Hands off Coles: Wesfarmers
Wesfarmers chief Richard Goyder has sent a clear message to Canberra not to interfere with the nation's supermarket sector, warning that an attempt to cap the market share of Coles and Woolworths would lead to higher prices for shoppers.
Mounting a spirited defence before shareholders of the Perth-based conglomerate's ownership of the nation's No.2 supermarket chain, Coles, Mr Goyder also made a play to the new Abbott government's "hands-off" approach to the economy, saying shoppers were benefiting from lower prices thanks to strong competitive forces in the grocery sector.
"I keep reading and hearing from market interventionists that market shares should be capped at 20 per cent like in the US," Mr Goyder told shareholders at the annual meeting on Thursday.
"Firstly, that would be a sure-fire recipe for higher prices for Australian consumers, and secondly, there is no such law in the USA. It's simply untrue. Indeed, the ACCC debunked this myth in front of a Senate select committee in 2012."
Mr Goyder, who in 2007 led Wesfarmers' purchase of the struggling Coles, said competition regulator reports have estimated that grocery prices would be 17 per cent higher in towns where a major supermarket such as Coles did not operate.
Internally, Coles and its arch rival Woolworths are greatly concerned that a government could one day try to push through caps on market shares to placate opposition to the perceived power of the supermarket chains. Some critics claim they have a combined grocery market share of about 70 per cent.
This would give a dream run to newer entrants such as German discounter Aldi and warehouse store Costco, the market-heavyweight supermarkets believe, robbing them of customers and freezing any growth opportunities.
The ACCC has led much of the charge, promising investigations into Coles and Woolworths for alleged treatment of farmers and suppliers, as well as shopper-docket schemes for fuel discounts at supermarket-owned petrol stations.
But Mr Goyder pushed back against critics, making some of his strongest comments to date. He said it was simplistic to blame all of the farm and food sector's ills on the chains' interaction with suppliers.
"So I get a bit perplexed when Coles is blamed for many of the challenges in the farming/food sector today," he said. "The farming and food industries do have challenges today, as they have had for many years.
"They are not helped by our strong currency, as well as productivity issues and cumbersome regulations.
"But, it is just too easy, too simplistic, to blame the supermarkets for a lot of these difficulties."
He said all stakeholders - suppliers, shoppers, staff and investors - benefited from the resuscitation of Coles. "Since Wesfarmers took ownership, Coles is now selling an extra $4 billion of Australian food and over 200,000 tonnes more Australian fruit and vegetables, valued at almost $1.5 billion."
He said earnings for shareholders who "took the risk" on Wesfarmers' purchase of Coles have seen the supermarket's pre-tax earnings increase 84 per cent between 2009 and 2013. "We sometimes make mistakes - we are not perfect, and we are very conscious of the important role we play in Australia for all our stakeholders," he said.
The Abbott government has promised a full review of the nation's competition framework.