Sam Hawley: Imagine what could happen to the cost of your groceries if the big supermarkets were in a price war to win your business. Well, we can dream about it, but with Coles and Woolies dominating the market, it's not going to happen. Why? Because they want to keep their profits as high as possible. Today, Four Corners reporter, Angus Grigg, on his investigation into the tactics of the big two players and why their stronghold on the market has suppliers and farmers reluctant to speak out about what's really going on. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily.
Sam Hawley: Angus, we're told they're the fresh food people, that they're selling us all this great food for our dinner table, for our lunches at everyday low prices. And I think for a little while we believed that, didn't we?
Angus Grigg: Yeah, we absolutely did. And, you know, I guess it's a testament to wonderful advertising and catchy jingles.But in recent years, probably over the last 12 months, really, this narrative has absolutely fractured.
Shopper: Have a go at this. It's one of the smaller trolleys too. This just cost me almost $400. This is ****. This is absolute joke.
Shopper: Half price was $19. No, it wasn't. $16.10. You absolute****holes.
Advertisement: Because our goal is to provide Australian families quality food that costs less. And it always will be.
Sam Hawley: So you've been digging around, and as part of your work for Four Corners, you did interview the heads of the big supermarkets, including the head of Woolies, Brad Banducci. Now, he walked out on your interview. Just give me a quick sense of that and then we'll come back to it.
Angus Grigg: Yeah, very strange, actually. We were pushing him quite hard about the lack of competition in the Australian market, and he walked.
Brad Banducci, Woolworths CEO: Yeah, no, I think I'm done, guys. You know, I do this with good intent. You know, I don't do this with bad intent.
Angus Grigg: You're walking out, really?
Sam Hawley: Yeah, all right, rather heated interview. OK, so let's come back to that. But first, I think I want you to take me to a farm where all this process really starts, where all that beautiful, fresh food we see in coals and Woolies comes from. So take me to Orange in New South Wales and to a farm there. Tell me about it.
Angus Grigg: Yeah, so we went and visited Michael Cunial, who's a third-generation orchardist.
Michael Cunial, grower: These are beautiful young trees and they're just coming to perfect production.
Angus Grigg: He really had a very interesting story. He told us about just how difficult it was being a supplier, in this case, to Coles.
Michael Cunial, grower: There's a huge power imbalance.There's a huge power You know, you've got hundreds and hundreds of growers trying to sell to two main supermarkets. So they're dictating the price. They're controlling what's being bought for how much.
Angus Grigg: Now, as a result of the price pressure that he received from Coles, he actually stopped selling to them two years ago. And he was, you know, he just really ran us through all the pressures that he faced. And I guess the ultimate thing about it was that he decided to rip out his trees at the end of last season because he simply couldn't make any money because he had no other choice but to sell to Coles or Woolworths.
Michael Cunial, grower: It's going to be a huge shame to see such fantastic trees and, you know, all that effort just getting pushed into a pile.
Sam Hawley: So they weren't giving him enough money for his cherries, that's his argument?
Angus Grigg: Look, it's more than that, actually.Look, it's more than that, When you broke it all down, in the 2022 growing seasons, he sent 11 shipments to Coles via a third party. Now, it's really interesting because early in the season, he made a small profit on four of those deliveries. But then the next seven deliveries that he sent to Coles, you would say that he maybe just break even or towards the end of the season, began losing a substantial amount of money on each of those shipments. And the really, I guess, galling thing for him was that one of those shipments Coles rejected outright.
Michael Cunial, grower: And, you know, they can pick something out of the air and say, no, we don't like it because of this.
Angus Grigg: And did you have any power to say, I disagree with that?
Michael Cunial, grower: Absolutely no power at all.
Sam Hawley: Gosh, OK, and what's Coles had to say about that?
Angus Grigg: Throughout the interview I had with the Coles CEO, Leah Weckert, she really refused to engage with the substance of questions and pretty much gave me standard responses to most of them.
Angus Grigg: Isn't there a huge power imbalance there? That once the fruit is sent off, they have very little choice other than to take the price that they're given?
Leah Weckert, Coles CEO: So, as I said earlier, we work closely with our suppliers because we know our suppliers have to be successful for us to be successful.
Angus Grigg: Growers are petrified of Coles and Woolworths. They are very, very reluctant to speak out and the simple reason is because they fear being blacklisted or black banned by Coles and Woolworths. And the only reason that Michael Cunial would speak to us was because he was getting out of the industry.
Michael Cunial, grower: It's like they've got their hand on your throat and just letting you breathe.
Sam Hawley: So, that's the perspective from a farm. That goes to how powerful I suppose the supermarkets can be. I want you to take me to the supermarket now because you found a number of insiders or former insiders willing to speak up about what's going on behind closed doors. Now, tell me, who is Julian Hilliard?
Angus Grigg: Yes, so he is a lawyer. He was a long-time employee of both Coles and Woolworths and he did a job that was called a category manager or a buyer. Basically, he was in charge of things like cereal or nappies and he would, on behalf of the supermarkets, he would buy those products and he would negotiate the prices and the promotions and the specials and the discounts and things like that. His job really was to decide what goes on our supermarket shelf. So, these are the people that really are at the sort of coal face if you like of this battle between suppliers and the supermarkets. And look, he was very candid about his experience working for both Coles and Woolworths.
Angus Grigg: So, you're saying when you worked for Woolworths and Coles put a price up, you'd follow pretty quickly afterwards?
Julian Hilliard, former Category Manager: That would normally be the case. If you did five shops in Woolworths and five shops in Coles, you know, and you spent $100, you'd be a few cents difference maybe, depending on the specials.
