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Alan Jones:

More on Woolworths 8 March 2007

But equally if I'm to take your correspondence seriously, as I do, I must return to this growing scandal that is Woolworths' monopoly power, discrimination against small business and appalling bullying of suppliers.

And worst of all, gutless government.

John wrote to say, "What can we do.  The Government mouths small business but does exactly nothing.

"I am a florist paying 24 per cent of my turnover in rent in a Westfield centre and Woolies and Coles are paying around 3 per cent.  How are we supposed to compete?"

But Rod says, "I'd like to congratulate you on exposing Woolworths ...

"If you check the wonderful Woolworths Select brand and Home brand you'll find, as I did, a huge number of items from overseas ... frozen potatoes from the Netherlands, frozen beans from China ... a country that cannot feed itself puts itself in dire economic circumstances.

"I also saw nuts from Vietnam, citrus from USA and Israel, dried fruit from Turkey, and on it went.

"I thought we were meant to be the fruit bowl for Asia.  Free trade.  You've got to love it."

But then this.

"I don't want my children growing up in a society where all the necessities of life are controlled by a few giant corporations ...

"The Trade Practices Act must be changed to guarantee equality of opportunity for all businesses regardless of their size, and every big corporation in the country will do all they can to stop this from happening."

Well, that led me to some very interesting figures.

Woolworths' submission to a Senate committee having a look at these matters.

Do Woolworths and Coles mislead the Government and the Australian public?

A blunter way of saying it is do they lie.

Woolworths argued to a Senate Committee of the Commonwealth parliament, "In comparison to grocery retailers overseas, Woolworths operates on very low margins." 

Coles, to the same committee, "Australian supermarket margins are significantly lower than EBIT margins of international supermarkets."

EBIT are the earnings before interest and tax.

So low profits in Australian supermarket retailing is now an economic fact.

Really.

Well, try the Food Market Institute based in Washington, DC.

They have yearly studies of profitability in grocery and supermarket retailing.

They analysed 2,300 companies spread over 60 countries.

And the Food Market Institute says of America, "The intense competition among food retailers for the consumer dollar is best demonstrated by profit margins at one and a half per cent of earnings before interest and tax throughout the industry."

One and a half per cent.

Woolworths, almost six per cent.

Coles, four per cent.

In other words, international studies show that profit margins for Woolworths and Coles are three to four times higher than the international averages.

And they continue to skyrocket year after year.

Why?

Well in no other country in the developed world do two companies enjoy such domination as Woolworths and Coles.

They've got combined sales of over 45 billion dollars in food and liquor.

Profit margins three to four times higher than the international average.

So Australian consumers are paying 1.75 billion dollars more for food than they should.

Almost $100 for every man, woman and child in the country.

The only thing that could stop Woolworths and Coles from exploiting consumers would be competition from small business.

But with price discrimination rampant in every business cost, rent, goods purchased, bank fees, Woolworths and Coles are sheltered from the competitive pressures that small business brings to the market everywhere else in the world.

The real disgrace in all of this is that those in charge of the ACCC and Government either don't know all this or don't want to know.

 Copyright 2GB 2007