Last month, the owners of Canberra's largest independent supermarket chain, Supabarn, announced they were selling most of their stores in the ACT and NSW to Coles in a deal rumoured to be worth about $70 million. The Koundouris family indicated the sale was for family reasons, but having been thwarted (as they would see it) in their expansion plans – including the establishment of a wholesale distribution network – Supabarn is arguably yet another casualty in Australia's cut-throat grocery retailing sector.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Those supermarket customers who found Supabarn's range and quality of fresh produce superior to that offered by Coles and Woolworths have lamented the Koundouris family's decision to sell. Probably more disappointed, however, are the operators of Canberra's other independently owned grocery stores, most of which trade under the IGA and Shoprite banners. Like Supabarn, these independent retailers are supplied by the Metcash distribution company, and they have concluded, probably correctly, that their wholesaler's buying power is likely to suffer once Supabarn falls under the Coles umbrella.
Within hours of the June 19 sale announcement, Australian Competition and Consumer Commission chairman Rod Sims indicated a public inquiry would be held to ascertain whether the Supabarn deal could lead to a substantial lessening of competition in the market. Public submissions closed this week, and while Masters Grocers Australia, which represents independent retailers (and dedicated Supabarn shoppers) would welcome the ACCC rejecting the deal, the prospects of that occurring do not appear promising.
The test the regulator will apply in consideration is outlined in section 50 of the Competition and Consumer Act (2010). This states that an acquisition is prohibited if it has "the effect of substantially lessening competition in a market" – and in determining this, the regulator has to take into account such matters as barriers to market entry, the degree of countervailing power in the market, and the extent to which substitutes are available in the market, or are likely to be available. With Supabarn's ACT market share estimated at about 7 per cent, the ACCC might take some convincing that a Coles buyout will substantially lessen competition in the Canberra grocery market. Coles will certainly argue the countervailing power of Costco, Aldi (which has 8 per cent of the ACT market) and Woolworths (with 34 per cent) will ensure competition is not lessened, and they will point to Costco's arrival in Canberra in 2011 (and before that Aldi) as indicating there are few serious barriers to market entry.
Supabarn's owners faced major market and regulatory hurdles as they sought to expand, including having difficulty obtaining suitable sites for new stores, and being prevented by the ACCC from buying sites off Franklins when that chain was being sold off. There was also, the family has said, the constant threat by the majors to undercut Supabarn if it became too "aggressive". Their saga indicates that despite efforts to even the playing field, Australia's grocery retail sector remains dominated by Coles and Woolworths. Consumers have embraced the price savings that concentration has brought, but the benefits have not been universal.
