Food and Grocery Council wants Federal investigation into barriers for supermarkets to enter Australian market

The Federal Government should kick-off an investigation into the barriers for major supermarket chains to enter Australia in a bid to increase badly-needed competition, a key lobby group says. Citing the need for consumer choice and price competition, as well as reduced supplier risks and keeping manufacturing jobs in Australia, the Food and Grocery Council has told a Senate inquiry into supermarket prices additional supermarket competition is required. It wants the Government to investigate barriers faced by new retailers keen to enter Australia, with an aim of developing policies to encourage new participants. The council — whose representatives are testifying to the Senate inquiry on Monday — is also calling for further investigation into the reasons behind German chain Kaufland’s 2020 decision to abandon its Australian expansion plans despite spending $500 million over several years. “The consequences of Coles’ and Woolworths’ combined market share are numerous, but all centre on a significant imbalance in negotiating power between the major supermarkets and their suppliers,” the council said, adding the high barriers to entry had stopped new companies other than Costco and Aldi entering Australia. “Whereas a supplier may derive half of its revenue from one of the major supermarkets, its business will likely represent a tiny fraction of the supermarket’s total revenue.” The council also argues moves by Woolworths and Coles into wholesale distribution, grocery delivery, insurance, dairy processing and retail media entrenches their control of the market. “Suppliers are sometimes encouraged to use services . . . controlled by the retailer at above-market rates, thus further boosting retailer profits, increasing the costs faced by suppliers and their reliance on Coles and Woolworths,” it said. It added the Australian market was yet to hit the “tipping point” to realise the full benefits of competition, and increased competition would remove the basis for the most unfair and problematic pricing practices.