Co-op model can help fix problems of Australia’s supermarket sector, says BCCM

The co-op and mutuals apex was responding to an inquiry into the sector by regulator ACCC

Australia’s Business Council of Co-operatives and Mutuals (BCCM) says a co-operative approach can help ensure equity, diverse ownership and community cohesion in the supermarket trade.

The apex body was responding to a paper from the Australian Competition and Consumer Commission (ACCC), which is conducting an inquiry into supermarket prices, looking at how retail competition differs across the country, particularly in regional and remote areas.

Ordered by prime minister Anthony Albanese, the 12-month inquiry comes in addition to a federal senate inquiry and a code of conduct review. 

A major focus of the inquiry will be supermarkets’ approach to setting prices and “whether there is evidence to show that a lack of effective retail competition is contributing to higher prices”.

It will investigate the relationship between wholesale, farmgate and retail prices; barriers to competition; challenes facing new entrants to the market; and the impact on competition of online shopping, loyalty programs and new tech.

“When it comes to fresh produce, we understand that many farmers are concerned about weak correlation between the price they receive for their produce and the price consumers pay at the check-out,” ACCC chair Gina Cass-Gottlieb says.

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“We will use our full range of legal powers to conduct a detailed examination of the supermarket sector, and where we identify problems or opportunities for improvement, we will carefully consider what recommendations we can make to government.”

“With the ACCC inquiry under way there is no better time than now to rethink how consumers and producers can get the best outcomes from the supermarket sector,” said BCCM chief executive Melina Morrison. “We welcome the ACCC’s wider lens on supply chains as well as pricing.

Supermarket competition is not just about lower prices for Australians and fairer relationships with suppliers. It’s about national security. With such high concentration in ownership, supermarkets can have an influence on the shape of domestic food production.”

Morrison added that BCCM‘s submission to the inquiry will encourage the ACCC to closely examine different business models in regional Australia and around the world to find ways to meet the objectives and needs of suppliers and customers.

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“The inquiry represents a fantastic opportunity to support a shift in how the national supermarket sector is managed and how a ‘co-operative’ approach can ensure equity, diverse ownership and community cohesion have equal place alongside profit as major operational benchmarks,” she added.

“If we conclude that certain markets are too concentrated then the answers might lie not only in how to encourage in more players, but also different business models.”

Morrison highlighted the success of supermarket co-ops around the world. “In Germany, two of the three largest retailers are co-ops with a combined turnover of $US142bn, while in France the largest supermarket group, E. LeClerc is a co-op. Italy’s largest supermarket chain, Conad, is also a co-operative with turnover of $US20.1bn. In the UK, the Co-operative is a well-known high street chain of supermarkets. That’s solid evidence of the trust that communities elsewhere in the world place in businesses structured as co-ops.”

There are 134 co-ops active in the Australian retail sector, generating a combined gross revenue of AU$1.13bn in 2023), and BCCM believes there is considerable scope to expand the sector and provide greater competition and choice for consumers.

Nearly 80% of Australia’s existing co-ops are located away from metropolitan areas, added Morrison, “supporting regional communities with essential services, generating vital employment, and retaining wealth in local economies”.

But a new regulatory framework is needed to allow the co-operative business model to develop and provide further diversity, she said.

“We are increasingly seeing that, in Australia, the notion of social licence does actually count for something.

“It is part of the DNA of co-operative businesses, and the growing discontent among Australian consumers should tell us there’s need for more diversity of corporate form as well as more competition.”

The ACCC will give an interim report to the federal government later this year, with a final report due in early 2025.

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