Yahoo Finance Coles and Woolworths decide if CEOs will face grocery inquiry but prices still 'don't pass the pub test'
Coles and Woolworths have dropped some prices, but are being told the moves are not enough as Aussies struggle.
Coles and Woolworths chief executive officers have decided to front a senate inquiry into price gouging after allegations they've ripped off Aussies struggling through the cost-of-living crisis as they've been told their lower meat prices "don't pass the pub test".
Senators will have the chance to grill Coles CEO Leah Weckert and Woolworths head Brad Banducci after the two supermarket giants were blasted by the Greens for "overcharging people without repercussion" while making billion-dollar profits.
Speaking before the inquiry was announced at the weekend, Australia Institute senior economist Matt Grundoff told Yahoo Finance the grocery market here was "broken", and broke down just why an "uncompetitive" market meant the two rivals could continue to price-match each other, without actually bringing prices substantially down for customers.
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“When the spotlight is on them on this issue, they're prepared to do something," Grundoff said. "But, let's be clear, a sale is a temporary thing. And the moment the spotlight is away, they're going to happily let prices revert to going back up again.”
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He said inflation was higher because "Coles and Woolies are increasing their prices more than they otherwise would be if they were just recouping their costs".
Yahoo Finance has reported extensively on the recent price battle between the two supermarket giants. One drops the price of lamb, and the other will meet them. One shares Christmas ham savings and, within hours, the other also reduces prices.
An analysis of two grocery baskets with ingredients for lunch, dinner, and some household essentials showed the difference between the two was mere cents.
Farmers said the price of red meat had been coming down for months, and both supermarkets publicised in November lamb prices being slashed ahead of Christmas.
But shoppers are still paying up to $20 for a kilogram of mince, and $15 for a steak, prompting Agriculture Minister Murray Watt to apply more pressure for further reductions.
“It doesn’t pass the pub test that Australians are paying so much more for meat at the supermarket than farmers are getting for their livestock,” Watt told news.com.au.
"I’m really pleased to see that Woolies have begun to cut the price of lamb, but we need to see more – from them and the other big supermarket chains.”
Under the microscope: What do $10 meals cost now?
Coles - which told Yahoo Finance it only made "$2.60 for every $100 you spend" claimed it could feed your family for under $10 six years ago. An investigation by Yahoo News in August found the total bill of a humble cottage pie was $24.62.
A price comparison today shows the same meal was slightly cheaper at $23.18 - but still up 131 per cent from 2017. The same ingredients at Woolworths would cost an Aussie shopper $25.03, according to 9News.
What about Aldi? The supermarket underdog has claimed it saved non-Aldi shoppers $675 million last year, simply by pricing some items so low that the major supermarkets had no option but to bring their own prices down. However, Aldi shoppers would still spend $22.02 on a shop for a cottage pie today.
Coles and Woolworths have both said deflation in the fresh-food sector meant they were able to drop the price of some fruit and vegetables by up to 40 per cent.
What do Coles and Woolworths CEOs say about price gouging?
Coles: "We have worked collaboratively with previous inquiries and are ready to work with the committee and engage in an informed discussion on the factors that influence supermarket pricing,” Weckert said.
“We continue to invest in providing great value to our customers, supporting our network of more than 8,000 suppliers and providing employment to more than 120,000 Australians right across the country.”
Woolworths: “We welcome the opportunity to explain to the senate how we are working to balance the needs of our customers, our team, and our suppliers in the context of economy-wide inflationary pressure,” Banducci said.
“As we have done at several inquiries this year, we will openly and constructively assist the parliament with its work on this important topic."
The last time the Australian Competition and Consumer Commission looked at the competitiveness of Australia's supermarket sector was in 2008. The inquiry is tipped to go ahead in early 2024.
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