Updated ,first published
Times are tough in the suburban belts of Australian cities that are the lifeblood of our two largest grocers, Coles and Woolworths, which pocket $2 out of every $3 that Australians spend at a supermarket.
That rising cost of living provides a febrile backdrop to the Federal Court finding on Thursday that Coles misled shoppers with its “Down Down” fake discounts.
Not that the judgment from Justice Michael O’Bryan used that word. He preferred the bloodless, technical phrase “not genuine”. In simple terms, the judgment found that Coles couldn’t claim it had slashed the price of a product when it had been sold for less just weeks earlier, before a short-term price bump in the middle.
Coles had worked on the basis that it could get away with four weeks of higher prices before luring in shoppers with a “Down Down” cut to a price that was actually higher than the item had started at before the price bump.
The judgment from Justice O’Bryan said it needs to be 12 weeks. Which is the exact gap that Coles initially relied on until “competitive pressure from Woolworths” led it to slash this “price establishment period,” the judgment said.
A glass half-full view is this gives the supermarket giants certainty about what period is now considered reasonable.
It also – mercifully – found that the Coles price increases themselves were genuinely based on higher supplier costs, as opposed to price gouging.
“I have concluded that the price increases all resulted from supplier cost price increases, and that Coles increased the prices in a commercially justifiable manner. Coles did not select an artificially high ‘Was’ price for the sample products in order to increase the perceived discount on the Down Down ticket.”
But this will not do much for the mood at Woolworths, which will be battening down the hatches on what looks very likely to be a similar verdict from the Federal Court on the Australian Competition and Consumer Commission’s allegations about the Fresh Food People’s own “discounting” practices. O’Bryan presided over the Woolworths case too, where the ACCC alleged it used almost identical practices to Coles.
Whatever the final judgment on Woolworths – and in its favour, the supermarket stopped using the style of discounts that got Coles in trouble after it was sued – today’s win is a significant one for ACCC chair Gina Cass-Gottlieb. The watchdog has been doggedly trying to hold the big supermarkets to account, despite its inquiry into the grocery giants last year failing to come up with any findings on excessive pricing.
But the champagne corks you could hear popping in the background Thursday morning was the Asolo Prosecco Superiore on sale at the everyday low price of $12.99 at Aldi’s.
The upstart supermarket brand got crunched last year with slowing sales growth and falling profits after Coles and Woolworths upped the price competition.
Aldi’s Good Different branding, and its strategy of largely using baseline low prices, are now looking very attractive for shoppers.
But the real hit will be Australians’ already badly dented trust in the supermarkets.
Last year, Roy Morgan reported on the massive fall from grace for the supermarket giants as rising costs, and allegations of price gouging, eviscerated the goodwill and brand loyalty built up during the pandemic.
Woolworths and Coles – the most trusted brands during COVID when they kept Australians’ pantries stocked – recorded the highest distrust scores since Roy Morgan began tracking brand trust in late 2017.
As Roy Morgan chief executive Michele Levine said: “Distrust has a far more potent impact on consumer behaviour than trust. While trust creates loyalty, distrust can drive customers into the welcoming arms of more trusted brands. The reputational fall of Woolworths and Coles is a powerful reminder of the fragility of trust in today’s environment.”
Ahead of today’s ruling, the pair ranked just ahead of Optus, Meta (Facebook) and Temu as the most distrusted brands, according to Levine.
Thursday’s ruling risks that cynicism setting in for good.
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Colin Kruger is a senior business reporter for the Sydney Morning Herald and The Age.Connect via email.