What to expect from appearances by Woolworths and Coles at the Senate inquiry into supermarket prices

Our two biggest supermarkets will be interrogated over their rising prices, growing profits and market power by a dedicated inquiry examining supermarket prices in Australia.

Coles and Woolworths control 65 per cent of Australia's grocery market, and have faced accusations of price gouging as customers struggle with cost of living pressures, and been heavily scrutinised for their business practices.

Here's how the supermarket giants dubbed "Colesworth" wound up having to give evidence about their business practices, what to expect from their appearances, and what it means for your next shop.

What is the supermarket inquiry about?

The inquiry both supermarket giants are appearing before is the Senate Select Committee on Supermarket Prices, but you'll often see it referred to it as a "supermarket prices inquiry" or a "Senate inquiry into supermarkets".

This particular inquiry was established in December last year after the Greens claimed that the major supermarkets were using inflation and supply-chain issues to charge more for their products than necessary.

The purpose of the Senate inquiry is to examine and report on "the price setting practices and market power of major supermarkets" by May 7 this year.

If it sounds broad, that's because it is — but the committee has nine terms of reference to guide it, including:

• The effect of market concentration and corporate power on the price of food and groceries
• Price setting patterns between the two major supermarket chains (that is, Coles and Woolworths)
• Rising supermarket profits and the large increase in prices of essential items
• The prevalence of price mark-ups, opportunistic pricing, and "discounts that are not discounts"; and 
• Whether home brand products have contributed to making major supermarkets more powerful

You can find the full terms of reference here.

Who is going to be appearing?

Tuesday's public hearing is set to begin at 8:30am AEST, with outgoing Woolworths CEO Brad Banducci the first to be questioned by the committee.

It will be one of Mr Banducci's final public appearances as the boss of the supermarket chain, after announcing his exit from the company in February — the same day its half-year results showed a $781 million loss.

Two days earlier, Mr Banducci made headlines after Four Corners aired footage of him walking out of an interview, as part of an investigation into allegations of price gouging by Woolworths and its rival Coles.

In the afternoon, the committee will question Coles CEO Leah Weckert and government and industry relations manager, Vicki Bon from 12:15pm AEST.

Coles was also featured in the Four Corners investigation, with leaked emails showing the supermarket chain received a one-off payment from a multinational supplier for allowing a price increase, then passing on the cost to customers.

In an interview with Four Corners, Ms Weckert denied that the practice amounted to price gouging.

Both Woolworths and Coles are each scheduled to spend two 90-minute sessions in front of the committee — or in other words, both supermarkets will be grilled by senators for three hours each.

What have Coles and Woolworths said?

Both supermarket giants have made submissions to the committee in the lead-up to their appearances, and have made similar arguments defending their price increases.

Coles and Woolworths both acknowledged that cost-of-living pressures are affecting households, but price increases to products on its shelves were the result of higher operational costs elsewhere.

In its submission, Coles stated that although its prices had increased in its stores, it was the flow-on effect of the company being charged higher prices by suppliers.

"Our suppliers are subject to the same cost pressures experienced across households, as well as the domestic and global economies," Coles said in its submission.

Coles also said that the cost of doing business has gotten more expensive, pointing to wage increases, energy prices, logistics costs and packaging prices.

In its half-year results posted in February, Coles post-tax profit fell by 8.4 per cent to $589 million, while its supermarket revenue increased by 4.9 per cent to $19.8 billion between July 1 to December 31 last year.

Woolworths also pointed to rising supplier costs in its submission, noting that increases to prices were driven by "cost increases from our supplier partners, and cyclical impacts in fresh food markets".

"While the market dynamics and cost drivers for long-life, meat, fruit and vegetables, dairy and bread are all different, in the last two to three years we have seen many of the drivers of higher costs coincide," Woolworths said.

The supermarket chain noted that it has taken steps to ensure customers are getting value for money, and pointed to weekly specials and having its own branded products priced at low prices, and remains confident prices will go down.

Like Coles, Woolworths also reported a loss in its half-year financial results in February, however it was largely due to two major write-downs of other parts of its business.

Excluding those, Woolworths saw a 2.5 per cent increase in its half-year profit to $929 million, with its food sales rising by more than 5 per cent, while its profit margins on Australian groceries also increased by 0.24 percentage points.

It may not sound like much, but it's equivalent to Woolworths' Australian grocery profits increasing by more than $60 million from sales totalling just under $26 billion.

Have we heard from other supermarkets?

Yes — Aldi and Metcash (which is behind IGA) both appeared at the same inquiry last week and were asked for their views of Coles and Woolworths.

During its hearing last Thursday, Aldi Australia's CEO Anna McGrath said the German-owned supermarket operates on a significantly simpler business model than Coles or Woolworths, which allowed it to keep its prices low, and noted that Aldi has under 10 per cent of market share in Australia.

Senators quizzed the Aldi boss on whether the supermarket would support changes that would make price changes and pricing decisions clearer to customers, and strengthening the Food and Grocery Code of Conduct.

Ms McGrath said Aldi would be in favour of both those measures, and also told the inquiry that Aldi does notice that its competitors (namely, Coles and Woolworths) do lower their prices when they open a store in the same market.

Comparatively, Metcash boss Grant Ramage's evidence was dominated by questions around land banking by Coles and Woolworths, where the supermarket giants buy large areas of land even if they don't have plans to build a supermarket to keep competition out.

Mr Ramage gave an example where Metcash was "forced" to buy a supermarket in South Australia for a higher price to prevent Coles from purchasing the store and not use it, only to re-sell it to an independent operator at a lower price.

He told the inquiry that the market dominance of Coles and Woolworths makes it easier for the duopoly to engage in anti-competitive behaviours, and land banking is one strategy the supermarket giants use to entrench their market power.

Is this the only supermarket inquiry?

No, there are several inquiries currently underway across the country that are looking at grocery prices and the dominance of Coles and Woolworths.

They include:

• The Australian Competition and Consumer Commission (ACCC) Supermarkets Inquiry
• Federal Government Food and Grocery Code of Conduct Review (sometimes referred to as the "Emerson Review")
• Australian Treasury's Competition Review
• Senate Select Committee on Cost of Living
• Queensland Parliamentary Inquiry into Supermarket Pricing

One inquiry however has already been completed, which was the inquiry into price gouging and unfair pricing practices commissioned by the Australian Council of Trade Unions (ACTU).

The inquiry was run by former ACCC boss Allan Fels, and his final report delivered particularly scathing findings about the supermarkets and their behaviour.

Despite the numerous inquiries, it's unlikely shoppers will see any relief at the check-out for a while due to the time it takes for each inquiry to be completed, governments to legislate any changes, and for those effects to flow through.

If you're unable to view the form, you can access it here.