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Friday, 16 January 2015

Shop Small! The duopoly of Woolworths and Coles is killing small business

Shop Small! The duopoly of Woolworths and Coles is killing small business

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If the Americans are screaming blue murder because
Wal-Mart and its competitors have 23 per cent of their market, why do we
put up with Coles and Woolies hogging over 80 per cent of ours? Mel
McCartney urges us to Shop Small or face big price hikes. 

IT WASN'T THAT long ago that the aisles of the two major supermarkets
in Australia were full of products other than the Coles and Woolworths
(WWs) "private brands".

Now our choices are limited to their brands competing with few other brands for shelf space. WWs offers 'Select', 'Homebrand', 'Macro, 'Gold' and 'Free From', whilst Coles offers '$martbuy', 'Coles', 'Organic', 'Finest', 'Simply Less' and 'Green Choice'.

This is not new and they model their business models on Tesco
in the United Kingdom (U.K.), right down to their recent convenience
store trials in Victoria but we will get more into that shortly.

Not only do they control over 70 per cent of the supermarket share out of the $82.5 billion grocery sector, but they both have their fingers in many other pies.

WWs for example, is not only the largest operator of hotels and poker
machine venues in the country, but it's also the largest take-away
liquor retailer in Australia. WWs and Coles also make up half of the
Australian petrol retail market, combine this with their discount
shopper dockets for alcohol, petrol and food and their strangle hold is
clearly apparent.

Interestingly there are no links
to either company on labels of wine brands that are owned by either of
the two like they do with their "private brands". Some brands include Cradle Bay, Bay Estates, Oak Lane, Iron Hill and South Island. Out of every dollar that is spent in a retail store in Australia 88c is spent at WWs or Coles.

In comparison to the U.S. where 12c out of every dollar is spent at
their largest retailer which is Wal-Mart, and it commands around 30 per
cent of the market share.

In August 2006, Coles attempted to make inroads into the pharmacy market, where it wanted to establish a presence by purchasing Pharmacy Direct.
They ended up selling it in 2009 at a reported loss of $28 million or
more after a three year battle with the Pharmacy Guild of Australia
(PGA), which concluded with legislation preventing Coles and the like from operating pharmacies within supermarkets.

At the end of June 2014 however, WWs announced its intention of offering in-store "free health checks"
by hiring final year pharmacy students, graduating pharmacists and
nurses to conduct health checks such as blood pressure and cholesterol.

Six stores have been trialling the system in New South Wales (NSW)
and Queensland with the intent of expanding the scheme nationally, and
the idea being that if any customers have readings outside of the normal
range, they will be directed to a doctor or pharmacist for medical

But the PGA is concerned about the move. The Guild's George Tambassis said it is an attempt by the supermarket to

"hoodwink consumers into believing they can get professional pharmacist advice and products from a supermarket.”


"It's a hypocritical and frankly a public disservice that a
supermarket giant which profits so heavily from retailing tobacco and
alcohol products – which are the biggest preventable causes of ill
health and death – is claiming to be interested in health care.”

The next five-year pharmacy agreement between the government and the industry is due this year in 2015.

The then NSW Labor government sold and privatised the NSW lotteries to the Tatts Group (Tatts)
in 2010. A condition of privatising it was a five-year moratorium that
prevented the big two from selling lotto tickets and Scratch-its
tickets. It also ends in 2015 on the March 31, not long after the NSW
state election.

With no review of the agency protection period being undertaken to
identify a future strategy, Tatts will have free rein from April 1 to
sell through any retailer it chooses.

NANA presented a petition to NSW Parliament. The petition read:

‘To the Honourable the Speaker and Members of the Legislative
Assembly of New South Wales in Parliament assembled. The privatisation
of NSW Lotteries in 2010 was accompanied by a five year Agency
Protection Period during which all existing arrangements with agents
were to be maintained. The Agency Protection Period will expire on 1
April 2015 at which point the protections for existing lotteries agents
will cease. This is likely to have long-lasting and devastating
consequences not only for the existing agencies, but also for the
broader local small business community. We the undersigned call upon the
NSW Government to indefinitely extend the Agency Protection Period and
enshrine the protective measure to support the viability of key
community small businesses.’

The petition garnered many signatures was handed to the NSW
government upon popular demand this one was set up too, if you would
like to sign there is only a few hundred or so to go.

