Grocery giants conveniently slash prices, but will a Senate Inquiry go far enough?

A few shoppers online have been pointing out the convenient timing of swathes of grocery shelves showing slashed prices in recent weeks as the supermarket giants make a show of defending last year's billion-dollar profits raked in at the height of a cost-of-living crisis.

In December, the Greens secured cross-party support to set up a national inquiry to examine the duopoly's market control as Coles and Woolworths face accusations of cashing in on consumers struggling to make ends meet.

Coles agreed to put up CEO Leah Weckert when the inquiry gets underway but has argued that sky-high food prices were just the cost of doing business.

"Having a profitable business means Coles can continue to serve Australians, invest in our stores, employ our 120,000 team members, support our local communities, pay taxes in Australia, pay dividends to our hundreds of thousands of mum and dad shareholders and ensure long-term sustainable relationships with our suppliers," the company said in a statement.

Woolies boss Brad Banducci has also agreed to participate and explain how supermarkets are balancing "the needs of our customers, our team and our suppliers in the context of economy-wide inflationary pressure".

Meanwhile, it's not only consumers feeling the pinch as, on the other side of the transaction, farmers have complained they were being gouged on supply costs as supermarkets under-pay and over-charge.

Australia's peak farm body says farmers are fed up with being kept in the dark about what's driving prices across the country's agricultural supply chains and have demanded supermarkets come clean on pricing strategies.

The National Farmers Federation released an issues paper in December arguing that mandatory price reporting and disclosure, increased powers for the ACCC to access supply chain data, reforms to unfair contract terms, improving whistleblower protections greater and encouraging greater uptake of collective bargaining would be a good start toward evening the playing market playing field.

The Senate select committee on supermarket prices is expected to release its final report in May, 2024.

Even as the mere threat of looming Senate scrutiny has apparently resulted in a sea of sales tickets, some of the Canberra political set have argued an inquiry won't have the teeth to really punish grocery giants burning into shoppers' back pockets.

Nationals' leader David Littleproud said in December that an inquiry in the Senate would take too long and wouldn't go far enough, and argued that calling in the national consumer watchdog would be more effective.

The Australian Competition and Consumer Commission is responsible for enforcing a voluntary code of conduct for grocery business' behaviour, and the mandatory 'Unit Price Code' which sets out rules around how and where businesses display the prices of their goods. Both the code of conduct and Unit Price Code are dealt with under the Competition and Consumer Act 2010.

"An ACCC inquiry could have started the investigation before Christmas and actions from the price inquiry can be undertaken immediately, without having to wait for the completion of the inquiry," Mr Littleproud said.

"An ACCC inquiry would have divestiture powers and be able to compel the CEOs of supermarkets to give evidence. We urgently need an ACCC inquiry, to give an investigation greater teeth and an immediate start.

"We also need punishment of more than $10 million to ensure supermarkets are doing the right thing. The alternative is too slow and too weak."

The accusations of price gouging have conjured up memories of celebrity chef Curtis Stone's now infamous "Feed your family for $10" campaign in 2017 and sent some shoppers into a fizz as the banknote that could once bake a family-sized cottage pie (according to Curtis' recipe) now barely covers a packet of cheese singles.

The renewed interest in the $10 dinner started in September when one misguided Coles Express manager tried to capitalise on some social media buzz by posting their own $10 haul, which included a coffee, a sausage roll, and a servo muffin.

Coles sold its Coles Express business to Viva Express back in May. Still, the response to the clip understandably caused a stir for all the wrong kinds of PR reasons, prompting a minor panic from the brand and a few outraged headlines asking whether "tone deaf" was an adequate descriptor without adding a few expletives in the middle.

With Curtis' cottage pie recipe showing cost inflation of around 140 per cent, the first thing to do was throw out all the old rules and start fresh.

According to the Australian Bureau of Statistics' most recent monthly Consumer Price Index (CPI) release, grains that make pasta have had one of the most significant increases in prices, rising 8.9 per cent year-on-year to September, outstripping other high-inflation items like dairy products (8 per cent) and manufactured items like soups and frozen pizza (6.8 per cent). Meat has risen steadily by 1.7 per cent since September 2022, when the CPI was at its highest in more than 30 years.

To be fair to Curtis, those prices represented the years before COVID and before Russia's war and the litany of almost everything that has fundamentally changed our understanding of the world since 2018. So, to test this $10-dinner theory, it was necessary to start from the beginning.

I settled on a Carbonara as the meal, reasoning that the traditional dish contains only four ingredients. It's also a reasonably common and easy mid-weeker where ingredients are readily available, and most of those ingredients come from the bigger end of the healthy food pyramid.

With a recipe planned, I hit up four major grocery outlets in Newcastle to see what I could pick up for $10 (or as close to it as possible).

Woolworths ultimately came in at the cheapest outlet at $10.17 for the four items, but only with a Rewards member discount that saved a dollar on cheese. Buying bacon through the deli, where I could control portion sizes (I bought three rashers at both Coles and Woolworths) against the kilogram price, was another saving.

