Supermarkets In The Crosshairs For Shrinkflation
As the Australian government continues to crack down on supermarkets for alleged price gouging and unfair supplier relationship terms, the federal government is now looking to target the phenomena of shrinkflation.
“Shrinkflation” – where manufacturers reduce the size of its products but maintain or even increase its price – will now be the target of changes to consumer rules and the introduction of new fines too.
Consumer group Choice has cited examples of household staples including breakfast cereal, potato chips, and cleaning products those displaying shrinkflation.
In a report from earlier this year, it showed how Coles’ Mighty Grain, which was being sold in 560g packets in October 2022, subsequently became available in 495g packages, though the price remained at A$4.50.
Another example it cited was Woolworths’ original salted corn chips which were A$2.30 for 200g in October 2023. The price has stayed constant but, its contents was reduced to 175 grams.
Woolworths and Coles have a combined 67 per cent share of the country’s grocery retail sales, and so their practices come under the most scrutiny.
Prime Minister Anthony Albanese has been targeting supermarket pricing and the government wants to improve unit pricing – the system consumers can use to measure value for money.
Product prices are displayed by their volume, weight or unit. A report by competition watchdog the Australian Competition and Consumer Commission (ACCC) last week found 89 per cent of shoppers regularly use unit pricing in their shopping.
The ACCC said the effectiveness of unit pricing could be improved in Australia, with readability and consistency of the units of measure advertised on supermarket labels improved.
The Unit Pricing Code of Conduct was introduced in July 2009 and requires retailers to display prices by unit of measure for fresh produce, meat, dairy, packaged goods, and other groceries.
Albanese has said that the government will consider whether to expand the range of retailers covered by the code, and also perhaps overhaul specific prominence and legibility requirements and improve cross-price comparisons too.
“We are cracking down on supermarkets to help Australians get a fair deal at the checkout,” the prime minister said. “Tackling ‘shrinkflation’ through stronger unit pricing and new penalties is part of our plan to get a better deal for Australians.
“We are also making changes to make sure the ACCC is a tough cop on the beat, while also encouraging more competition and making sure there are significant consequences for supermarkets who do the wrong thing.”
Last week, the ACCC welcomed the announcement by the Treasurer of A$30 million over 3.5 years in additional funding for investigations and enforcement relating to the supermarket and retail sector.
The ACCC is currently conducting a 12-month inquiry into Australia’s supermarket sector following a formal direction from the government on 1 February 2024.
The interim report which was launched last week found that the price of a typical basket of groceries has increased by more than 20 per cent in the past five years. The ACCC’s consumer survey also indicated that the majority of respondents in low-income households are spending more than 20 per cent of their net income on groceries.
Significantly, almost 50 per cent of respondents to the ACCC’s recent consumer survey said that they ‘always’ or ‘most times’ compare prices between stores before shopping. In contrast, the ACCC’s 2008 Grocery Inquiry found that only 17 per cent of consumers reported ‘always’ comparing prices.
It comes as the ACCC has dragged Coles and Woolworths to court last month for allegedly misleading shoppers over discounting claims on hundreds of everyday products. It contends that the supermarkets offered certain products at a regular price for at least 180 days. They then increased the price of the products by at least 15 per cent for a relatively short period of time, and subsequently placed it onto their ‘Prices Dropped’ or ‘Down Down’ programme.
As part of the government’s efforts to keep the supermarkets in check, the government proposed a new mandatory Food and Grocery Code of Conduct earlier this year which outlined steep maximum penalties which amounted to the greatest of A$10 million, three times the benefit gained from the contravening conduct or 10 per cent of turnover in the preceding 12 months.