26 May 2023

Consumer watchdog knocks back supermarket giant's plan to take over Karabar IGA

| James Coleman
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IGA Karabar

SUPA IGA and Liquor Boss occupy an 840-square-metre spot in the Karabar Shopping Mall. Photo: Google Maps.

Woolworth’s proposed takeover of an IGA supermarket in Karabar has been knocked back by Australia’s consumer watchdog.

The Australian Competition and Consumer Commission (ACCC) has spent the last 10 months consulting with a range of businesses and industry bodies and more than 700 customers on Woolworth’s plans for the Karabar Shopping Mall.

The supermarket giant wants to buy out the residential area’s SUPA IGA and attached Liquor Boss and turn the 840-square-metre site into a Woolworths Metro store.

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The ACCC has concluded this “would be likely to substantially lessen competition in the supply of groceries in the local area”.

“The proposed acquisition would see Woolworths operate three of six supermarkets in the local Queanbeyan/Jerrabomberra area,” ACCC chair Gina Cass-Gottlieb said.

“Local consumers would be left with just one Coles and two ALDI stores as alternatives.”

Karabar is a mere 2.5 km from Woolworths in the Queanbeyan town centre and not much further from another in Jerrabomberra. ALDI has a presence in both Queanbeyan and Jerrabomberra and Coles in the Riverside Plaza in Queanbeyan. This leaves the SUPA IGA as the only independent supermarket in the area.


Woolworths already operates two supermarkets within 5 km of Karabar. Photo: Ampol.

The ACCC investigated the spending habits of local consumers, including how often and how much they spent at different supermarkets in and outside the local area. It decided there would not only be negative impacts for customers but also further up the supply chain.

“Supermarkets compete not just on the price you pay at the checkout, but the frequency and types of promotions they run, the range of products they sell, the quality of these products, and the level of service delivered at the store,” Ms Cass-Gottlieb said.

“The local SUPA IGA competes with its different product mix, service offering and store amenity and different promotional cycles.

“It also has the ability to make decisions locally, and to dynamically adapt and respond to changes in tastes and preferences of local customers.”

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SUPA IGA is owned by Karabar Property Pty Ltd and managed by John Krnc, who also owns the Karabar Shopping Mall. But this isn’t the first time Woolworths has attempted to buy it. In 2008, when it was a bigger 1250-square-metre supermarket trading under the Supabarn banner, the ACCC opposed the proposal on similar grounds.

Under its guidelines, the ACCC can’t oppose mergers that reduce competition unless the effect is “substantial”. If Woolworths decides to go ahead with the takeover regardless of the ACCC’s decision, the ACCC can apply through the courts to stop it.

“If we reach the view that a merger is likely to substantially lessen competition and the merger parties don’t agree to modify or abandon the merger, we can apply to the court for orders,” the ACCC says.

“This may include an injunction, divestiture or penalties.”

For now, Woolworths “will be taking time to review the ACCC’s decision”.

“We had been working closely with the current owner of the site and are disappointed that our plan to bring a renewed retail experience to the residents of Karabar has been opposed by the ACCC,” a spokesperson for the company said.

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To see the downside of having duopoly in our grocery market, look at the gouging and record profit they’re making. Often they’re the only players in town and thus has enormous leverage on extracting as much out of the community under the guise of “inflation”.

Either costs have gone up and they’re passing those on, or you’re just gouging because you can – I wonder which it is from looking at the recent record profits?

Bob the impala12:35 pm 28 May 23

Nett Profit Margins for both Coles and Woolworths run around 2-3.%. The recent record was 2.8%. These are not remarkably low for consumer staples though way below expected profits for most of the remaining market sectors. Were you expecting them to make a loss?

The question is not profit-gouging as such but the ease with which they have been able to raise prices to cover increasing costs and thus preserve normal margins in straitened times. Metcash, owner of IGA, also achieved a record profit margin over the same period as Coles and Woolworths, although their nett margin normally sits lower at around 2%. Like others, IGA price by location and store.

Well done ACCC !! We travel from Canberra / Belconnen at least once a month to the IGA Store at Karabar to get things we can’t get anywhere else. Ease Parking, nice shop, nice Staff and a good selection of items from Europe… And as for Woolworths… Go away !!
Anyone that wants to go and shop at Woolworths can do so… But leave IGA Karabar as it is !!

If IGA is cheaper, I wonder why Woolworths/Coles is always packed and IGA and others are virtually empty. I must admit there shops are neat, clean etc, but sorry it’s to pricey for me.

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