Aldi proved more challenging, where free-range eggs were twice as expensive as the caged variety, and the cheaper caged eggs were only available as a full dozen for $4.49. But, even without the deli-shopping saving method, Aldi had reasonably affordable diced bacon in 200g packs for $3.99. Even with a windfall of considerably cheaper pasta than all other outlets at 99 cents, a slightly more expensive cheese did away with the potential savings, bringing the total shop to $13.96.

Coles fell shy of the most expensive shop at $15.37, where caged eggs were again only available by the dozen for $4.90, representing almost half of my budget, and pasta was more than twice as expensive as Aldi at $2. Shopping through the deli again helped keep meat costs down, but still came in at $3.97.

IGA ultimately proved to be the most expensive shop at $16.69, where specials were limited, and a smaller range of items meant budget options were less widely available. The pasta was the most expensive of the four outlets at $2.58, and 250g of middle bacon was $7.12.

The consumer price index measures inflation, published by the Bureau of Statistics. Generally, it keeps track of the rising costs of essential commodities like food, housing, transport, utilities, and alcohol and tobacco, among other items.

In broad terms, items become more or less expensive depending on the market's relationship of supply and demand.

The Reserve Bank describes two broad themes of inflation as items becoming more expensive when demand for a particular item outstrips supply or when the cost of production of certain products is pushed up by the price of domestic or imported materials that force producers to make less or charge more.

The ABS has been tracking the CPI monthly since around September 2022, which began steadily rising in July 2021 when COVID-disrupted supply lines began to be felt and peaked around a year later as Russia's condemned war on Ukraine created havoc for import items from that part of the world like wheat and energy materials like oil and fuel, mixed with themes of a three-year La Nina causing harvest shocks, and rising energy prices.

The price of food and alcohol accounts for a considerable part of the CPI calculation. While the CPI has been gradually falling since its peak in December 2022, the cost of food and alcohol products has risen about 4.8 per cent year-on-year to September.

However, these local figures for grocery prices contrast the costs of global food items, measured by the United Nations, and have been gradually falling since May 2022.

While inflation in grocery prices has been cooling steadily, supermarket giants like Coles and Woolworths (which collectively control about 65 per cent of the Australian grocery market) have continued to blame supply chains and Russia's war for passing costs on to consumers more than a year after the event.

The problem that has causes such rancour among consumers and supplies, then, is that supermarkets have thus far failed to disclose details on how they price their goods in relation to buying prices and supply chain costs. This is despite research showing that price transparency helps businesses build trust with their customers.

UTS Business academic Sanjoy Paul, writing for The Conversation in December, argued that "supermarkets use several pricing strategies to win customer support - such as locking in prices for a certain period of time, everyday low prices on key products, specials, price-matching and discounts.

"Supermarkets spend millions of dollars on these price-related advertisements, but perhaps they would get more community support by simply disclosing cost breakdowns on their websites and in-store to show their commitment to transparent and fair pricing.

"Prices change constantly due to factors outside their control - such as fuel prices, shipping problems or even supply chain issues linked to global conflict. But being more open with customers about these issues could help repair relationships and their public image."

Coles Group posted an annual profit of $1.1 billion after tax in 2023, eclipsed by Woolworths at $1.72 billion. It comes as grocery bills around Australia reached an average of $160, according to Canstar data, leading to accusations by the likes of former competition watchdog boss Rod Sims that food giants have used their considerable market control to charge more for items than they necessarily need to, to capitalise on profits.

There are more effective ways to budget to afford groceries than the $ 10-dinner problem, but it does reveal some of the issues facing shoppers at the checkout.

The NSW government has advised shoppers to plan meals to identify savings, find areas where food waste is happening in the house and try to address it and shop for specials and imperfect vegetable items, which can often prove cheaper.

Store offerings like the odd bunch or imperfect picks are often a place to save on fresh produce, and planning soups for wilted vegetables and smoothies for soft fruit is one way to make items stretch.

But even then, the state recommends budgeting as much as $100 per person in the household per week for groceries, as long as the total doesn't exceed more than a third of total after-tax income.

The University of Newcastle advises students who are budgeting and often living out of home for the first time to plan a shopping list based on prepared meals for the week to avoid impulse buying, consider eating meat-free for a night a week, and shop for essentials on special and fruits and vegetables that are in season and are more readily available.

Buying in bulk is another often suggested saving method, but budget experts say that the possible savings from bulk buy may be more complex than they appear on the surface. Buying times at bulk prices can reduce the cost of the items per unit (a dinner portion, for example, may work out to meet the $10 mark, even though the cost of bulk ingredients was much higher). Still, shoppers must consider the utility and extra cost of storing the produce.

For example, bulk items take up space and can require larger refrigerators that run at a higher energy cost. Experts advise that intentional and planned buying is often a better way to save than buying broadly in bulk.