Australia Targets ‘Heavy Imbalance’ in Supermarket Sector

Australia is reportedly stepping up efforts to regulate its supermarket sector.

A new government study, the subject of a Monday (April 8) report by The Guardian, warns of the need to reverse a “heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry.”

However, the report said, the study stops short of asking for the ability to break up Australia’s supermarket giants, saying stiff penalties and proper enforcement would be “a far more credible deterrent to anti-competitive behavior than forced divestiture laws.”

The study recommends that Australia’s code of conduct for grocery stores “be made mandatory and apply to all supermarkets with annual revenues exceeding $5 billion, which at present are Coles, Woolworths and Aldi and [the] wholesaler Metcash.”

Under the proposal, the Australian Competition and Consumer Commission “would be able to seek penalties for major or systemic breaches of up to $10 million, 10% of a supermarket’s annual turnover, or three times the benefit it gained from the breach, whichever is the greatest.”

A separate story Monday by Bloomberg News noted that Australia has one of the world’s most concentrated supermarket sectors, with Woolworths and Coles controlling a little more than half of the market.

Meanwhile, in the U.S. grocery sector, economic pressures have consumers spending more conservatively, leading grocers to look more closely at their bottom lines. 

PYMNTS Intelligence has shown that 86% of consumers have made changes to their grocery shopping habits to contend with rising prices, with 58% saying they’ve cut down on nonessential spending, 44% have switched to cheaper merchants, and 34% have reduced the quality of products they purchase.

Against this backdrop, some major players in the supermarket sector are learning that in-house delivery fulfillment may be more trouble than it’s worth.

For example, multinational grocery giant Ahold Delhaize’s Giant Food brand is making the shift at one of its eCommerce facilities in central Pennsylvania, where it will continue to pick and pack orders in-house at its fulfillment center but switch over to third-party delivery.

“We’ve learned over the past few years that there isn’t a one-size-fits-all approach to our eCommerce business, particularly our fulfillment model,” said Ashley Flower, a spokesperson for the grocer, noting that the chain regularly reviews its offerings in an effort to operate “as efficiently as possible.”

Meanwhile, Kroger is closing down three of its in-house delivery facilities — two in Texas and one in Florida — that operated in regions where it did not have consumer-facing stores.