Australia’s biggest supermarket chain, Woolworths, has described the sector as “fiercely competitive”, naming dozens of retailers it says it is vying with for a share of the grocery market.
The country’s other dominant supermarket, Coles, describes competition as “generally strong” and accelerating.
The claims have been made amid growing calls for government-backed measures to increase competition and help alleviate cost-of-living pressures.
In its submission to the Australian Competition and Consumer Commission inquiry, Woolworths provided a list of more than 40 competitors, ranging from a specialist cheesecake maker to newsagents and online delivery services, as proof of the robust conditions it says it faces.
Guardian Australia decided to test that claim by buying and pricing groceries from those stores, and checking for accessibility, to see whether they are really viable alternatives to the major chains.
Bake-off
Woolworths named several highly specialised retailers on its list, most of which have a handful of stores and are unavailable to most shoppers.
For example, Joe’s Meat Market and Bush’s Meats are both butcher chains with just a handful of stores each, all in New South Wales.
The Cheesecake Shop, which shot to fame in the 1990s and has 230 franchised stores across Australia, is one of the more curious names on Woolworths’ list given its highly specialised offerings.
Its “American Baked” vanilla cheesecake with biscuit base weighs just over 1.4kg and is priced at $37.95.
The closest product we could find at Woolworths was a two pack New York-style cheesecake sold in smaller portions. If you bought multiple packs to get up to 1.4kg, it would cost roughly the same as the The Cheesecake Shop option.
Sanjoy Paul, an associate professor at the UTS business school who works on supply chain risk and resilience, says a competitor is defined as a comparably sized company that offers similar products to a major supermarket.
“These are highly specialised stores on the list, and don’t have anywhere near the turnover of supermarkets and don’t deserve to be called competitors,” Paul says.
“If you see a small shop selling some vegetables, that doesn’t make it a competitor to the biggest supermarket in Australia.”
Not ‘the entire range’
In its submission to the ACCC inquiry, Woolworths identified petrol stations, newsagents and convenience store chains as competitors.
Given none of these offer online shopping, our test involved driving there from a Melbourne residence close to the city.
It took about 25 minutes to drive to the nearest Nextra (passing three Woolworths on the way), more than 10 minutes to park, and another 10 minutes to find the news agency inside a shopping centre.
The only Nextra products comparable to Woolworths items are Christmas wrapping paper, notebooks and stationery. They are similarly priced, but the news agency doesn’t sell any essential groceries.
Woolworths told the ACCC it also competes with the Ampol/Foodary chain, although there is a longstanding relationship between the two. Woolworths’ MetroGo stores were rebranded to Foodary last year, and shoppers who spend $30 or more at Woolworths receive a discount on petrol.
Woolworths still supplies some of the products, although the wholesale relationship is coming to an end soon.
When Guardian Australia stopped by an Ampol/Foodary in Melbourne, it offered the usual convenience store fare – snacks, junk food and an assortment of groceries you might turn to in a pinch.
A box of Weet-Bix, one of only a few traditional grocery items on the shelves at the Ampol we visited, was $5.70. It would have cost $3.50 at Woolworths.
There were even fewer options at BP. A can of Rexona women’s deodorant sat alone on one of the shelves, on sale for $11.23. Woolworths was selling the same item for $4.25.
A Woolworths spokesperson said competition comes from any retailer that a customer may choose to spend their money with instead of the supermarket.
“We face competition from many businesses which are not supermarkets, which often operate right alongside our stores on the same street or in the same shopping centre,” the spokesperson said.
“We are not suggesting these businesses offer the entire range we do – groceries are sold today through a variety of convenient online and physical store formats.”
Bigger, but not that big
Under questioning at the inquiry, the Woolworths chief executive, Amanda Bardwell, conceded that only Coles offered an equivalent “one-stop-shop” range.
Even the country’s third biggest grocery chain, Aldi, does not claim it can fulfil all customer needs. Its “shop Aldi first” campaign acknowledges shoppers will top up at other stores for items they can’t find at the discount retailer.
Coles and Woolworths account for about 67% of national supermarket retail sales, according to the regulator. By contrast the UK market has four big retailers – Tesco, Asda, Sainsbury’s and Morrisons.
While the big supermarkets may compete with IGA and high-end options such as Harris Farm in some locations, many of the stores it lists as “traditional supermarket” competitors are highly localised.
Spudshed operates only in Western Australia and Cornetts is a Queensland-only business.
But wait, there’s online
Woolworths named as competitors multiple ready-made meal delivery services.
One of those, Lite n’ Easy, doesn’t sell any groceries, although some of its products are sold in certain IGA and Drakes supermarkets.
Ordering five days’ worth of “standard” breakfasts, lunches and dinners online from Lite n’ Easy will cost at least $134.95 if you want to consume about 1,200 calories a day, or $143.95 for about 1,500 calories daily.
This works out to between $9 and $9.60 a meal, according to the company.
By comparison, a pre-made spaghetti bolognese from Woolworths’ home brand will set you back $8, while a chicken caesar salad bowl costs $6.50. Woolworths also sells the My Muscle Chef ready meals for $11.95 a serve.
When we looked at Lite n’ Easy’s website, the quickest delivery date was a week away.
We searched the Wesfarmers-owned daily deals site Catch for groceries and got an array of results mainly consisting of cleaning products and snacks such as chip variety packs.
The delivery costs for a shopping basket were prohibitive given we didn’t sign up to the paid OnePass membership program promoted across Wesfarmers’ businesses, including Kmart, Target and Bunnings.
Shoppers looking for a very specific cleaning product or household item, and who buy in bulk, can save a few dollars using e-commerce sites, although they have very rudimentary grocery choices.
Amazon is the most interesting prospective online rival, and is heavily cited by Coles and Woolworths as an emerging competitor.
It is the second biggest online goods retailer in Australia, according to a report by Goldman Sachs and is investing in distribution infrastructure, including robotic fulfilment and logistics centres.
While its grocery range is still limited in Australia, it has a fresh produce division that delivers in some US cities and a handful of others in other countries.
Still, even in the US where it is a much more mature business, Amazon commands only a tiny fraction of the grocery market. The data company Numerator says Amazon has just 3% of the US grocery market, half of which comes through sales from its Whole Foods supermarket division, bought in 2017.
Another online retailer, Kogan, is predominantly a consumer electronics brand, not a supermarket rival.
