Supermarkets in Australia under fire over pricing tactics adding to consumers’ cost-of-living woes

SYDNEY – The authorities in Australia are cracking down on the ploys used by major supermarket chains to boost prices amid concerns that unfair practices are deceiving customers and adding to the cost-of-living crisis.

Though consumer advocates have long warned about unscrupulous activities by the major supermarket chains Coles and Woolworths, a series of inquiries and a recent court action began to expose the extent of these practices.

The supermarket chains have been accused of ploys such as “shrinkflation”, in which the size of an item such as a packet of chips is reduced

but the price is maintained, and “fake discounts”

, in which prices are raised before reducing them to levels higher than the original price.

At a Woolworths supermarket in Sydney, a 45-year-old shopper told The Straits Times that her shopping costs have increased dramatically in recent years, but said she was unaware of shrinkflation and other tactics used to boost sales.

Rosa, an office worker, who asked that her surname not be published for privacy reasons, said she was considering taking a second job due to the high cost of living.

“Everything (in the supermarket) has gone up,” she said. “It makes things more difficult. I usually look for things that are on special (on discount).”

Yet there is growing evidence that “special” offers at supermarkets may not be as special as they appear.

In March, research by the consumer advocacy group Choice revealed the extent of shrinkflation at Coles and Woolworths.

It found, for instance, that Coles reduced the size of a breakfast cereal called Mighty Grain from 560g per packet in October 2022 to 495g in March 2024, but retained the price of A$4.50 (S$3.90).

Separately, a privately developed app that allows shoppers to keep track of historical prices of items at these two chains has exposed the uncanny consistency with which thousands of items have had their prices raised and lowered.

Coles on Nov 4 was offering a packet of 10 Pepsi Max cans at half-price for A$9.

But the app shows that the price of Pepsi Max had consistently fluctuated for months, selling for A$18 for a week and then A$9 for a week, continuously.

The Australian federal government, which is facing pressure over the soaring cost of living, is attempting to curb some of these practices.

On Oct 2, Australian Prime Minister Anthony Albanese announced a plan to improve unit pricing, which requires companies to show the exact price of an item by its volume, weight or per unit.

“Tackling ‘shrinkflation’ through stronger unit pricing and new penalties is part of our plan to get a better deal for Australians,” Mr Albanese said.

Separately, Australia’s consumer watchdog, the Australian Competition and Consumer Commission (ACCC), launched legal action in September 2024 against Woolworths and Coles, accusing them of offering “illusory” discounts.

The supermarket chains were accused of raising prices by at least 15 per cent for small periods, then lowering them, and promoting the new price as a discount, even though the discounted price was higher than the average price in the years before.

They have rejected the allegations, saying price rises have been initiated by suppliers and occurred at a time of high inflation.

Addressing an annual general meeting of Woolworths on Oct 31, the company’s chairman, Mr Scott Perkins, said: “We disagree with (the ACCC’s) assessment that the price drop programme is deceiving.”

Australia has an effective supermarket duopoly, with the two chains accounting for 67 per cent of the country’s sales.

Professor Nitika Garg, an expert on consumer behaviour from the University of New South Wales, told ST that supermarkets were “being a little greedy, or at least it looks like it”.

She said that if they are passing on price increases from suppliers, they should be honest rather than using tricky pricing tactics.

“If there are genuine reasons why prices have gone up or if there are supply chain problems, why are they not communicating it and justifying it?” she said.

“It may be there is no justification, or they may think communicating it makes things worse.”

To address concerns about such practices, the Australian government has commissioned a wide-ranging inquiry into supermarkets, which is being conducted by the ACCC and is due to be completed in February 2025.

The Australian federal Parliament and the state authorities have also conducted inquiries.

The scrutiny of supermarkets comes at a time of unusually high inflation in Australia that has hurt consumers.

The annual inflation rate peaked in December 2022 at 7.8 per cent – its highest level in more than 30 years – but has since dropped to 2.8 per cent.

Though the inflation rate has finally fallen, overall prices remain far higher than before the inflation spike in the past two years. 

Food inflation peaked in December 2022 at 9.2 per cent and is now 2.9 per cent in September 2024.

A survey released on Oct 7 by The Australia Institute, a progressive policy think-tank, found that 60 per cent of Australians said groceries had the highest price increases, with 21 per cent naming utility bills, and the remainder pointing to transport, restaurants, childcare and other costs.

The Australian Council of Social Service, an advocacy body for those affected by poverty and inequality, said a growing number of people were having to skip meals or cut back on meat, fresh fruit and vegetables.

“The steep rise in the cost of living, including soaring grocery costs, is causing serious distress and harm among people on low incomes,” council head Cassandra Goldie said.

“Food has become a discretionary item for many people forced to choose between affording groceries, energy and rent.”