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Both can significantly influence the experience of shoppers on one end and the economic viability and practices of producers on the other.

The first of these has been a headline issue in the last two years, with the Australian Competition and Consumer Commission (ACCC) taking the supermarket giants to court in September 2024, accusing them of misleading marketing via Woolworths’ “Prices Dropped” and Coles’ “Down Down” campaigns.

However, in a follow-up enquiry completed in February 2025, the regulator expanded its concerns into the relationship between producers (including agricultural and horticulture growers) and the supermarkets they do business with, finding the dominance of ‘Colesworth’ is equally problematic there.

In its ‘Supermarkets Inquiry’, the ACCC confirmed the significant market share held by Woolworths and Coles, acknowledging they accounted for 38% and 29% of supermarket grocery sales in Australia.

In third place was ALDI at 9%, while wholesaler Metcash – which supplies independent supermarkets – came up last at 7% in the supermarket rankings.

This formation plays an important role in shaping the national product pricing environment, with the regulator stating that “Coles and Woolworths have limited incentive to compete vigorously with each other on price.”

It added that while ALDI offered a viable low-cost alternative for shoppers – and could therefore act as a “source of price constraint” on the two giants, especially when there was product overlap across all three, it did not compete with them head-to-head across the whole range of products.

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Independent grocery stores – represented by Metcash – often played an important role in servicing local needs, particularly in areas outside Australia’s urban centres, where Woolworths, Coles, and ALDI aren’t always present.

(The ACCC also noted independent stores had been losing market share over time.)

Crucially, the inquiry confirmed the market structure of Australia’s supermarket sector which it described as “oligopolistic” – was unlikely to change soon.

When it comes to the supply chain for fresh produce in Australia, supermarkets – particularly the two majors – are influential players, and this is particularly enhanced when it comes to the horticulture sector.

Woolworths has been buying up between 20% and 25% of the country’s fruit and vegetable supply (excluding processing), while Coles procured approximately 15%.

The ACCC has acknowledged that due to this framework, business arrangements negotiated between supermarkets and growers influenced the production cycle, the pricing of goods, and also the viability of some growers’ and producers’ businesses.

To find out more, the regulator held a series of roundtables with farmers and wholesalers across Australia to gain insight into how farmers and wholesalers perceive this relationship and to hear about their experiences within the supermarket supply chain.

What they found was many suppliers were reluctant to raise concerns about the trading relationship due to fear of retribution; they feared the latter companies being able to practice ‘monopsony’ power in these relationships.

This refers to a situation in which a company can affect the overall market price of a product through its control of a significant chunk of upstream purchases. It can take the form of a price reduction (when the company buys less of it), or even a price increase (when the company purchases more).

The inquiry found many producers felt they had “little choice but to agree to highly unfavourable terms, including lower prices than they would expect if Coles and Woolworths faced greater competition from other buyers,” in addition to feeling under pressure to use ancillary services (such as freight or marketing) that came from the supermarkets in question, even if these were perceived to offer substandard services.

Also highlighted was the problem of information asymmetries which were sometimes taken advantage of by Coles and Woolworths: Resulting in suppliers themselves being unable to make the best business decisions for themselves.

The ACCC concluded protections offered under existing regulatory codes – such as the Food and Grocery Code – should be strengthened to support suppliers.

The unequal relationship between farmers and supermarket buyers may also have a detrimental effect on the former’s capacity to adopt sustainable practices that benefit Australia’s food system overall, according to the Australian Conservation Foundation (ACF).

ACF corporate campaigner Bonnie Graham said several of the concerns raised by the ACCC’s inquiry reflected wider problems of sustainable food production and protection of the environment.

“The competition regulator has highlighted how the supermarket giants’ market dominance means farmers are less able to make informed decisions about how to invest in their businesses,” she explained to HotCopper.

“When Aussie producers don’t have the confidence to invest in their farms, this negatively affects the long-term viability and sustainability of Australia’s food system.

“Many farmers want to adopt nature and climate-friendly production methods to future-proof their businesses and Australia’s food security: the major supermarkets should support their suppliers in making these changes that benefit all of us.”

Ms Graham said adjacent issues connecting food production and environmental sustainability had been raised in the ACF’s Future of Food report, released in July 2024, which assessed 20 major food companies in Australia on how they measured up to 37 indicators of sustainable practice.

A crucial issue for the companies – which included Coles and Woolworths, McDonald’s, Hungry Jacks, Aldi, Bega, and Sanitarium – was their inability to track commodities back to the farm level, with only nine of 20 being able to.

“Food supply chains are incredibly complex, with most food companies purchasing ingredients from middle suppliers, not from the farmers themselves,” Ms Graham said.

“There are often several suppliers and processors between the farm gate and the factory, making it harder for food companies to trace their ingredients back to farm level.”

This made it extremely hard to know how the associated supply chains might be impacting nature, according to the report.

The Future of Food also emphasised the importance of companies following international best practices in setting deforestation targets connected to their production, with some, like ALDI, already ahead on this issue.

