Aussie supermarket duopoly comes under the spotlight
New Zealand is not the only country facing rising food costs. Over in Australia the government has directed its Competition and Consumer Commission to launch an inquiry into food prices. Interestingly there the inquiry is focusing on the perceived lack of competition between Australia’s two major grocery suppliers, Woolworths and Coles, who between them control 78% of Australia’s grocery market.
Here is New Zealand the grocery industry is also dominated by just two players, Foodstuffs and the Woolworths-owned Progressive Enterprises. As the Commerce Commission notes
On an aggregated basis, Foodstuffs accounts for an estimated 56% of total New Zealand supermarket grocery sales, and Woolworths accounts for an estimated 44% of total New Zealand supermarket grocery sales.
Currently global pressures such as erratic weather events like drought and flooding, crop land being used to grow biofuels instead of food and the arrival of peak oil are all driving up the price of food around the world. However Australian consumers are concerned that their food retailing duopoly is also contributing to the financial pressure both food producing farmers and food eating consumers are currently feeling. The Australian Competition and Consumer Commission findings may also shine a spotlight on the food price issue here in New Zealand.
January 23rd, 2008 at 11:16 am
Frog — the “peak oil” link talks about demand from emerging markets, biofuels etc — but doesn’t mention peak oil. I believe the issue is still debatable, although demand for oil is obviously outstripping supply.
January 23rd, 2008 at 1:53 pm
‘Tis an interesting connundrum.
Happy duopoly’s are usually looked on as only marginally less bad than monopolies, but that may not be the whole story. As that annoying television ad reminds us, “We buy more, you pay less!”; is it possible that if each of the large supermarkets had their own purchasing, warehousing and distribution that we might actually end up paying more for food as economies of scale are lost…?
January 24th, 2008 at 2:18 am
It wouldn’t only be economies of scale that are lost. Efficiencies from having only two supply chains would also be lost. Although the two giants each have at least two “brands” they often use the same trucks to deliver to both brands. That would not happen if the brands were under separate ownership. Thus breaking the duopoly could lead to a significant increase in truck traffic depending on how much fexibility is available with load factors and driving hours regulations.