ACCC Chairman Graeme Samuel has disputed claims that the grocery sector is becoming more concentrated and consequently posing a threat to suppliers.

In an interview with Business Spectator last week, Mr Samuel said that the ACCC’s grocery inquiry last year – which found the sector “workably competitive” – had managed to dispel some “myths” related to the industry.

“If you examine it, about one half of our 600-page report in that area focuses on the supply chains, focuses on the supply sources. From the farmer right through the processor, through to the wholesalers, the manufacturers and the like and ultimately what happens in this market is two or three things,” he said. “The first is if you get too great a concentration new entrants come in. Aldi’s entered the market. Metcash is a wholesale supplier that has got a very substantial presence.”

In the fresh food area, smaller niche retailers were placing greater pressure on the two leading supermarket chains, Mr Samuel argued, with the market share of the majors below 50 per cent. Coles and Woolworths have both outlined plans to boost their share of fresh produce sales this year, however, as they rollout their improved stores and capitalise on the convenience trend. Coles, for example, is hoping to improve the quality of the produce they sell by improving supply chains and possibly purchasing from local markets.

“Everyone thinks Woolworths is our biggest competitor, but our biggest competitor is right outside our front door,” Wesfarmers Managing Director Richard Goyder said in March. “In a world where convenience is so important, why is that less than 50 per cent of our customers trust us on fresh produce? That is an issue we need to deal with.”

Mr Samuel added that the competition regulator would continue monitoring the make-up of the grocery sector, however he believed that they had to be careful “not to be caught up in some of the rhetoric that’s out there that says Coles and Woolies are becoming exceedingly dominant”. Their report found a concentrated industry but not one which was devoid of competitive tension.

“They’re a duopoly. There’s no one left in the market. Now that’s actually not the case,” he advised. “There are many participants in the market and many new entrants that are coming into the market, both in the fresh food area and in particular in dry package groceries. We’re starting to see some more entry there, particularly with Aldi. Now Costco is coming into Melbourne and then into Sydney. There’s a range of different competitive tensions that are taking place.”

The ACCC is facing a difficult decision in coming weeks in relation to the grocery sector, with an announcement due on Woolworths’ proposed acquisition of organic retailer Macro Wholefoods. Australia’s largest supermarket chain is hoping to turn the stores into Thomas Dux outlets – potentially boosting their gourmet grocer subsidiary.

The regulator has to determine the extent to which organic retailers compete with major supermarket chains and whether or not a purchase by a subsidiary of Woolworths will reduce competition. A final decision is expected next Wednesday (June 17).

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