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Odds & Sods
ACCC Attacks the Hero
Tuesday, 12th August, 2008  - David Farmer
"I wonder whether Mr Samuel has been living on the moon."

The hard working executives at Metcash, who saved the independent grocery trade, must be wondering "Why us?" when they read the recent government commissioned report on the grocery industry. The ACCC wrongly concluded that if the independent grocery trade had another wholesaler to buy from they would be able to compete more vigorously against each other and Coles and Woolworths.

Reluctantly they also concluded that maybe it is not profitable enough for two independent wholesalers. Exactly, so be happy that we have at least one that is good and profitable. And recall who allowed the dominance of Coles and Woolworths to occur-why none other than the ACCC.

John David spent a decade joining all the state based independent grocery wholesalers into a large outfit that could compete with Coles and Woolworths. He had to do this as independent retailers were losing market share rapidly, and basically were a disjointed rabble and he could see his family business becoming worthless. He almost pulled it off but management issues in integration almost drove the listed company broke. In 1997 you could buy the forerunner of Metcash for around 40 cents a share. Fortunately some tough South Africans saw an opportunity, put up the money and took over John David's company, Davids Holdings. The fact that we have a thriving independent grocery trade is due to their hard work.

So what does Graeme Samuel say in commenting about the grocerychoice.com web site: "You can see that in 52 of 61 regions, Coles is cheaper, and that the independent outlets are uncompetitive across most of the regions. If I was an executive at one of those retailers, I would be thinking, 'How long can we survive with a reputation as the most expensive outlet?' I would consider changing my pricing practices."

I wonder whether Mr Samuel has been living on the moon. How can an independent wholesaler who will not be buying as well as Coles and Woolworths, and who is in many cases supplying sub standard grocery shops, many who buy in small volume, supposed to make them competitive with Coles and Woolworths. An independent close to a Coles or Woolworths will not survive and mostly but nor entirely the banner groups under the Metcash umbrella provide a supermarket service from smaller suburban centres, small country towns, strip shopping, localised and hard to reach areas in cities and other out of the way locations. Alas they do not have enough stores the equal of Coles and Woolworths. As these stores I guess would cost tens of millions to build and fit-out perhaps Mr Samuel can tell us how a family business is meant to find this type of money. Metcash does do a lot to assist as it's in their interests to have independents thriving. But to then take on Woolworths with price-no thanks. Metcash has in fact done better than it should have as they have been able to feed off the very weak effort over the last decade of Coles. Thank goodness Aldi has arrived and pray that Costco goes ahead.

I leave the last word to Henry Ergas writing in the Australian, 11th August:

"The best that can be said is that though the analysis on which it is based is shallower than a Murray dam, GroceryChoice does not seem as harmful as FuelWatch. But surely the public can expect better of the competition regulator. Is the ACCC really incapable of looking at a market without wanting to tinker with it? Why wouldn't the ACCC give frank advice that gimmicks such as GroceryChoice merely waste taxpayers' money?"

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