Woolworths bread price war raises more concerns

Posted by AFN Staff Writers on 29th September 2014
Woolworths bread price war raises more concerns
Woolworths bread price war raises more concerns

Just days after cutting the price of a loaf of Homebrand white bread to just 85c, Australian supermarket giant Woolworths has announced the latest products in its campaign to reduce the cost of living for Australian families by slashing prices on more consumer staples.

Over recent weeks Woolworths has introduced new ongoing specials on a range of goods including Devondale Longlife Milk 2 litre down to $2, Homebrand Nappies down to $11, Sanitarium Weet-Bix 1.2kg to $4.60 and 24pk Quilton Toilet Tissue down to $12.

From 25 September 2014, Woolworths shoppers can buy 1kg of beef mince for $5 per kg. Carrots will sell for $1.30 per kg in New South Wales, Queensland Victoria, and Brown Onions for $1 per kg in Western Australia, South Australia, the Northern Territory and Tasmania.

These price reductions come close on the heels of Woolworths announcement that it would reduce the cost of its Homebrand white bread to 85 cents a loaf.

“Woolworths has listened to our customers and cut ongoing prices on products they buy the most,” said Tjeerd Jegen, Woolworths Managing Director of Australian Supermarkets and Petrol. “These are staples that families put on the table every day and these cuts can really help with the budget,” he said.

“Our ongoing price reductions on this range of products starting with our 85c Homebrand white bread demonstrate to our customers that Woolworths remains Australia’s lowest price full range supermarket across our customers’ whole shop,” Mr Jegen said. “This is just the start of a range of savings we know will make a real difference to our customers,” he said.

Coles “deep freeze on prices” in its ‘Down Down’ campaign

Meanwhile, Woolworths’ rival Coles has also reduced the cost of many items in its stores in recent months.

Coles said more than 100 product lines were now permanently reduced across the freezer aisles, by as much as 32 per cent. It said its ‘Down Down’ campaign now applied to 35 new frozen product lines and ‘Deeper Down Down’ on 66 products. According to Coles, compared to six years ago, shoppers “can save an average of $570 by shopping at Coles”.

The permanent price reductions at Coles supermarkets include:

  • Coles Brand Frozen Corn Cobs 1kg (Aussie Grown): was $3.80, now $2.60 — Deeper Down Down — save 32 per cent
  • I&J Crispy Frozen Fish Fillets 425gm: was $7.19 now $5.00 — New to Down Down — save 30 per cent
  • Streets Blue Ribbon Ice Cream 2L, multiple varieties: was $6.99 now $4.90 — New to Down Down — save 29 per cent
  • Bulla Frozen Yoghurt 1.8L, Mango & Wildberry varieties: was $6.29 now $4.70 — New to Down Down — save 25 per cent
  • Coles Brand Frozen chips 1kg (Aussie Grown): was $2.49, now $2.00 — Deeper Down Down — save 20 per cent
  • Coles Brand Frozen Fruit 300-500g, multiple varieties: was $5.00 now $4.50 — Deeper Down Down — save 10 per cent

“Coles customers expect lower prices across the store, and with these new ‘Down Downs’ and ‘Deeper Down Downs’ hitting the freezer, shoppers will see savings of up to 32 per cent off some of their favourites,” said John Durkan, Coles Managing Director. “We are more committed than ever to offering our customers great value and great quality, and we’ll continue to keep bringing down prices for Australians in the coming months,” he said.

Price reductions not welcomed by all

But the price reductions put in place by the two major supermarket groups have attracted some criticism.

In the wake of the Woolworths’ ‘Cheap, Cheap Bread’ campaign, Independent Senator for South Australia, Nick Xenophon, has said he will move to reinstate a key part of competition law.

Until 1995 Australia’s competition laws contained a specific prohibition against a firm charging a different price to different persons or groups for the same product or service.

Senator Xenophon said the abolition of then-Section 49(1) of the Trade Practices Act was severely criticised by dairy farmers and the Australian Food and Grocery Council in a 2011 Senate Committee Inquiry into the ‘milk price wars’.

“Woolworths’ latest discounting gimmick of 85c loaves of bread might seem appealing to consumers, but in the long run it will cripple independent supermarkets who can’t access bread at that price from suppliers,” Senator Xenophon said. “When independents are pushed out of business that hurts competition and consumers too,” he said.

“Whether it’s milk, petrol or bread, why shouldn’t the competitors of Coles and Woolworths be able to access prices from suppliers at the same cost as the big two?” Senator Xenophon said. “Prohibiting this sort of price discrimination will level the playing field once and for all,” he said.

Senator Xenophon said that independent petrol retailers had also complained to him that the wholesale price that they often buy fuel for was above the retail prices at Woolworths- and Coles-branded outlets.

Senator Xenophon the 1995 repeal of Section 49(1) was a “big mistake”.

“In the 19 years since the abolition of laws against anti-competitive price discrimination Woolies and Coles have grown significantly and to the detriment of the independent grocery sector,” Senator Xenophon said.

Senator Xenophon said he would release a draft of the proposed reform early next month with a view to introducing the legislation into the Senate in November 2014.