[divider]
The competition watchdog, Australian Competition and Consumer Commission (ACCC), has recently begun legal proceedings against Coles, claiming that the supermarket giant has “engaged in unconscionable conduct” against its suppliers, by forcing suppliers into making “profit gap” (the difference between the amount of profit Coles had wanted to make on those goods and the amount it had achieved) and “waste” payments (price reductions Coles implemented to clear goods after having accepted the goods).
[divider]
ACCC says that Coles has taken advantage of its bargaining position, demanding payments with “no legitimate basis”.
Leading industry association for the independent grocery and liquor sector, Master Grocers Australia (MGA)/Liquor Retailers Australia (LRA), represents and advocates on behalf of independent grocery and liquor retailers, with regulators including ACCC. In 2012 MGA/LRA developed the Let’s Have Fair Competition Report, to highlight the unfair practices of the chains. This report has since been used to inform politicians and regulatory bodies, as well as the work of ACCC.
Recently drinks trade sat down with CEO of MGA/LRA, Jos de Bruin, to seek further insight into how the association is representing the independent retail sector in its fight for market presence.
drinks trade: Why did MGA/LRA conduct the Let’s Have Fair Competition Report?
Jos de Bruin: In 2010-2011, the biggest concern for grocery and liquor independent retailers was the market dominance of Coles and Woolworths. So we decided to develop Let’s Have Fair Competition in 2012, to highlight the issues our members face.
Later in August 2013 we developed another report – The Let’s Have Fair Competition Report – in which we recommended legislative change; we wrote what we thought would be appropriate legislation, including the suggestion of a supermarket code of conduct – something enforceable, that we felt could generate a robust retail environment that independent chains could compete sustainably in.
DT: These reports have since been used as evidence to support regulatory work, such as the Harper Review, and currently ACCC’s legal proceedings against Coles. What do you hope the evidence in the reports will achieve?
JdB: A lot of our retailers will tell you that competition is not just about substituting one good business with another. Competition is about robust interaction and engagement in a community for the betterment of consumers. Competition is not about the last man standing, that certainly isn’t good for consumers and it’s not good for our members.
We feel that what is occurring is that those with the deepest pockets are the people who will last the longest. We feel that if Coles, Woolworths or Dan Murphy’s, for example, want to develop somewhere, they are either developing to crowd out existing retailers, or because they want to stop new competitors from coming in. And I get that, they have a market saturation strategy, but unfortunately as independents, we are in the middle of it.
We need rules in place to stand back up against this behaviour.
We welcome what ACCC is doing; it’s about time, because prior to Rod Sims (ACCC Chairman) there was nothing being done. I think ACCC is right on the money; it’s addressing something that’s been going on for decades.
DT: What do you think the independents’ strengths are in comparison to the chains?
JdB: They’ve many strengths. The chains pretend to be good at getting involved with local communities but they’re not – they’re a faceless business. I think independents have the ability to engage with their customers on a day-to-day basis, to be able to provide their customers with what they want – service, support, product, etc. Independent retailers are resilient as well. The only thing they don’t have, are those deep pockets.
DT: Do you think it’s important for retailers to be part of a industry association?
JdB: I think it’s more than important.
Mark Brennan, who is the Australian Small Business Commissioner, once said that independent retailers, particularly those in liquor, should be regarded as negligent if they don’t become a member of an industry organisation; from a professional development point of view, from an education point of view, and from a connection point of view.
DT: What issues will MGA/LRA be resolving over coming months?
JdB: Well currently we are working on the Harper Competition Policy Review Report, which is due by the 17 November.
Moving forward we will be vigilant about speaking with our politicians, because it doesn’t matter what reformists suggest unless the politicians get behind the reforms and do what’s right for Australia.
[divider]
MGA/LRA initially started out as Master Grocers Association of Victoria (MGAV) in 1898. As demand for a national body grew, so did the association, and in 2006 MGA expanded nationally and became Master Grocers Australia.
Then, later in 2009, MGA absorbed Liquor Stores Association of Victoria, which resulted in the formation of Liquor Retailers Australia. Today the two work alongside one another.
Today MGA serves as a union for independent supermarket operators, including liquor licensed retailers, and offers services in areas including workplace relations, compliance training, representation and industry networking. MGA works with 500 different grocers and their liquor licenses, including IGA Liquor, FoodWorks Liquor, Cellarbrations, Liquor Legends, Local Liquor and The Bottle-O.
