The question of whether Australia’s major supermarket chains, Coles and Woolworths, have too much power or are trying to control what brands we buy is rarely out of the media. But as former Australian Competition and Consumer Commission (ACCC) chairman Graeme Samuel points out, much of the discussion is driven by vested interests and doesn’t necessarily reflect our interests as consumers. And he argues persuasively against the notion that store brand goods will dominate our shopping habits in the future.
Picture by Ian Waldie/Getty Images
Samuel, who retired as chairman of the ACCC last July, was interviewed at The Conversation on a wide range of competition-related issues. The whole interview is worth a read, but from a Lifehacker perspective one of the most notable issues is the discussion of supermarket competition and the rise of house brands.
Samuel points out that back in 2008, the main anti-supermarket argument was that a lack of alternatives meant prices were likely to rise:
The bemusing element of the debate is this: back in 2008, contrary to all the statistics, it was being said that the two major grocery chains, Coles and Woolworths, were leading increases in the prices of groceries beyond the rate of inflation, and beyond the rates of increases in grocery prices in other major OECD nations. That wasn’t borne out by the statistics, but it didn’t matter, it was what was being put out.
In 2011, the argument switched to suggesting that the price wars between Coles and Woolworths were dangerous for exactly the opposite reason: because they made goods too cheap:
On January 26 last year – Australia Day – Coles announced the commencement of the price war in some of the staples, milk and ultimately, bread. Suddenly the supermarkets were charging too little and so it’s no longer a question of them pushing the prices up. It’s a question of them pushing the prices down too low. And we get another group that comes out which is the suppliers and the farmers in the supply chain who are saying it is going to impact on them significantly. To the best of my knowledge actually, to date, that hasn’t happened.
Samuel suggests that we’re seeing a tussle between the supermarkets on the one hand and other large suppliers on the other:
There is a battle of some quite powerful vested interests that’s going on here and it’s a fascinating tussle for the consumer dollar. On the one hand, (there’s) farmer groups and on the other hand, major supermarket chains like Coles and Woolworths and the Metcash IGA group. But also sitting in the centre are some very powerful suppliers and processors of milk and bread and the like, who are feeling the squeeze.
What’s worth emphasising here is that while this competition has impact on individual groups in the supply chain, the impact for consumers is very clear: goods get cheaper.
Samuel also makes a simple argument against the proposition that we’ll be “forced” into buying store-brand products rather than other brands:
The scare campaign out there – I’m taking home brand products as one of the examples – is that Coles and Woolworths are going to crowd their shelves with home brand products and they’ll sell nothing else.
Well, forgive me, but that can’t possibly happen if consumers are exercising a choice. Because there are a vast number of consumers that simply say they’re not prepared to buy the home brand milk, they’re not prepared to buy the home brand bread, or they’re not prepared to buy the home brand baked beans, or toothpaste, or whatever.
Experience overseas and elsewhere has shown there are some consumers who are very price conscious who will buy the home brand product. And there is a group of other consumers who, for a range of reasons, are less price conscious and won’t buy the home brand product. I first recall reading six or seven years ago about how Coles and Woolworths were going to increase the percentage of home brand products on their shelves by 35%, over a period of two years.
But you know, if I walk up and down those aisles today in either of the major supermarket chains, I’ve actually got to look to the bottom shelves to see the home brand products.
So clearly, Coles and Woolworths don’t believe that their home brands merit eye-level positioning on shelves and there is a massive amount – tens of thousands – of products that are there that are not home brand. So we keep on seeing these prognoses that the home brands are going to take over and there will be no branded products left on the shelves. If that was the case, no one would shop anywhere but Aldi, but that hasn’t happened, it’s just not the way it works.
It’s also very evident that while a lot of noise is made about store-brand goods, that stance isn’t generally reflected in our behaviour. For instance, eggs as a category are dominated by store brands. (That’s also indicative, incidentally, that levels of concern over caged eggs aren’t especially high in the general community.)
Testing by Choice, Lifehacker and others indicates that store brand goods are often (though not invariably) just as good as their pricier equivalents. You won’t know until you check, but many people demonstrate confirmation bias and dismiss the products without actually trying them.
And that’s the ultimate point: whether you want to get the best value or whether you have a particular ‘ethical’ approach to shopping, it’s up to you to consider what you buy carefully. Supermarkets might design their store-brand products to look similar to name brands, but you’re the one who chooses what goes in your trolley.
Having a single dominant supplier has obvious risks (Telstra’s control of the copper network being the clear example). However, with Woolworths and Coles aggressively price-matching and ALDI expanding rapidly, rising food prices because of supermarket behaviour seem fairly unlikely in the near term.
Graeme Samuel: the problem with petrol, the NBN and the “scare campaign” against supermarkets [The Conversation]
Lifehacker’s weekly Loaded column looks at better ways to manage (and stop worrying about) your money.
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