01.Milk price war extends to beer
The Senate inquiry into milk discounting will unofficially extend to beer when both Coles and Woolworths are questioned next week. This comes amidst revelations that Foster's, Australia’s largest brewer, had temporarily stopped the supply of key beer brands to Coles and Woolworths liquor outlets after learning that both retailers planned to sell their beer below the normal retail and wholesale price.
Foster's avoided running into legal issues around restraint of trade by relying on a section of competition law that allows businesses to withhold supply when their products are being used as “loss leaders”. Loss leading involves selling a popular product at a loss to attract customers to a store who might then buy other profitable products - it has been a central to the debate around supermarket milk discounts.
Senator Nick Xenophon applauded the move by Foster's, and has urged the ACCC to take action to outlaw below-cost pricing.
CHOICE has pointed out that the major supermarkets are not the only players with significant market power in this debate, given that Foster’s has shown a capacity to influence the discounting of its products in a way that other suppliers, for example Dairy Farmers, have not. Previous research has suggested that independent liquor outlets are unable to purchase beer at the same price Coles and Woolworths secure from the major brewers.
The Senate Economics Committee launched an inquiry into supermarket milk discounting on 10 February, following concerns that $1-a-litre milk prices would threaten the viability of Australia’s dairy industry.
CHOICE has made a written submission to the Inquiry calling for the establishment of a Supermarket Ombudsman to promote genuine competition, and will appear before the Canberra hearing on Tuesday 29 March.