The CEO of retail giant Woolworths has revealed the company enjoys higher margins at its Australian stores than it does in New Zealand.
Michael Luscombe told the Australian Competition and Consumer Commission (ACCC) inquiry into grocery pricing that its margins are lower in New Zealand because Woolworths is not the price leader there.
“We may have to sometimes reduce prices further in New Zealand to make money,” Luscombe said. “The business that we purchased in New Zealand is not in the same position (as here)… significant investments still need to be made in New Zealand. The issue in New Zealand is we have a very strong competitor who has been very stable for a long time.”
Luscombe also reiterated that Woolworths holds a 30.77% share of the grocery market share in Australia, though this figure is disputed by the National Association of Retail Grocers of Australia (NARGA), which puts the combined figure of the two leading retailers, Woolworths and Coles, at 80%.
ACCC head Graeme Samuel questioned the Woolworths’ estimate, saying he found it hard to believe that about 40% of the market could be made up by independents. Luscombe said the rest was made up of Aldi, independent grocers, milk bars, petrol stations and speciality stores.
The ACCC is due to report the findings of its inquiry to the Australian government by 31 July.
Meanwhile, a report by former ACCC chairman Professor Allan Fels threatens to put further pressure on the major supermarket operators.
Fels said in his report that Sydney residents are paying almost 30% more than they should for household goods because of archaic planning laws that allow big supermarkets to dominate in the suburbs.
Fels said consumers in the western suburbs of Sydney are the most disadvantaged and that the out-of-date legislation was hurting competition. The research also found that grocery costs were higher because of the domination of the big players.
Fels is calling for an overhaul of retail planning legislation to allow greater competition and increase the number of supermarkets.