Sam Hawley: He says you might be given the impression that there's some sort of price war that goes on between Colesand Woolies, but that's actually not the case at all.
Angus Grigg: Yeah, this was, you know, a really sort of startling moment when he reveals that actually Coles and Woolworths do not compete on price. In fact, he sort of goes the other way and says, well, they compete hard for customers. So, they try to get you in the store by having nicer trolleys or better parking or, you know, other sort of things that are, I would argue, sort of peripheral. But when it comes to actual price, they don't compete.
Angus Grigg: How closely do Coles and Woolworths track each other on price?
Julian Hilliard, former Category Manager: Both organisations would have teams of people that would be checking prices to ensure that you were not exceeding what was, I guess, deemed to be the acceptable price in the marketplace.
Sam Hawley: Yeah, really, really interesting. And if there's no price war, the two big supermarkets can, what, just concentrate then on their profit margin?
Angus Grigg: Well, that's the thing. It really is a very cosy supermarket duopoly here in Australia.
Angus Grigg: Do you think your profits are excessive?
Brad Banducci, Woolworths CEO: No. I think they are fair in the context of the investment that goes into the business every year and the performance of our team. Is the question, did we drive profit by jacking up prices? The answer is no.
Leah Weckert, Coles CEO: It's really important that businesses like Coles are profitable enterprises. If you look at our profit, for every $100 that a customer spends in our stores, we make $2.60, and that is broadly consistent with what we see with other global retailers.
Sam Hawley: And there's a term which is very intriguing, Colesworth. Is that what we should call them from now on?
Angus Grigg: Yeah, I hadn't heard this term before, but it had been sort of doing the rounds on social media, this idea of Colesworth, and that basically means that there's very little difference between Coles or Woolworths, and that's what our buyer, Julian Hilliard, was confirming, that really they don't compete on price. So I guess the term's appropriate, really.
Sam Hawley: Mm, OK. So that brings us back to your rather heated interview with the head of Woolworths, Brad Banducci, because he was really taking issue with what Rod Sims was saying, his take on what's going on here.
Angus Grigg: Yeah, that's right. He was, bizarrely, he was really biting back quite strongly at the suggestion that Australia has a concentrated retail environment.
Angus Grigg: Rod Sims, the former head of the ACCC, says that we have one of the most concentrated supermarkets in the world. Is he lying?
Brad Banducci, Woolworths CEO: It's not true, and it's... It is not true. This community over here, there will be three Coles stores within two kilometres of it, at least one Aldi store, a series of independents.
Angus Grigg: And when I pointed out to him that Rod Sims thought the opposite, we sort of got into a bit of a back and forth, back and forth, and he said that, you know, Rod Sims is retired, basically what would he know? And then he sort of thought better of making those comments, and he sort of said to me, oh, can we take that out?
Angus Grigg: He retired 18 months ago, he's not...
Brad Banducci, Woolworths CEO: OK, well, can we take that out? Is that OK? I mean, he is retired, but I shouldn't have said that, Angus. Are we going to leave it in there if we are?
Angus Grigg: Well, I mean, we're on the record, you said it, I mean, you know, let's move on, but...
Brad Banducci, Woolworths CEO: Yeah no, I think I'm done, guys. You know, I do this with good intent. You know, I don't do this with bad intent.
Angus Grigg: You're walking out, really?
Angus Grigg: As you would well know, Sam, CEOs have lots of corporate minders. They went off and talked for five or six minutes and talked him back and he got back in the chair and finished the interview. But I think, you know, really for me, the most interesting thing here is that he's the CEO of a massive corporation. He has been in that job for seven or eight years and really during that time he hasn't faced that much tough questioning or that much scrutiny. And I think, you know, finally that is changing. There is going to be some scrutiny on the supermarket sector or there is being far more scrutiny on the supermarket sector here in Australia, but it really shows you that, you know, a few questions from me and he's getting up out of the chair and walking, that's a strange response.
Sam Hawley: All right. Well, Angus, I guess the big question is, do you think this sort of scrutiny that's now on the supermarkets, is it going to make a difference? Are the supermarkets going to have to change what they're doing?
Angus Grigg: Look, there's six separate inquiries or investigations into the supermarket sector ranging from everything from sort of price gouging to their market power. But whether anything's actually going to change, I've got to say I'm sceptical because the sort of changes that are needed are enormous. I think you might see some tinkering around the edges. I think the merger laws probably will change to make it more difficult for Coles and Woolworths to sort of add incrementally new stores across the country. I think you might see some action from the ACCC around pricing and maybe a warning of some variety for Coles and Woolworths on their pricing practices. You know, you'll see other small changes like the grocery code of conduct. That will become mandatory and maybe there will be some fines for breaches of that. But the really, really big changes that are required, economy-wide changes that are required to reduce the market power of these big two, I think it's too difficult and I don't think any government would be really brave enough to take on these giant corporations like Coles and Woolworths.
Sam Hawley: Angus Grigg is a reporter with Four Corners. You can catch his report tonight on ABC TV at 8.30 or on iView. This episode was produced by Bridget Fitzgerald, and Nell Whitehead. Audio production by Sam Dunn. Our supervising producer is David Coady. I'm Sam Hawley. Thanks for listening.
Imagine what could happen to the cost of your groceries if the big supermarkets were in a price war to win your business.
It’s not going to happen, because Coles and Woolworths dominate the grocery market and want to keep their profits as high as possible.
Four Corners’ reporter Angus Grigg reveals the tactics of the big two players and why their stronghold on the market has suppliers and farmers so reluctant to speak out.
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Angus Grigg, Four Corners’ reporter
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