$3 billion: profit transfer from manufacturers to retailers quantified

A report by broker Morgan Stanley shows that a profit transfer of $3 billion from food and grocery suppliers and smaller retailers to Coles and Woolworths has taken place over the last seven years.

The report, 'Raiding the Larder' has found that Coles' and Woolworths' share of the food retail profits has more than doubled to $4.4 billion over the last seven years while the profits of smaller food retailers has fallen to $2.5 billion, down from $3.2 billion.

Moreover, in the last four years, the combined profits of food and grocery suppliers have fallen to $3.7 billion, down from $6.1 billion, while the combined profits of Coles and Woolworths have climbed to $4.4 billion, up from $3.1 billion.

If that trend continues, Coles and Woolworths would will be reaping 100 per cent of industry profits by 2020, according to the author of the report, Thomas Kierath.

Kierath has also predicted, however, that the retailers' profit windfall may be coming to an end as governments and regulators crack down on anti-competitive practices.

Last week, the ACCC launched another major legal action against Coles over allegations of unconscionable conduct towards its suppliers.