Coles and Woolworths, Australia's dominant supermarket chains, have persistently increased their profit margins on food sales throughout the pandemic and cost-of-living crisis, according to a Guardian Australia analysis. Critics argue the pricing decisions amount to inflationary profiteering, as the supermarkets charged shoppers more than enough to cover additional costs and rising expenses.
The analysis of financial accounts over five years shows that both chains used the pandemic to not only sell more goods but also increase the amount they profited from sales. Gross margins at Coles' supermarket division rose from 24.7% before the pandemic to 26.5% in its most recent disclosure. Woolworths' Australian food division margins increased from 29.1% to 30.7% over the same period.
George Boubouras, executive director and head of research at K2 Asset Management, said the figures suggest some sectors are approaching 'oligopolistic pricing power', where a few companies exert control and provide uncompetitive prices. He called for an inquiry 'with teeth' to improve transparency and help bring prices down.
Coles attributed the margin improvements to a cost-saving program involving faster checkouts and changes to stock ordering and distribution centres. A spokesperson said gross margin expansion was driven by 'smarter selling, strategic sourcing initiatives and reduced Covid-related costs'. Woolworths said higher wholesale prices paid to suppliers were the primary driver of inflation, and that many factors besides customer costs influenced margins.
Both chains have defended their pricing, telling a Senate committee into cost of living that they were shielding shoppers from some supplier cost increases. Coles said it often absorbed increased costs rather than passing them on, while Woolworths said it had frozen prices on some essential items. The supermarkets also cited the war in Ukraine and ongoing pandemic disruptions as factors behind high food prices.