As mentioned in the first paragraph, convenience store trials
have begun in Victoria and Sydney and the initial branding for the
"Woolworths' corner store" push is "Woolworths Small Format". WWs is
reportedly snapping up land for smaller corner stores in the centres of
our capital cities, taking on 7-Eleven and other similar-style

7-Eleven has done very well selling Tatts products and no doubt the
multinationals want some of the action. Tatts wants to introduce a new
Franchise Agreement to Newsagents in NSW in July this year and it is
also demanding a corporate branded Tatts shop fit-out from all of the
1,500 agencies (including 300 small retailers selling lottery tickets),
using only Tatts approved shop fitters who have to buy Tatts acquired

With a minimum cost of $22k and "with no contribution from Tatts", if you want to remain a lottery agent, things look very dire indeed.

Tatts also wants to increase "direct debit" access to newsagents accounts for payments from once a week to twice
a week. Cash flow is integral and with prize payments, card
transactions and the reimbursement of them to consider, what will this
achieve exactly? Is it a designated push against small business or a
lack of forward thinking?

NANA Chief Executive, Andrew Packham, says the flow-on effect could
be devastating for newspapers and that the new Lotteries Franchise
Agreements would be economically disastrous. He warned:

“From the April 1 next year, the government oversight of a huge
part of newsagents’ business will no longer be there and the operator
will be able to do whatever it wants.” “The newsagent system was created
to ensure low cost home delivery of newspapers. That entire system is
under threat.

Mr Packham also said that removing
income from lottery tickets would render 60-70 per cent of businesses
non viable. A mediation with
and the Newsagent Association of NSW and ACT (NANA) in November last
year produced no results. The five year moratorium rule was meant to
include meetings every six months between Tatts, NANA and the NSW state
government, this did not occur.


What has eventuated is Tatts having talks with the major players
about lottery sales, following lottery tickets trials in Victoria at
eight Coles Express stores recently. Mr Packham said,

“we will undertake other measures”

and that

“We’re now relying on a political solution to a commercial problem.”

NANA are lobbying state members of parliament and forwarding their concerns to the small business commission.

Gerringong Newsagency co-owner Janet Ware who has been running her business for nearly 12 months told Kiama-Independent Lake Times:

 “We’re distressed by the state government’s lack of support for
our small business, especially when they are a government that says they
are for business……They’ve had five years to make some decisions on
this, and nothing has happened so far. I find it very distressing. The
tireless enthusiasm of newsagents has built Lotto up; we’ve built their
business up to where it is now. Lotto is gambling, and this will put it
into supermarkets and normalise it.”

The Australian Newsagents Federation
(ANF) has written to Bruce Billson, Minister for Small Business, and
Malcolm Turnbull, Minister for Communications, to outline how the
newsagency channel is well-placed to take on more of the Australia Post
services following reports in the Australian Financial Review
that Australia Post will require government assistance to urgently
restructure its letter service in the New Year in order to remain
viable. ANF CEO Alf Maccioni said:

"The ANF was shocked to see how Australia Post is looking for a
government hand out to help with their struggling retail outlets. We
have written to both Bruce Billson and Malcolm Turnbull reminding them
again that there is a network of retailers, larger than Australia Post
out in the Australian Retail landscape that already runs a large amount
of LPO and are willing to help take on more business. Let's look at
saving the government some money by using the largest independent retail
network in Australia."

In June 2013, Bob Katter introduced the Reducing Supermarket Dominance Bill 2013, it didn't get anywhere but had the support of Independent senators Andrew Wilkie and Nick Xenophon.

The bill sought to reduce the market share of Coles and WWs from
their combined market share of around 80 per cent, to no more than 20
per cent each. Senator Katter said:

“The Americans are screaming blue murder because Wal-Mart and
their competitor have now reached about 23 per cent market share. Here
we have two supermarkets with a market share of over 80 per cent, so if
they decide to cut down the amount of money they are going to pay
farmers and jack up the price to the consumers, they can, because there
is no competition”

No competition perhaps with the two majors but you would think plenty
of employment, right? Well according to a Price Waterhouse Coopers report on the state of the Australian grocery industry shows that despite controlling most of the market share,

WWs, Coles and Aldi only employ 43 per cent of all grocery employees.
In contrast, independent retailers with a 20 per cent market share
employ 57 per cent of our nation’s grocery staff.

Clearly this can't go on for much longer. We haven't even touched on
the other brands that they own and fairly recent moves into the
financial markets. The Australia Post idea is good as was Senator
Katter's Bill above but who will have the mettle to tackle them?

Please "Shop Small" whenever you can, or we may end up with only two choices to do our entire shop at.

This article was originally published on on January 12, 2015.

Mel blogs at and you can follow her on Twitter at Lady Mel Mac @CartwheelPrint.

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