Here’s a big test of Graeme Samuel and his plods at the
ACCC, our competition watchdog.

Will they allow Woolworths to buy some of Foodland’s Australian stores as part of the break-up organised with Metcash, even if
it increases Woolies’ already solid grip on the Australian retail trade?

The Woolies’ buys, reportedly in Western
Australia and Queensland,
shouldn’t really be allowed as figures suggest the retail giant already
controls 40% of the Queensland
market and 30% of WA.

Woolies will no doubt trot out the usual figures that
suggest it has only a small share of the total market, but those are used
subjectively. Woolies and Coles control around 80% of the supermarkets business
in Australia.
Their control is being cemented by their growth in liquor.

Metcash will take
the bulk of Foodland’s Australian stores and
wholesale business, especially in Western Australia,
and Woolies will snap up the New
Zealand stores and distribution business of Foodland. Metcash will pay around
$1 billion or so for the local assets and Woolies $2 billion for the Kiwi

The deal is likely to be announced today when Metcash produces its
2004-2005 final profit. The company is now Australian-owned having
bought out its
South African parent as a precursor to the Foodland

The New Zealand
business is the successor of the operations Coles once controlled and could not
make work in New Zealand.
Woolies, under Roger Corbett, is a better operator
than those Coles managers were, so there should not be too much of a worry.

But this should be the last great deal for supermarkets
retailers in this country.

Metcash will emerge
as a true third force with the WA businesses, especially the wholesaling
operation. It will be able to expand its Australian Liquor Marketing arm deeper
into WA to offset Coles and Woolies growth in grog.

Meanwhile the limits to growth for Coles have been exposed.
It has opened its first grog superstore in Melbourne, about eight years behind Woolies
and its 30 or so Dan Murphy stores, and it is spending another $150
million buying back shares.

The big question for Coles is to decide about the future of
Myer, and how many of the stores are to remain at Myer branded outlets and how
many will be sold or turned into Targets, like the company did with grace Bros
stores across regional NSW several years ago.