It’s been quite the week. If the major retailers thought they were out of the Weeds of Scrutiny, the ACCC put a swift end to that. Another food and beverage manufacturer declared voluntary administration, this time, dairy processor, Beston Global Food. Food & Drink Business editor Kim Berry reflects on the week that was.
When the Prime Minister took to the lectern at the National Press Club on the 25th of January, and announced he had instructed the ACCC to carry out a 12 month investigation into supermarkets, pricing, and supplier relationships, I wonder just who within the major retailers realised the annus was going to become very horribilis.
There was already a senate select committee on supermarket prices underway, Craig Emerson was carrying out a review of the Food and Grocery Code of Conduct, and Allan Fels was just days away from delivering his report on price gouging and unfair pricing. (Some of those findings still stick with me.)
Then there was the Four Corners investigation and that interview with former Woolworths CEO, Brad Banducci, which in hindsight could possibly be seen as “Beware the Ideas of March: The supermarket version”.
Reckoning
The ACCC’s announcement this week that it was launching court action against Woolworths and Coles for allegedly misleading customers with discount pricing strategy was at best shocking and at worst, not surprising.
It’s irritating because it is a win for all the conspiracy theorists out there who make these claims about (generally) big business with little evidence to support their argument. I can hear everyone’s annoying crusty uncle going on about it at Christmas lunch already.
If proven, it is galling. Woolworths recorded a $1.7 billion profit in FY24, Coles, $1.2 billion.
While both grocers were keen to point out their small their profit margins – (Woolworths/Australian Food Group 3.6 cents in every dollar, and Coles 2.57 cents), when you extrapolate that across hundreds of stores and millions of products – well you get those tidy profits just mentioned.
Former ACCC chair, Graeme Samuel, was reported in the AFR as saying he had “no interest” in defending the two companies, but it could have been the suppliers’ fault for higher prices.
Meanwhile, another former ACCC chair, Allan Fels, was over at the SMH reflecting on the alleged products affected, and if proven, the questions it will raise about Coles and Woolworths’ management and directors.
Ethical questions
The reputational damage is, I think we can say, already done. The fines could be massive, but the answers to the questions – who knew and for how long – are, I suspect, going to be devastating.
Again – if proven – these allegations reflect systematic, illegal practices – and it seems still being used despite the intense scrutiny of the last 12 months.
But, as Samuel advised, only the passage of time in the courts will provide answers.
One final comment though – if the alleged behaviour is proven, what on earth were the decision makers at Coles and Woolworths thinking?
As Coles CEO, Leah Weckert, and Banducci told various inquiries and reported in the FY24 results, the impact of Covid disruptions and then inflation, interest rises, and cost-of-living pressures have created shoppers that are much more judicious in their purchasing behaviour – dropping brand allegiance, buying items only when on sale, and buying in bulk.
With that knowledge in hand, that this alleged illegal pricing dance continued seems unlikely – or absolutely morally bereft.
Consumer smarts
The ACCC said consumers contacting the ACCC, and then it being able to mine its data into social media as well as current chat had been critical in it being able to make its case.
While tales on X and Facebook can be dismissed as hearsay, hyperbole, opinion, or pushing an agenda, the Reddit platform is moderated. If you’ve got something to say on Reddit you better come armed with evidence to back it up.
The AFR had a story this week about how one disgruntled shopped turned to Reddit to express his frustration on the pricing of a Caramello Koala – arguably one of Australia’s most iconic food groups so only mess with it if you dare.
Data scientist, Adam Williamson, said, “Here is a product that was consistently $1 discounted to 80¢ – $1 discounted to 80¢. And then one day, it just jumped up to $2, so now it’s $2 discounted to $1. And Coles is calling that a ‘half price’.”
He then did two things – started a TikTok account called Price Check Guy in July that looked at how the cost of popular items changed over time. Within two months he had more than 15,000 followers.
He also built Woolworths and Coles extensions for Google Chrome that tracked how much an item had previously cost – as my dyed in the wool big nerd husband said, “Never p*$s off a nerd”.
I was going to have a natter about the collapse of Beston Global Foods this week, but am keen to talk to more people in the dairy industry before I do - please get in touch if you are such an individual, even for a chat on background - email me.
