Coles and Woolworths have been robbing us

Photo by Evgenia Tsvirko/Getty
By Joe Montero

Everyone knew it all along. Now the hard evidence is in. Coles and Woolworths have been price gouging and made big increases to their profit margins by doing this. Some would suggest this is a form of theft.

An analysis by Guardian columnist Jonathan Barrett, gleamed from an examination of five years of the financial accounts of the two supermarket monopolies, revealed the use of the covid pandemic to increase prices.

Cartoon by Nicholson

This is hardly surprising. Shoppers depending on Coles and Woolworths knew they faced the increasing cost of their shopping bill at a time when they were particularly vulnerable. Nor were they convinced that this was the result of market conditions.

Coles has explained away the profit rise as due to cost savings. Woolworths has said that price rises were due to increasing costs payments to suppliers. This doesn’t explain why both profits and prices went up together. Reducing costs should work to hold down prices. Increasing supply costs should work to hold down profits. Something else is going on and these supermarkets want to keep this hidden.

For Coles, the gross profit margin from its supermarket division increased from 24.7 percent before the pandemic, to 26.5 percent in its latest result. Woolworths recorded a lift from 29.1 percent to 30.7 percent. These gross figures represent the profit rate before tax and a few other expenses are calculated in. They may appear to be small. Don’t be fooled by this. More than two thirds of Australia’s weekly shopping bill is spent at these two supermarket chains. Any change represents a big part of the nation’s spending.

It can be argued that some price rises have been due to other factors. Examples are the impact of drought, fire and flood on farm products, and the cost of fuel on transport. But these would not result in a simultaneous rise in prices and profit.

The rising profit margins are the result of charging higher prices, and these higher prices are an important part of the rising cost of living being experienced across Australia. In the present circumstances, where a stagnant economy and wages are the medium and long term reality, they are also an important driver of inflation.

The perceived behaviour of the Coles and Woolworths is bound to bring support for any call for an inquiry into their monopoly power. This power brings them the capacity to exercise control over prices and take advantage of any opportunity that may arise. And the pandemic proved to be a good one. Price gouging has continued since the pandemic lockdowns.

Profiteering like this is harmful to society because it both hurts people and misallocates resources in the economy. These are good reasons why it should be delegitimised and banned.

So long as it has real teeth, an inquiry would help to bring out the details of what has been going on. Australia needs to know how monopoly power is operating, the damage it causes, and to determine a course of necessary action to defend our shared interest in blocking this power.

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