Coles, one of Australia’s largest supermarket chains, has rejected the claims of price gouging in the grocery sector, amid an ongoing investigation by the parliament and the competition watchdog. The company’s CEO, Leah Weckert, said that Coles’ profit margins have been flat for years, and that the company needs to make a reasonable return to invest in its business and stakeholders.
Coles reports lower profit but higher revenue
Coles reported its half-year results for the period ending December 2023, showing a 8.4% decline in its underlying profit to A$589 million ($386 million), compared to the same period in 2022. The company attributed the lower profit to higher costs, such as wages, energy, and logistics, as well as lower tobacco sales and increased promotional activity.
However, the company also reported a 3.7% increase in its group revenue to A$22.2 billion, driven by strong sales growth in its supermarkets, liquor, and online segments. The company said that it gained market share in the grocery sector, and that its customers were satisfied with its product quality, availability, and value.
Coles faces scrutiny over price hikes and competition
Coles’ results came amid a heightened scrutiny over the pricing and competition practices in the grocery sector, which has seen inflation rise by an average of 5.5% in the past year. The parliament’s Senate Economics Committee announced in December 2023 that it would launch an inquiry into the claims of price gouging by the major supermarket chains, such as Coles and Woolworths, which together account for about two-thirds of the market.
The inquiry was prompted by a report by the Greens party, which accused the supermarkets of exploiting their market power and raising prices beyond the level of cost increases. The report also claimed that the supermarkets were squeezing the margins of their suppliers, especially the farmers and producers.
In addition, the Australian Competition and Consumer Commission (ACCC) announced in January 2024 that it would conduct a year-long investigation into the grocery sector, focusing on the relationship between wholesale, farmgate, and retail prices, as well as the level of competition and innovation in the market. The ACCC said that it had concerns about the possible anti-competitive conduct and price-fixing by the supermarkets and their suppliers.
Coles defends its pricing strategy and social responsibility
Coles’ CEO, Leah Weckert, defended the company’s pricing strategy, saying that Coles’ profit margins have been stable at around 3% for several years, and that the company needs to make a fair return to invest in its business and deliver for its stakeholders, such as customers, suppliers, employees, community partners, and shareholders.
Weckert also said that Coles’ prices are competitive and reflect the changes in costs and demand, and that the company offers a range of products and promotions to suit different customer needs and budgets. She said that Coles has been investing in lowering prices in key staple categories, such as bread, milk, eggs, and meat, and that the company has seen its inflation rate moderate over time.
Weckert also said that Coles is committed to supporting its suppliers and the Australian agriculture industry, and that the company has a strong track record of social and environmental responsibility. She said that Coles has paid more than A$1.5 billion in additional payments and premiums to its suppliers since 2011, and that the company has implemented various initiatives to improve animal welfare, reduce food waste, and promote sustainable farming practices.