Australia’s major supermarkets accused of purchasing properties to ‘turf out’ independent stores
The head of the food division at Metcash, which owns the IGA and Foodland brands, has accused major supermarkets of paying inflated prices to buy out competitors, and purchasing properties to “turf out” independently owned stores at the end of their leases.
Grant Ramage, the chief executive of Metcash Food, told a Senate inquiry on Thursday that the practices diminished the network of independent stores by removing successful businesses.
“That removes critical scale from our network and they’re often prepared to pay significantly inflated prices, far more than any other independent would ever afford to pay,” Ramage said on Thursday.
“If they can’t buy the store, they try and buy the property. We have good examples where they then turf out the independent at the end of the lease even when they already have multiple stores in that locality.”
The Senate inquiry, designed to investigate how major supermarkets set prices and use their market power, is due to report its recommendations to the government in early May.
The recommendations may include measures that would help rivals better compete with Coles and Woolworths, which collectively control two-thirds of the market.
Ramage said the major chains also “landbank”, a strategy that ties up sites that could otherwise be taken up by competitors, which he said they do to stifle competition.
“The multiple examples of anticompetitive conduct mean that there is no single solution to addressing their unchecked growth and entrenched dominant position in Australia, but to prevent more of the same, action is needed now,” he said.
A Woolworths spokesperson said most developments in the past five years had been in greenfield areas, including growth corridors.
“Our customers would expect us to build new stores, distribution centres and other facilities with the number of new stores in recent years mirroring population growth,” the spokesperson said.
“Our focus is on our business – strengthening our network of stores and better servicing communities – not on the business or plans of our competitors.” A Coles spokesperson said many factors helped determine where the supermarket purchases land to build new stores, such as proximity to new communities and growth corridors.
“Due to regulatory and other requirements, it can take several years between purchasing land and beginning construction,” the spokesperson said.
“Once the store is operational, we generally sell the site to a landlord to allow us to invest in building new stores.”
Some of the complaints against the major chains resemble those made by other smaller supermarkets.
Fred Harrison, the chief executive of Ritchies Supermarkets, said in a submission to the inquiry that after Coles bought a shopping complex in Brisbane three years ago, it did not offer a lease renewal to a rival store.
Harrison said there were two Coles supermarkets less than five minutes drive apart, leaving shoppers with no non-chain grocery stores.
Public discontent with the supermarkets has been growing as the major chains continue to lift grocery prices while recording strong profits. The farming sector has also raised concerns over the prices they are forced to accept in a sector dominated by two players.
Anna McGrath, the chief executive of Aldi Australia, told the inquiry on Thursday she had noticed that competitors would typically lower prices when the German retailer set up a store nearby.
“I can state that we have had situations where we’ve entered markets and where our competitors have, from our observations, reduced their prices in response,” she said.
The German-owned retailer has almost 600 stores across Australia, although it has been unable to expand into more isolated areas with smaller populations where the major chains are present.