Woolworths, Coles shares lift after ACCC report
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More news: Woolworths and Coles were the top two performing ASX 200 stocks in early trading after the ACCC outlined 20 recommendations to improve competition across supermarkets but stopped short of recommending a divestiture.
Woolworths shares were up 5% to $29.55 at 11:10am AEDT. Coles shares lifted 3.9% to $19.29. The rally helped the consumer staples sector surge 3.1% as the ASX 200 index added 0.1%.
Woolworths has 'already taken action' on value and transparency, says CEO
More news: Woolworths has noted the recommendations made by the competition regulator following its year-long inquiry into grocery prices and pointed to a number of actions it has already taken to improve value and transparency for customers and suppliers.
The supermarket group said it has delivered "lower prices and deeper promotions", made it easier for customer to find and compare the best unit prices, and publishes all product prices online.
Woolworths CEO Amanda Bardwell said supplier costs to supermarkets have "increased dramatically" in the wake of the Covid pandemic, while prices in the supermarket's Australian food business have declined for four consecutive quarters, year over year.
What they said: "We welcome recommendations that improve transparency for customers where they don't have unintended consequences or increase costs," said Bardwell.
Coles 'welcomes' ACCC recommendations but warns against added red tape
More news: Coles has defended its actions after the competition regulator found that supermarket rivals Coles and Woolworths wield too much power and outlined 20 recommendations to improve competition.
Coles said that it must compete "vigorously" for a share of consumers' grocery baskets due to increased competition from both Woolworths and IGA, as well as multinational players like ALDI, Costco and Amazon, and retail chains like Bunnings, Chemist Warehouse and Priceline.
This "diverse and evolving" competitive landscape benefits consumers by providing more choice and greater value, the company said.
Coles noted that grocery price increases over the past five years have been impacted by the rising cost of doing business, inflation hitting essential costs such as electricity, rent, insurance, wages and transport.
It also flagged that the competition regulator's own analysis shows grocery price inflation in Australia has been lower than in countries like Canada, the UK, the US and New Zealand.
Coles said that its net profit margin has remained at around 2.6% over the past five years, including through the Covid pandemic and the height of inflation.
What they said: "Coles welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs," the group said in a statement.
No break-up, but ACCC report finds unchecked power, demands change
The news: The ACCC’s year-long supermarket inquiry found Woolworths and Coles wield too much power and fit the definition of an oligopoly but stopped short of recommending forced divestiture.
The context: The ACCC report found Woolworths and Coles have entrenched power, limited incentives to compete vigorously and are among the most profitable supermarkets globally, with margins increasing since the pandemic.
It comes weeks before a federal election set to be dominated by the cost-of-living crisis, as Peter Dutton continues to threaten a supermarket break-up and Labor seeks to win back voters frustrated by rising prices.
The numbers: According to media reports citing the 441-page report, the regulator made 20 recommendations to improve competition, including mandatory online price publishing, clearer pricing practices and stronger protections for suppliers.
Grocery prices have risen 24% in five years, with eggs up 47% and milk up 34%.
The government will allocate $2.9 million over three years in the next budget to help suppliers, according to the reports. That is on top of a $30 million increase to ACCC funding granted last year to investigate and take enforcement action on the supermarket and retail sectors.
What they said: Treasurer Jim Chalmers said that while the government supports the ACCC’s recommendations, the report does not back the divestiture powers proposed by Peter Dutton, the National Party and the Greens in response to rising prices.
“This is about ensuring Australians aren’t treated like mugs by the supermarkets,” Chalmers said.
ACCC Deputy Chair Mick Keogh said “there is no ‘silver bullet’ that will address all the issues we have identified in the supermarket sector, but we are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector.”
The sources: ABC, Australian Financial Review, The Australian
