FMCG duopoly under pressure?

It seems that new ACCC chief Rod Sims is getting serious about the reality of the power of the two major supermarket retailers.

At the same time, Andrew Reitzer  MD of Metcash is giving the ACCC a headache over his presumptive execution of the purchase of Franklins from Pick n’ Pay before the Federal court had ruled, simply on the basis that the business was bleeding cash, and the transaction had to be done, even at the risk of the consequences of  an adverse finding.

An interview by Alan Kohler of  Reitzer and the accompanying commentary give a great insight into the thinking behind the only real alternative to the power of Coles and Woolworths.

The overwhelming power of Coles and Woolworths has nevertheless not stopped the evolution of niche retailers like Harris Farm, competitive regional supermarkets like Drakes and Ritchies, and market entry of Aldi and Costco. The downward pressure on purchase price has however wrecked havoc on the Australian food manufacturing  sector, with very few left, and those that are in pretty shallow water, with the only really large domestically owned manufacturer left, Goodman Fielder performing poorly

I can only hope that in the new environment of more aggressive review of the retailers, that the plight of the domestic manufacturing sector  is adequately considered.

 

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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3 Responses to FMCG duopoly under pressure?

  1. Pingback: A fine line between flattery and robbery « Strategyaudit's Blog

  2. Essceelle says:

    It’s fair to say that as a consumer, and if I was still in FMCG commodity manufacture, I wouldn’t be holding my breath for things to change. The scope of enquiry for the 2008 ‘ACCC inquiry into the competitiveness of retail prices for standard groceries’ looked at the downward push of pricing, lack of acceptance of price rises from manufacturers and duopoly control of the market all for no result.

    In that enquiry, Woolworths just pointed to IGA and Aldi and said ‘there is competition and they are growing’ and the argument falls flat. Little consolation if you are a manufacturer being told that you can supply to us as long as it is at this price AND you make our private label product as well, otherwise we put you on the top shelf where a good proportion of consumers can’t even reach and watch your sales drop before we delist you.

    Or maybe that’s me just being jaded and cynical.

    • Allen says:

      Hi,
      Absolutely right, I suspect not much will change, and competition is taking a bit out of Coles/Woolies share, but not much.
      The manufacturers left are both the best of the bunch because they have not folded yet, and are under great pressure. In the long term, I think consumers will be disadvantaged by the impact of the duopoly, but it is hard to carry that argument as prices to them continue to drop, and who cares if their canned fruit comes from South Africa, their tomatoes from (subsidised) Italy, and frozen veggies from China.

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