The Australian Competition and Consumer Commission (ACCC) was recently tasked by the federal government to investigate bargaining power imbalances affecting perishable agricultural products between farmers, processors and retailers. Given the ongoing issues within supermarket supply chains and some agri-processors, this review will no doubt find that bargaining power imbalances in these relationships adversely impact the efficient operation of these markets, and current regulations do not go far enough to deliver efficient and equitable outcomes.
Woolworths, Coles and Aldi control over 80 per cent of the grocery market share in Australia, with constant price wars to increase market share which result in the devaluation of fresh food. In 2016, the supermarkets instigated the battle of the milk prices when they reduced the price of their own-brand milk to $1 per litre. They have recently removed the retail price cap but Queensland’s dairy industry declined by 40 per cent during this time. Chicken meat is another staple that our retail giants treat as a ‘sacrificial product’ with the price of roast chickens dropping from $11 to $8 in 2016 and remaining well below fair market price since.
Supermarket imposed price ceilings and heavily discounted agricultural produce have set an unrealistic price bias in consumers’ minds, and according to recent analysis by market researchers IBIS World, this has led to falling industry profit margins for these same retailers. Supermarkets are now bolstering their bottom lines by “shifting away from discounting and towards profit” with competition becoming more “rational” in the grocery sector while a reduction in specials offered on the back of the COVID-19 pandemic will only lead to higher prices at the checkout but not at the farm gate.
Farmers in this country are among the world’s best at growing high quality food, fibre and foliage. As a major link to consumers, supermarkets are accountable for their bargaining power and the imbalances which have resulted in cut price and ‘below the cost of production’ fresh food.