The Australian Competition and Consumer Commission (ACCC) has drawn attention to shrinking product sizes and deceptive pricing strategies at Coles and Woolworths, leading to a major probe into Australia's supermarket giants.
The findings of a 12-month inquiry released on March 21, 2025, revealed that both supermarkets have, in fact, increased their profit margins significantly over the years, particularly Woolworths, which has raised its average profits to astonishing figures—43 percent for potatoes, 38 percent for cucumbers, and 35 percent for bananas.
The probe uncovered what is termed 'shrinkflation,' where product sizes are reduced but prices remain constant or even escalate, a trend that has concerned consumers. The ACCC noted that one of the key issues raised by shoppers during the inquiry was the lack of notification regarding these price hikes.
In response to these findings, the ACCC has recommended that supermarkets be required to inform consumers when the size of a product shrinks or when prices are raised. The Commission further stated, 'This information would, at a minimum, be required to be published in proximity to the product ticket on shelves, and on the webpage for the product.'
Such transparency, the ACCC believes, would help consumers make informed choices and possibly switch to cheaper alternatives if they are aware of price hikes.
Moreover, the ACCC questioned the supermarkets' pricing strategies, which were classified as a 'high-low' pricing strategy. This can create a misleading impression of discounts, painting a false picture for the consumers who may think they are getting a better deal than they are. The inquiry shed light on a pattern where the two major players, Coles and Woolworths, seemed to engage in coordinated pricing strategies, limiting competition rather than enhancing it.
Significantly, the report revealed that there is far less competition in Australia compared to other countries, rendering the supermarket sector more oligopolistic in nature. 'Coles and Woolworths have limited incentive to compete vigorously with each other on price,' the inquiry concluded.
The ACCC also commented on how grocery prices have risen 24 percent over the past five years, juxtaposed with a 22 percent increase in the prices of other goods and services. While there has been mounting criticism against the supermarkets for contributing to the cost of living crisis that has plagued the Australian economy since the pandemic, the ACCC stopped short of accusing them of price gouging.
Instead, it suggested that there is ample room for increased competition in the retail grocery market, particularly for fresh produce.
Dr. Nataliya Ilyushina, an economist at RMIT University, pointed to another issue stemming from the ACCC’s findings—land banking—where major supermarkets buy land around their establishments, effectively stifling new competition. 'The big supermarkets will buy land around them, preventing other competitors,' she explained, emphasizing that in many remote areas, customers have no choice but to shop at one supermarket, creating a local monopoly.
The supermarket landscape in Australia is dominated by a few players: Woolworths leads with 38 percent of sales, Coles follows with 20 percent, Aldi contributes 9 percent, while Metcash-linked independents such as Foodland and IGA make up 7 percent of the grocery trade.
With their market shares increasing and profit margins on the rise, the potential for consumers to be impacted remains high. The ACCC's recommendations, which encompassed a total of 20 suggestions, included enhancing scrutiny over discount claims and making pricing data public as means to increase accountability among Australia's supermarket giants.
In conclusion, the ACCC's inquiry shines a light on the dynamics of the supermarket sector in Australia and raises questions about fairness, transparency, and competition in an increasingly oligopolistic market. As profit margins soar, it becomes essential for consumers to have visibility into the true pricing practices at the major supermarkets that dominate their shopping experiences.