“ALDI is a multinational company with headquarters in the EU, and the EU has stronger laws on deforestation and supply chain sustainability than Australia,” Ms Graham said.

“This is most likely the biggest factor in Aldi becoming the first Australian supermarket to adopt a deforestation-free policy.

“Since the Future of Food report was published, Woolworths has also set a deforestation-free target for its products by the end of 2025. Woolworths’ commitment includes beef, which is the biggest driver of deforestation in Australia.”

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This included providing customers with lower prices and “deeper” promotions, simplified promotional programs, clearer specials explanations, and greater accessibility to pricing info through the supermarket’s site and app.

Woolworths also confirmed it was following the ACCC’s recommendation in publishing all product prices online.

“We have worked constructively with the ACCC to help it understand our business, the sectors in which we operate, our suppliers and supply chains, and the considerable competition we face,” Amanda Bardwell, Woolies’ CEO, said.

“We play an important role in the lives of millions of Australians, more than 200,000 teammembers, and our suppliers.

“We have taken steps to improve the experiences customers and suppliers have with us, andcontinue to listen carefully to all of them.

“We fully understand customers want us to make it easier to find value, especially as the cost of living remains their major concern.”

In September 2024, the national regulator took both Woolworths and its close competitor Coles to court over claims their respective staple “Prices Dropped” and “Down Down” campaigns had been misleading.

The ACCC claimed some products were sold at regular long-term prices – excluding short-term specials, sometimes for up to a year – before being increased by 15%.

Then, these same products would be included in Woolworths’ “Prices Dropped” and Coles’ “Down Down” promotions, the ACCC said, with new prices less than the previous spike but still higher than the regular long-term price.

The ACCC review that followed – and which Woolies responded to today – aimed at encouraging greater transparency in pricing among Oz supermarkets.

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In its findings reported today, the ACCC noted “ALDI, Coles, and Woolworths are some of the most profitable supermarket businesses among global peers and their average product margins have increased over the past five financial years.”

Woolworths has been higher after the news and at 10:59am the supermarket was trading at $29.68 – a rise of 5.44% since the market opened.

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Coles’ EBITDA (earnings before interest, taxes, depreciation and amortization) was $2.04 billion for the half year to December 2024, while its underlying profit from continuing operations (excluding significant items) was $666 million.

The supermarket giant also declared an interim dividend (fully franked) of 37 cents per share.

More specifically, Coles said its supermarket sales revenue had increased by 4.3% during the period, while its liquor sales revenue pushed up slightly higher, by 0.8%.

Group CEO Leah Weckert said the business continued to perform strongly within the context of higher cost-of-living realities.

“We have had a strong focus on value, fresh quality and availability which has supported volume-led growth in supermarkets during the half,” she said.

“Pleasingly, we saw improving customer experience metrics during the period, reinforcingthe importance of delivering affordability and a great shopping experience whilst customers continue to face cost of living pressures.

“We made good progress on our Simplify and Save to Invest target, delivering $157 million in cost savings, allowing us to offset continued cost inflation and invest in our customer proposition, whilst delivering returns for the many Australians who are shareholders.”

Coles also announced that its chairman James Graham would be retiring, with Peter Allen appointed as chairman-elect, set to replace Mr Graham from 1 May 2025.

Coles shares jumped after the news, and at 15:58 AEDT, they were trading at $20.35 – a rise of 3.33% since the market opened.

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The 2.8% rise in group sales took Woolworths to $16,800 in the third quarter of the 2024 FY, a rise from $16,338 million for the same period last year.

Within this, the biggest rise was in Australian business-to-business (B2B) sales, which were up 3.2% to $1,098 million, while more modest increases were evident in food sales – which rose 1.5 percent to $12,578 million, New Zealand food sales lifted 1.4% to $1,884 million.

Big W sales were down 4.1% to $1,002 million – from $$1,046 million the same time last year.

Woolworths Group CEO Brad Banducci, said the results indicated greater caution being taken by customers in their spending habits, although he expected the situation to improve as inflation continued to moderate.

“It was a challenging quarter across the Group with a noticeable shift in customer sentiment and shopping behaviours since Christmas,” he said.

“Customer metrics and sales growth across the Group have been impacted but encouragingly unit volumes and customer metrics improved as the quarter progressed and we expect more stable trading in Q4.

“In Australian Food, total sales increased by 1.5% with Woolworths Food Retail’s adjusted total sales also increasing by 1.5%: sales growth reflects the context of a very strong Q3 F23, a material moderation in inflation, and the cycling of collectibles.

“BIG W total sales for the quarter declined by 4.1% reflecting increased consumer caution and downtrading most evident among budget customers.”

Mr Banducci added that both Australia and New Zealand had experienced weak consumer sentiment for a while, causing people to change their behaviour in shops due to concerns about the overall cost of living.

“Customers are looking for more ways to save, are cross-shopping more, buying more own brand and buying more product on promotion,” he said.

Woolworths Group Ltd has been trading at $31.82.