Malcolm Knox - Supermarket Monsters: The Price of Coles and Woolworths Dominance

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Why We Argue about Climate Change

ERIC KNIGHT

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ROSS GARNAUT

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Copyright Malcolm Knox 2015

Malcolm Knox asserts his right to be known as the author of this work.

ALL RIGHTS RESERVED.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means electronic, mechanical, photocopying, recording or otherwise without the prior consent of the publishers.

The National Library of Australia Cataloguing-in-Publication entry:

Knox, Malcolm, 1966 author.

Supermarket monsters: the price of Coles and Woolworths dominance / Malcolm Knox.

9781863957304 (paperback)

9781925203257 (ebook)

Coles Limited. Woolworths Ltd. SupermarketsAustralia. Grocery tradePricesAustralia. CompetitionAustralia. Competition, UnfairAustralia.

381.4564130994

Cover design: Peter Long

Cover images: Alexey Buhantsov/depositphotos; JGade/Shutterstock

INTRODUCTION

W oolworths and Coles are luminous successes of Australian enterprise. The two supermarket companies employ more Australians than any entity other than the state governments. Although this country provides just one fiftieth of the worlds economic output and is home to one three-hundredth of its population, these two supermarket operators, whose business is mostly limited to Australia and New Zealand, are among the twenty biggest retailers on the globe, outsized only by the retail megaliths of the United States and Western Europe. Coles and Woolworths have, as Australians like to say of ourselves, punched well above their weight.

While Woolworths and Coles have not had to compete in global markets, unlike other Australian business successes such as BHP, Fosters, Westfield or CSL, their long march to the summit of a uniquely wealthy and isolated retail economy has been no meagre accomplishment. Once-ambitious rivals of Coles and Woolworths are now retail ghosts. The corporate self-esteem these two corporations take from their achievements over the past ninety years (Woolworths) and one hundred years (Coles) is merited. They have emerged, after a century of endeavour, as clear winners.

So theirs is not a story of rise and fall, but of rise and rise. Their histories may only be tallied in the currency of success. Some may like or dislike the supermarkets or what they represent, but that is hardly, in itself, the point facing Australians today. The modern corporation is programmed for creative destruction, and the strongest can no sooner be diverted from its destination than could the Terminator. The vectors that have brought these two companies to where they now stand are more akin to those of physics than of the humanities. As the University of British Columbia law professor Joel Bakan put it in his 2005 book The Corporation: The pathological pursuit of profit and power, The corporations legally defined mandate is to pursue, relentlessly and without exception, its own self-interest, regardless of the often harmful consequences it might cause to others.

It does not take a leftist critique to outline the simple amorality of the modern corporation. Milton Friedman said, approvingly, that a corporations only responsibilities are to its shareholders and its customers, and its only driving force is to maximise profit. Whether it is valued positively or negatively, there is agreement on the nature of this machine. We are not asking if Coles and Woolworths have been true to their founders intentions, or if they have failed in their missions. Those matters are settled. Instead, we pose questions about the consequences of their success: not whether these corporations are good or evil, but what the impact of their ascent on Australian life has been. What, in short, do these companies mean?

The most eye-opening feature of Coles and Woolworths is almost too obvious to comprehend: their stupendous scale. What are the consequences of having two supermarket chains that are so mind-warpingly enormous? There are many ways of apprehending this size, each with a capacity to stun the beholder. On average, every Australian man, woman and child, even taking into account those who never shop at Coles or Woolworths the hospital patients, newborn babies, conscientious objectors and farmers living hundreds of kilometres from the nearest town spends $100 a week on food, merchandise, liquor, hardware or petrol at an outlet owned by either of these two companies. Together, they take in more than 70 cents of every dollar spent in Australian supermarkets. That is how successful they have been, and its only the tip of the iceberg.

They are even bigger than many of us realise. The $100 a week each of us spends at Coles or Woolworths is not limited to the supermarkets. It is the petrol and newspaper from a Coles-Shell outlet. It is the wine from Dan Murphys and the beer from BWS. It is the fertiliser and hose from Bunnings or Masters. It is the clothes from Target, the toys from Big W and the towels from Kmart. It is the coins fed into the pokies at their pubs. Their meaning to Australian life lies not so much in what we spend in their outlets as in the diminishing possibility of spending it anywhere else.

As they have grown, they have converged. Statistically, they are almost mirror images: each has nearly 1000 supermarkets, nearly 700 petrol stations, more than 1000 bottle shops and hotels (making them the countrys biggest poker machine operators), and more than 500 variety and hardware stores. All up, Coles (we will treat it synonymously with its parent company, Wesfarmers, of which retail operations form the major part) has 3383 retail outlets generating $62.3 billion in revenue and $2.7 billion in annual profit, while Woolworths has 3756 outlets generating $60.8 billion in revenue and $2.5 billion in annual profit. The share market values Wesfarmers at $51.2 billion, Woolworths at $43.5 billion. Together, the two corporations employ some 400,000 Australians.

Like anything too colossal and too ubiquitous to stand back from, Coles and Woolworths almost defy comprehension. Rather, we take them for granted. Trying to imagine modern Australia without them is vain; if there were not Woolworths and Coles dominating our malls and our suburbs, we could only conceive of the same giants with different names.

In recent years, there has been an unusual upsurge in disquiet over how the supermarket chains use their dominant positions. The bigger they have grown, the higher the anxiety. At some point, the publics perception of the growth of Woolworths and Coles tipped over from pride in local success to fear and suspicion of their size and power, and their names became lighting rods for populist campaigns against corporate bullying. In June 2014 Woolworths faced nationwide condemnation when farmers supplying fruit and vegetables for the chain were asked for a voluntary contribution of 40 cents a crate, on top of a standard marketing payment of 2.5 per cent, to pay for a marketing campaign starring the British chef Jamie Oliver. Even conservative politicians were stirred, agriculture minister Barnaby Joyce saying the requested payment was a bit rich. Oliver drew ridicule by saying he was only an employee of Woolworths, even though his branding traded on the idea that he could sway a retailers ethical decisions. Coincidentally but symbolically, the next week Woolworths had to recall thousands of defective Oliver-branded vegetable-shaped toys.