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Have we left ourselves in a vulnerable state? Omicron has left chain store supermarket shelves bare. Is it time to break the grocery duopoly? MGA for many years has addressed the duopoly - Coles and Woolworths – that continues to use market power and dominance to expand and grow at a rate not seen in the world, placing consumers at risk by limiting their choice of where to shop. Over the past decades, family and independent food and grocery businesses have been ‘crowded out’ by unsustainable and unimaginative “must drive to” shopping centre developments across Australia, with market share dwindling from 55% in the 1970’s to approx. 14% today. Experts say empty shelves in the major chain supermarkets underscore the problem with the ‘oligopolistic’ structure of Australia’s grocery industry.
Key points • Australia’s grocery duopoly has exacerbated food shortages, according to a business expert.
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New Zealand is considering ways to break its supermarket duopoly to increase competition.
• Independent retailers have managed to keep shelves full during the Omicron outbreak. Coles and Woolworths control 66 per cent of Australia’s grocery retail market. That is greater than Aldi, IGA and independent outlets combined. This duopoly has exacerbated the disruption caused by the rapid Omicron outbreak. According to Macquarie Business School senior lecturer, Prashan Karunaratne, “Perhaps it’s not beneficial to Australia in the long term if we are mga.asn.au | February 2022 | Edition 1
reliant on these concentrated supply chains which don’t deliver when such shocks hit.” New Zealand is considering ways to break its supermarket duopoly, so should Australia do the same? Coles and Woolworths rely on economies of scale and centralised distribution centres, currently at risk with COVID-19 disruption.
Supply chain disruption Surging Omicron infections in nearly every state and territory have crippled supply chains, forcing workers in processing, packaging, transport, distribution, and supermarket staff into isolation. Consumers have responded to bare shelves by panic buying, going without, or sourcing alternative supplies. Dr Karunaratne said Australia’s supermarket duopoly put consumers in a precarious and unique position compared to other developed economies. “The usual supply chain issues, during some sort of crisis or otherwise, are a little more pronounced in Australia’s case because we have a more concentrated market structure in this grocery chain space.” Coles and Woolworths rely on funnel produce and products through central processing and distribution centres,
then freight them across the country. “They have an over-reliance on central facilities and therefore we have less of them in Australia,” Dr Karunaratne said. “Therefore any disruption causes a larger proportional disruption.”
Independent retail thrives National Farmers Federation President Fiona Simpson says the supply chain story is entirely different for independent retailers, butchers, and grocers. “At the moment, a lot of the independent retailers and smaller fresh food markets and butchers are doing much better than the bigger supermarkets,” she said. Bevan Betros runs a family-owned grocery store, Betros Bros, in the Queensland town of Toowoomba, 120 kilometres west of Brisbane. Aside from some top-brand toilet paper, his shop shelves are full. “I think there’s next to no lines we’re out of as far as fruit and veg go,” he said. “Independents like ourselves, we’re at the market every day and we buy what we want and bring it up or our local growers bring it in, because the stuff has to go — it doesn’t stop growing.” Mr Betros said smaller retailers had flexible supply chains with local farmers even delivering the produce themselves. “There’s no shortage of anything really,” he said. “It’s all to do with distribution systems.”
