, Woolworths is dropping its own brand tomato sauce from $2.10 to $2, while a 12 pack of Maggi Noodles is being reduced from $10 to $9. One investment manager tells Guardian Australia they expect Woolworths will accept a stable profit margin, rather than an expanding one, over the near term in order to gain some sales momentum. But the manager believes the major chains will refrain from being too aggressive on pricing. 'There won't be flat-out competition between the majors because that would be negative for both of them,' the manager says. Bardwell said on Monday that families spending $150 on their weekly shop would save about $15 a week when buying the reduced items, marking 'the start of a real, tangible change'. 'This isn't just a short-term promotion; it's about lower shelf prices on the products we know customers regularly shop for, and providing genuine, lasting and dependable value they can count on,' Bardwell said. Woolworths has pledged to keep the products at their new prices 'at least until 2026'. Coles will need to decide whether it follows with its own reductions. While a price war is unlikely, the cuts are still a welcome development directly linked to the intense public scrutiny of the sector, which is set to continue. The re-elected Labor government has promised to boost competition and consumer protections, including improving transparency about grocery prices, price trends, promotions and loyalty programs. Elsewhere, the supermarkets are defending allegations by the regulator they misled shoppers by offering 'illusory' discounts on hundreds of common supermarket products, with those proceedings still in their early stages. There are still regular examples of shrinking products appearing at supermarkets – an issue that fuels distrust among shoppers. (For example, Woolworths is selling a shrunken Brut deodorant stick for double the unit price of the product it replaced.) And there are concerns that when public scrutiny subsides, the major supermarkets will use their market power to expand their profit margins at the expense of shoppers and suppliers, as they did during the inflationary period. Asher says more frequent sector scrutiny is needed, given long lags between inquiries previously. 'We shouldn't be waiting until food price [increases] get out of control before looking at it,' she says. 'The approach should be more considered and structured, as opposed to reactive.'
