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Woolworths and Coles Putting on the Squeeze

March 5, 2012 by Ben Collins in Business with 0 Comments

Woolworths and Coles are again under the watchful gaze of the Australian Competition and Consumer Commission (ACCC) amid allegations of unconscionable conduct amongst the grocery chain powerhouses.
Rod Sims, the fearless Chairman of the ACCC yesterday confided in reporters that his department had been approached by fearful suppliers complaining about bullying behavior.

In the ongoing supermarket war, Coles and Woolworths have both tried to slash the cost of staple groceries such as toilet paper, milk and fresh bread. Central to this strategy is the apparent squeezing of suppliers on price.

It has been alleged that both chains have been asking suppliers to increase output in order to influence their commitment of capital. Once capital has been committed, the grocery powerhouses who control more than 70% of spending on groceries in Australia, have allegedly put the price squeeze on.

Central to the price squeezing allegations are the increased promotion of the super market chains’ own branded groceries. Woolworths announced in 2011 that it intended to double sales of its Home Brand label over the next five years. This would effectively mean another $4.5 billion in sales which would shift away from other Australian brands already struggling in an ultra-competitive environment.

In their continual expansion into all areas of household consumption, both Woolworths and Coles have been continuing their foray into the liquor industries.

No longer content with just owning the outlets, Woolworths has increased production of its own branded liquor. House alcohol sales for Woolworths of $3.6 billion equalled its second largest supplier after a 13% increase in the December half-year. The company launched 100 new alcohol brands and continued its acquisition of hotels through its hospitality arm.

As the duopoly continues to dominate and extend its reach into all areas of household consumption, the ACCC will continue to monitor its behaviour, particularly when allegations of unconscionable conduct are made.

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