The supermarkets are not profit gouging: less than $3 of every $100 spent goes to profits. Look at the market power of brewers and big tech instead.
Already a subscriber?If there was a business sector that people wanted to make legitimate complaints about for so-called “price gouging”, supermarkets would not be high on the priority list based on any rational analysis.
Wage costs have risen sharply, following the government-endorsed Fair Work Commission’s retail worker wage increases of up to 5.2 per cent in 2022 and 5.75 per cent in 2023, plus the 0.5 of a percentage point increase in the superannuation guarantee. Some 80 per cent of the profit is distributed to Coles’ 440,000 shareholders, including many “mum and dad” investors and superannuation funds representing millions more Australians.A 2.57 per cent profit margin, admittedly on high-volume turnover, is broadly in line with, and actually slightly lower, than Coles’ after-tax margins of 2.61 per cent in 2020, 2.6 per cent in 2021 and 2.73 per cent in 2022. Woolworths’ after-tax profit margin is 2.7 per cent.
Coles and Woolworths combined control about 65 per cent of the grocery market, compared to Aldi at 10 per cent and IGA-connected Metcash at 7 per cent. There are also additional retail competitors such as Costco, Amazon, Bunnings, Chemist Warehouse, Bakers Delight, and local butchers and greengrocers.
Perhaps big tech companies compete strongly against each other, even if there are just a few of them. “In 2010, by our count, the commission regulated, monitored, or reviewed competition and pricing across 10 markets. Last year, that number had more than doubled, to 24 markets.”
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