The issue of the dominance of Wesfarmers (nee Coles) and Woolworths in Australia’s retail grocery sector is often discussed as if it is a matter of purely economic importance.
This is not entirely without reason — it is true that the market dominance is problematic for smaller players wanting to enter the market, and has also had marked effects at the farm and on product manufacturers. However, it is much more than just an economic issue — it also raises major public health concerns.
It is becoming more and more apparent that increased market concentration results in higher prices and lowered choice — a pattern observed not just in Australia but replicated in studies from Finland, Britain and the United States.
And we already know that affordability and access are the major factors affecting healthy food consumption, and that improving these does more to promote better eating habits than any public health intervention.
People generally want to eat healthier, but if we do not address the issues that are making healthy foods less affordable and accessible, or restrict choice, crude efforts to increase consumption will be in vain. This is not a fringe issue — we regularly hear facts such as up to 30% of cancers may be linked to inadequate fruit and vegetable intake, or that poor nutrition now affects the health of developed nations more than smoking.
Food quality may also be compromised in a concentrated retail environment. Vertical integration and the increasingly complex distribution networks of major retailers often means that perishable foods have a longer time between the farm gate and the plate (and may therefore be nutritionally compromised) than those purchased in smaller retailers such as independent greengrocers and butchers — who are often significantly cheaper as well.
The British Competition Commission has recently announced that it will advise the government to add a “competition test” to all new supermarket applications. This test would stop a retailer opening a new (second) store in an area if it already controlled 60% of grocery sales within a “ten minute drive” or if there were less than three other retailers in the area.
It also requires the Office of Fair Trading to be a consultant to local planning authorities on all new development applications in excess of 1000 square metres. Consultation with major retailers resulted in concessions being made on extension of existing stores, but this is limited to 300 square metres — and only if they had not previously been extended within the last five years.
One of the interesting things emerging from the Commission’s report was that it acknowledged that the demise of smaller players and retailers — and the impact on high streets around Britain – was a bad thing not only for the consumer in terms of the hip-pocket, but also had broader negative social implications.
However, the Australian Competition Consumer Commission (ACCC) seems to believe that competition law exists in a vacuum, and that non-economic factors — such as those pertaining to social capital or health – are not important so long as the letter of competition law is not broken.
In its report last year on competition in the grocery retail sector, the ACCC actually acknowledged the potential for increased market concentration to negatively affect access to healthful foods, but suggested that such issues were not within its mandate.
Whilst this is true, the issue should have been referred to an organisation with such a mandate. It is easy to bash the grocery heavies, but at the end of the day these are just companies doing what their shareholders expect them to do — use the systems available to them to maximise profit and accelerate growth.
The real issue is the various upstream factors that have allowed this dominance to play out. These factors are multi-factorial and require a number of approaches.
Planning policy could be used to promote the development of new retail options, and encouraging sustainable competition via these means will be far more effective than designing legislation specifically to break up the duopoly. The rebirth of the high street encourages competitive retail environments, but also requires a concerted effort to ensure these areas remain accessible, attractive and affordable.
The idea of encouraging farmers’ (or even non-farmers’) markets and artisanal foods is also worthy of consideration, though efforts need to be made to ensure they are made broadly accessible rather than just trendy and overpriced.
The idea of ensuring food security by promoting home gardens and urban agriculture may also have a role to play — though in cities like Brisbane this may require tweaking water restriction laws. Legislative tools may also be useful — would consumers stand for the significant rebates and fees major retailers charge producers if they were listed alongside unit pricing? They ultimately pay for them, after all.
It is clear that a multi-faceted approach is required — one that looks at social and health factors as much as economic ones. Perhaps it is time to look at developing healthy policy throughout government, not just specific health policy.
Jon Wardle is lead author on the article “Is lack of competition in the retail grocery sector a public health issue?” published this week in the Australian and New Zealand Journal of Public Health.