Coles faces the music
The Australian Competition and Consumer Commission (ACCC) resumed their grocery price inquiry in Melbourne yesterday, with Coles the latest supermarket to be put under the spotlight and forced to deny accusations of anti-competitive behaviour.
The ACCC has been worried that competition could be limited based on revelations by IGA and Woolworths that they instruct store managers to merely match the prices of their competitors. “If Coles’ instruction to its managers is exactly the same as Woolworths, we’ve got a pretty cosy arrangement at that stage, haven’t we?” Mr Samuel concluded at last week’s hearing.
Coles, however, indicated that, in their endeavours to be competitive, they provided grocery prices between one and three per cent cheaper than their main rival, Woolworths. Chief Operating Officer, Mick McMahon, also claimed that predatory pricing was not practised at their stores with store managers not instructed to undercut to such an extent that they lose money on a sale.
Further, Mr McMahon echoed Woolworths’ claims last week that competition is strong in the supermarket industry and added that they had been trying to absorb price rises and not pass them on to consumers. “That’s why we make sure we are competitive at a local level because at the end of the day, our customers are making choices at a local level and they’re comparing prices not just against Woolworths but they’re comparing them against Aldi and IGA,” he claimed. “Over the last six months, for example, we have passed on less than a third of the price increases we have experienced in the cost of house brand milk.”
ACCC Chairman, Graeme Samuel, then questioned Mr McMahon as to the true difference between two of their home brand milk varieties, ‘You’ll Love Coles’ and the cheaper ‘Smart Buy’. The line of questioning follows accusations two weeks ago by the Victorian Farmers Federation that major supermarkets were duping consumers by providing the same product at different prices by using different brand names.
Mr McMahon stressed that the “in the eyes of the customer” there is a difference, before adding that the Smart Buy milk is sourced nationally while You’ll Love Coles is sourced from the same state as the point of sale.
Mr Samuel was clearly dissatisfied and frustrated by the response. “Are you being serious? What percentage of your customers would differentiate the source of the milk in those two different brands?” he queried.
“So if it was ‘Smart Buy’ milk being sourced in the same state in which it was sold for 20 per cent less than the ‘You’ll Love Coles’ milk, it would be the same source, same quality and, I presume, the same cow, with different packaging?”
Mr McMahon conceded that it was possible for the same milk to be used but maintained that the different brands catered to different customers and were sourced and packaged in a different manner.
The ACCC is scheduled to have their last hearing next Monday in Melbourne with Metcash the last company to be queried.
The final report into the state of competition in the grocery industry is expected on July 31.