Files
Abstract
Over the past two years, the oligopsony of Australia’s
big two supermarkets has been put under the spotlight.
Woolworths was the dominant retailer, powering ahead
of Coles which was lost in the haze of a dysfunctional
management team and a poor business model. With the
arrival of Coles’ new team from the UK, the sleeping
tiger has leapt into battle to recover years of lost time.
The Coles recovery strategy and Woolworths defensive
response has thrown agrifood supply chains into disarray.
Milk at $1 per litre, the banning of hormone growth
promotants and the phasing out of caged egg production
are examples of the power of supermarkets to restructure
entire industries and redefine the economics of the Australian food sector.
The farmers’ share of the food dollar continues to decline. Processor and
value-adder margins are now below the levels needed to fund reinvestment
to ensure the sustainability of these businesses. At the same time, the
regulators have been reluctant to confront the issue because, fundamentally,
lower grocery prices are good for consumers. Although there can be little
doubt of the power and impact of the two major retailers, there are signs
that new contenders are encroaching on their space. ALDI is making its
presence felt and Costco has plans for further inroads into the Australian
market. Both offer a totally different shopping experience. On a smaller
scale, farmers markets, specialty retailers and on-line direct businesses are
giving the big boys something to think about.