Metcash profit soars as CEO slams lack of grocery competition

Grocery supplier Metcash has this morning posted an 18.4% increase in net profit to $197.4 million for 12 months to 30 April, just hours after its chief executive Andrew Reitzer told the Australian Competition and Consumer Commission’s grocery inquiry that the “cosy duopoly” of Coles and Woolworths was limiting competition and hurting consumers.

Metcash’s profit was boosted by growth in its distribution and fresh food businesses. Reitzer said that while the grocery market remained volatile because of higher fuel prices, inflationary pressures on food and weakening consumer sentiment, Metcash is likely to increase profit by between 9.4% and 13.3% in 2008-09.

The stronger-than-expected Metcash results came just a day after Reitzer appeared before the ACCC’s grocery inquiry in Melbourne. In an extraordinary day of evidence, Reitzer heard ACCC chairman Graeme Samuel argue that independent grocers were doing little to put downward pressure on grocery prices.

Reitzer conceded there is little price competition on the majority of items on Australian supermarket shelves and in fact widespread price matching occurred. But he argued that there was spirited competition on weekly specials, which account for around 40% of all supermarket products.

Reitzer also claimed that unchecked consolidation in the grocery market had allowed Coles and Woolworths to reach a combined market share of 76.3%. “This cosy duopoly has led to weaker competition in the retail market through lack of choice of all Australian consumers.

“On a local level, many consumers have little choice but to reluctantly accept the retail offer of a major chain outlet in their area. With no large independent in their area, the consumer is vulnerable to price increases as well as declines in quality.

“The major chains often point to the availability of food from retailers such as butchers and fruit and vegetable shops as evidence of their smaller share of stomach, but consumers remain heavily dependent on the traditional supermarket for the bulk of their purchases,” Reizter said.

Read more on the grocery inquiry