Woolworths’ expansion plans provoke ACCC
A legal battle between Australia’s largest supermarket group Woolworths Limited and the Australia Competition and Consumer Commission (ACCC) may be looming.
Originally what seemed to be a dispute over the market impact of Woolworths’ proposed acquisition of the Hawker Supa IGA, Canberra’s only independent full-size supermarket, has now escalated.
The ACCC has sought to implement an initial six-month trial of a “streamlined assessment protocol” for single supermarket acquisitions, including new supermarket developments. While Coles has cooperated (although not applying the protocol in its liquor or hardware divisions), Woolworths has not agreed to include the protocol in any Woolworths sectors.
Woolworths has refused to provide information being sought by the ACCC on its future supermarket expansion and acquisition plans.
ACCC chairman Rod Sims said that while he acknowledges the protocol trial period is voluntary, the ACCC is “particularly disappointed with Woolworths” and the lack of cooperation.
“The ACCC will continue to pay close attention to all acquisitions in the supermarket, liquor, hardware and fuel sectors by the major supermarket chains,” Mr Sims said.
The trial protocol is a fresh initiative from the ACCC.
In 2008, the ACCC’s Grocery Inquiry found that barriers limiting competition included entry barriers to the market such as difficulties finding new sites for development, and limited price competition that Coles and Woolworths face from the independent sector.
However, at the time, the ACCC was willing to conclude that “competition between retailers is, however, sufficient to ensure that Coles and Woolworths cannot simply retain all of the benefits of the lower wholesale prices they extract—at least some of the benefits flow to consumers in the form of lower retail prices.”
Woolworths’ acquisition of the Hawker Supa IGA
The ACCC indicated last week that the Woolworths proposed acquisition of the independently-owned Hawker Supa IGA will mean that there is no longer an independent full-size supermarket in Canberra, which currently already has a Woolworths, as well as two Coles supermarkets and two ALDI supermarkets.
Australian Food News has previously reported Woolworths’ expansion strategy and how it contrasts with rival supermarket Coles’ strategy. While Woolworths relies strongly on more stores to grow the business, Coles concentrates on its own store productivity and increasing sales within its current retail locations.
Some commentators such as Macquarie’s Greg Dring have pointed out that the progressive percentage rent formula in the shopping centre leases can explain the Woolworths’ strategy:
“If Woolies owns two stores out of three in town, earning $60 million, it is better off than owning one earning $50 million. Store rent is often based on turnover, so two stores, earning less, pay comparatively less rent, and of course it helps to keep pesky competitors out of the market.”
ACCC Chariman Rod Sims had indicated that if the Woolworths’ takeover of Supa IGA was to go ahead, supermarket competition would be “unlikely to be re-introduced into the local market because of high barriers to entry in the local market, including regulatory limits on development and expansion of supermarket sites.”
“Market inquiries have indicated that the Hawker Supa IGA differentiates its offerings from its competitors in terms of price, product range and service. This differentiation represents a competitive response to the offer of rival supermarkets, providing additional choice to consumers,” Mr Sims said.
The ACCC has invited further submissions in response to the Statement of Issues by 17 January 2013, and will defer a final decision until 7 February 2013.
Meanwhile, the ACCC’s expression of displeasure with Woolworths’ lack of cooperation concerning the ACCC protocol may signal a more difficult process for Woolworths and its acquisition plans.
A new study led by Australian researchers has found a probiotic that may help babies with colic.
Two new studies, separately released this week from Roy Morgan Research and Euromonitor Internationa...
Youfoodz and Meat and Livestock Australia have both made the Advertising Standard’s Board 2017 most ...
Woolworths has announced a comparable food sales growth of 4.9 per cent in the first three months of...
Consumer desire to physically see and choose groceries remains a major barrier to the uptake of onli...
Children from regional and remote Australia are not eating nearly as many vegetables as they need, r...
Recently, Dutch supermarket chain Ekoplaza opened the world’s first plastic-free aisle in one of its...
Snowdale, one of Western Australia’s largest egg producers has been penalised AUD $750, 000 for maki...