Checked out

The ACCC Grocery Inquiry Report is out. And the dramatically anticipated conclusion: it is normal, normal, normal. It has two big chains (Coles and Woolworths) that occupy 50 – 70 percent of the space depending upon what you are looking at (which is much better than the situation in telecommunications or airlines). And there are a number of other players, most of whom are beholden to a single supplier of goods (Metcash) who knows it is their only lifeline to stock and sets wholesale prices accordingly. There are some minor issues with site regulations that the ACCC says should be freed up but otherwise you get the feeling that they were struggling to say something, anything. Some have argued that the ACCC will have a tough role finding a new Petrol Commissioner but in reading this report, having something to do with groceries is likely to cause potential candidates to die of boredom.

Of course, if you are looking for interest, it is all in Appendix D (the econometric analysis). To my shock, not a single newspaper reports on this today. In that appendix the ACCC looks at the impact of local competition on major supermarket chains. It is a cautious analysis but a relevant one given that prices across different Coles and Woolworths stores can differ between 0.5 and 2 percent on any given week. Now this isn’t at the magnitude of differences between petrol stations but in this highly competitive market, it is interesting nonetheless. For instance, you will save 1.36% on your grocery bill if you shop at a major chain where there is another major chain store within 5 km. That is as good as having an ALDI in your local area. But in terms of other independents the price effects are muted and, on my reading, they are adding little in terms of competitive pressure. No wonder the ACCC is not too fussed about creeping acquisitions of those independents.

The only significant immediate reform to be touted is mandatory unit pricing. That whole issue remains a puzzle as it is unclear why (a) it matters and (b) if it did, wouldn’t the supermarkets have an incentive to put it in place and advertise it. Nonetheless, the government looks set to repeal the innumeracy tax. Of course, have they thought about the educational issues associated with this. When I take the kids to the supermarket, a favourite activity is working out the cheapest size per unit. They learn division that way. Now what will they do? Pick it up at school? Supermarkets are now going to have to think up new ways to pose maths challenges in the aisles.

5 thoughts on “Checked out”

  1. Yup. Our family has long enjoyed an unfair advantage from skill in mental arithmetic, optimising purchases across size, brands and specials. Must everyone be let in on the secret?

    And BTW isn’t it “touted”?

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  2. Shouldn’t those last few sentences be on your other blog? 😉

    I feel I’m going to miss out on any discount I was getting from others paying the innumeracy tax. But then again, time saved might be worth it?

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