Check out the hypocrisy in the war on supermarkets
There is a glossy protest poster which rural conservative MPs put up in their parliamentary offices in Canberra last month. It features a bag of groceries under the words “Can you afford to pay Labor’s carbon tax?”
It’s a fair question. Oddly it’s a question being put by the same group of people who are conspiring to make sure that we all pay much more than we need to for our milk.
The National Party and country Liberal MPs have been joined by consumer advocates and competition crusaders in denouncing the conduct of supermarket giant Coles in forcing a price war not only over milk but beer, petrol, even barbecued chooks.
There is something cute about the role of the Nationals in all this. The Nationals spend much of their time trying to keep prices down for people who live in the bush. They also spend a fair bit of time trying to keep prices up for people who live in the city.
Whenever things get too pricey in country Australia there are calls for an emergency meeting of Federal Cabinet. When farmers are forced to compete with imports from another country – even though liberalised trade regimes open up new export markets for Australian primary producers and bring down prices for consumers – city people have often been enlisted through the tax system to mollify or prop up the afflicted industries.
Yet it appears to be the case that whenever things get too cheap in the cities, a Senate inquiry is required to step in make us all pay more again.
I have no burning love for supermarkets. I spent five years working part time at the Adelaide produce markets and would not buy supermarket fruit and veg on principle. Nothing beats a good local butcher. I know that supermarkets on occasions have been caught offering discounts to attract new customers and damage smaller competitors, only to put their prices up again once they have increased their market share.
But in the debate over pricing by the big two supermarkets, particularly Coles which is currently the most aggressive of the two, the issues are being presented in a superficial, black-and-white fashion. It’s like some Vaudeville play where we, the crowd, are implored to boo and hiss when the evil guy from Coles comes on stage.
The most deeply suss moment came when Foster’s – poor little battlers – announced they would withhold supplies of VB from the supermarkets when Coles’ First Choice Liquor and Woolworth’s Dan Murphy’s started selling cartons for $28. Foster’s argued in laughable marketing speak that their first concern was for the consumer and that they didn’t want the supermarkets to “damage the brand”.
Huh? This is Australia. The idea of mass panic due to the availability of cheap beer doesn’t gel with the national psyche. I can’t imagine too many blokes who after a hard day on a construction site would boycott a slab of VB on the grounds that a $28 price tag for 24 stubbies failed to pay due deference to this supposedly sacred brand.
Foster’s claim that $28 was also below cost price begs the question – are they making it wrong? How on earth can it cost $28 to manufacture a slab of VB, which has a wholesale price of $33, given that it’s 99 per cent tap water anyway?
Rather than Coles and Woolies having the cheek to charge us too little for beer, the issue here may well be that Foster’s has been getting away with charging us too much, and someone has finally blown the whistle on them.
Milk is a more emotional question as many of the primary producers affected are small family-based operators. But there is a simple point of economics at the centre of this debate – namely, just because a price has been charged for something for a long time, it doesn’t mean it’s the right price, or a fair price, for the consumer.
If you think back to the introduction of compact discs in the mid 1980s, for a long time it was decreed that all CDs would cost $30 a pop, no more, no less. It was only when the supermarkets smashed the stranglehold of the record stores on top 20 CD sales, and started selling them for $20, that competition began.
Small stores suffered as a result. It’s because they had been charging too much. The fact that Coles and Woolies pushed down prices isn’t an example of collusion or gouging or evil duopolies at work, but an example of competition in its purest form.
The media is very excited about this story and MPs such as Nick Xenophon are all over the television tormenting the big end of town. A quick glance around the suburbs, such as at my local Woolworths last Thursday, suggests a chasm between critics of the supermarkets and the human behaviour of several million Australians who shop at them once a week.
It is hard to put a price on convenience, but most of us are prepared to pay for it. This is what big supermarkets provide – the biggest range in one central location, with plenty of car parking. Even if some prices have gone up or stayed high to pay for headline-grabbing discounts on some lines, shoppers are smart enough to buy the cheap items and avoid those which haven’t been cut.
The one product which makes me go to the supermarket regularly is Diego brand corn tortillas. I love Mexican food and as any decent Mexican cook knows you need real corn tortillas to make proper Mexican dishes.
For all their alleged friendliness and homeliness, independent supermarkets such as IGA never have Diego brand tortillas in steady supply, and usually not at all. Aside from this supply issue, there is now also a cost issue in the tortilla sector. Over the past few years a pack of six Diego brand corn tortillas has cost about $3.50. Diego’s had the corn tortilla space all to themselves. But guess what. Woolies, the bastards, have started making their own corn tortillas. And a pack of 10 Woolies corn tortillas costs $4.19. For an extra 69 cents you get four more. And they’re just as good as Diego’s, painful as it is to say that about a small Australian brand which filled a gap in the market for those of us who like a plate of enchiladas on a Saturday night.
There is a word for these practices. That word is capitalism, and as the saying goes, it sure beats the alternatives.
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