Yahoo Finance Coles' 'secret $1 deal' to buy out Woolies store
In a development that’s likely to intensify the ongoing supermarket wars, Coles has reportedly paid $1 to officially take control of a store leased to its rival Woolworths.
Fairfax media reports that Coles paid $40 million for the store and reportedly held it through a complex corporate tax structure involving a company based in the British Virgin islands.
The Woolworths store, located at Grosvenor Street in Sydney’s Neutral Bay, is one of the best performing in Australia.
Woolworths is reportedly “livid” that Coles is its new landlord, as it can now access Woolies’ sales data, Fairfax reports.
Coles has defended its actions as a "common" industry practice, dismissing questions about the use of an offshore company to act secretly on its behalf.
Supermarkets on notice
With supermarket competition policy unchanged in more than 20 years, the federal government is pushing ahead with a "root and branch" review of how it applies to the food industry.
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Small Business Minister Bruce Billson said while intense competition between Coles and Woolworths has led to lower grocery prices, there are concerns this has happened at the expense of suppliers.
"Some of the alleged behaviour of supermarkets may not necessarily breach the competition laws as they are today," Mr Billson told a food industry conference in Canberra on Wednesday.
"But at the same time, it doesn't mean that the status quo is necessarily delivering the most efficient or optimal outcomes for the market, our economy and for our consumers."
Related: Woolies stores, servos post sales gains
The price war between the nation's big two supermarket chains could hurt consumers in the long run if food suppliers don't have money to invest in their businesses.
Wesfarmers boss fires back
Wesfarmers chief executive Richard Goyder, the ultimate boss of Coles supermarkets, defended his turf in the wake of the criticism and said Australia does not have a supermarket duopoly.
"I don't buy that at all," Mr Goyder said on Tuesday, pointing to Aldi, Costco and Metcash as evidence of a vibrant market beyond the Coles-Woolworths universe.
Australian Food and Grocery Council (AFGC) chief Gary Dawson fired back the next day in a speech at the National Press Club.
"Australia has the most concentrated supermarket retail environment in the world, with the exception of New Zealand. Seventy to eighty per cent is controlled by the two major supermarkets," Mr Dawson said.
The relationship with the retailers was "far and away the biggest, most challenging issue for food and grocery suppliers".
