Shoppers in rural and regional towns across Australia are bound to pay even higher prices for their groceries, especially those in smaller towns where there are no Woolworths or Coles supermarkets.
That is the claim made by SPAR Australia, the last remaining independent grocery chain of any size, in the wake of a Federal Court judgement which paves the way for Metcash to take over Franklins Supermarkets.
The “practical reality” of the court decision, according to SPAR managing director Lou Jardin, is that Metcash will now control almost 100 per cent of the supply of packaged groceries to family-owned shops and supermarkets. The rest of the market is shared by Coles and Woolworths which account for 70 per cent to 80 per cent of grocery sales.
Mr Jardin has lashed out against the court’s decision in a letter to the Minister for Small Business Nick Sherry and independent MPs Bob Katter, Rob Oakshott, Tony Windsor, Andrew Wilkie, and Nationals Leader Barnaby Joyce.
He said the Federal Court had left “struggling rural and regional Australians” at the mercy of “a monopolist with monopolist pricing power”.
“Metcash now controls around 97.5 per cent of the supply of packaged wholesale goods to the mostly family owned small business independent supermarkets. This is even worse than the Coles/Woolworths duopoly that controls between 70 and 80 per cent of the retail grocery industry,” writes Mr Jardin.
The court case against Metcash was brought by the Australian Competition & Consumer Commission (ACCC) which had sought to block the wholesaler’s $215 million bid to buy Franklins last year. The regulator argued the deal would diminish competition and drive up grocery prices.
However, in a comprehensive defeat for the ACCC, Justice Arthur Emmett found last week that the sale of 80 Franklins supermarkets to Metcash could allow Metcash to better compete with the supermarket duopoly of Woolies and Coles and therefore benefit consumers.
Jardin writes the independent family-owned supermarkets are the main source of packaged goods in the majority of smaller rural and regional towns.
“So this decision will now ensure that small rural and regional consumers will have no wholesale price competition as there will be only one monopolist supplier, Metcash. Rural and regional towns already face high grocery prices, I would fully expect those prices to only go even higher in light of this decision.”
Among his points:
- Smaller rural and regional towns will suffer because Coles and Woollies rarely establish stores where there is a customer base of less than 30,000 people to draw from.
- Most suppliers will only distribute in bulk quantities that can be handled in a warehouse environment. The only retailers that can handle these quantities are Coles, Woolies and Metcash.
- Coles and Woolies mostly compete in very close locations; very rarely do they compete in smaller rural and regional towns.
- Most Independent supermarkets have only one source of supply, the Court’s decision will now entrench that.
Metcash is yet to comment on the SPAR claims. Lou Jardin had worked for Metcash for years before joining SPAR and had been slated as chief executive. He was seen off however by incumbent chief Andrew Reitzer in a power struggle for the top job and subsequently left to head up SPAR.