Supermarket giants Coles and Woolworths have defended their pricing and practices to a Senate inquiry examining their market powers, as the duopoly faces increasing scrutiny during a cost-of-living crisis.

The inquiry was launched after the Greens accused the big two supermarkets of using inflation to jack up prices on consumers.

It will hold public hearings before a Senate committee report is released in May.

On the defensive

Coles claimed that while prices are increasing in store – and despite recording a $1 billion profit last financial year – it has not led to greater profits for the supermarket.

“A key driver of supermarket price increases has been cost price increase requests from our suppliers and farmers,” Coles said in its submission.

“Coles received an average of over 70 requests per week from suppliers and farmers in FY22 and FY23.”

Woolworths argued that “empirical evidence demonstrates that Australian consumers enjoy high levels of supermarket competition and choice,” pointing to Aldi, Costco and Amazon’s presence in the market as proof.

“In addition to global competitors, we continue to face robust competition, both in store and online, from long-standing rivals Coles, Metcash and the independent sector,” the submission said.

“On top of this, large national retailers such as Kmart, Bunnings, Chemist Warehouse, The Reject Shop and others compete vigorously in key long-life food and everyday needs products.”

Coles said Costco and Aldi’s presence in Australia is proof of strong competition. Photo: AAP

Woolworths said it received more than 1800 cost increase requests from “long-life suppliers,” averaging 4.5 times as many compared to pre-COVID-19 levels.

The supermarket giant made a $1.7 billion profit in the 2023 financial year.

Will prices go down?

In its submission, Woolworths said it was confident prices would continue to fall as inflation and supply issues subside.

“Prices have been falling across beef and lamb products since the middle of 2023,” it said.

“We have dropped the price of (roughly) 80 red meat products over the last six months, including 20 per cent off all lamb standard cuts in November 2023.”

Coles said it is investing in “state-of-the-art automation” to create lower cost bases.

“More than ever, customers are seeking value and Coles remains committed to providing immediate cost-of-living relief through our value campaigns, Flybuys discounts and our growing, award-winning Coles own brand offering,” it said.

“We work constructively with our suppliers on promotional campaigns to offer great value to customers and to limit or defer the impact of supplier cost price increases to keep costs low for customers.”

Under fire

The submissions come as an ACTU price gouging report found that rising prices across many industries, including supermarkets, were because of “profit pushing” and not true inflation.

“Neither Coles nor Woolworths experienced declines in profit nor revenue over the pandemic as their main businesses were, rightfully, deemed essential services,” report author Allan Fels said.

“What has occurred since the pandemic, though, is an increase in margins in both Coles and Woolworths food and grocery segments driven by low competitive forces and an ability to not pass on immediate cost reductions.”