Coopers and IBA call out retailers on market power

The impact of concentration in the Australian retail market on brewers has been scrutinized at a Federal parliamentary inquiry with both Coopers and the Independent Brewers Association claiming the power of the major retailers harms the beer market.

Speaking before The House of Representatives Standing Committee on Economics,  former Independent Brewers Association chair Richard Adamson described the Australian beer market as “one of the most restrictive in the world with market power in the hands of a small number of large corporations”.

“Two foreign-owned companies dominate beer supply and two supermarkets dominate the sale of beer,” he said in his opening remarks.

“EDG, the Endeavour Group, is now one of the largest producers behind the two Japanese-owned beverage companies, Asahi and Kirin, and Coles Supermarkets are rapidly expanding their own beer brands.

“These conditions make it very challenging for independent-owned small businesses to access key distribution channels and respond to consumer demand.

“This restrictive and anti-competitive marketplace…threatens the existence of many independent brewers.”

The IBA’s comments came a day after Coopers Brewery managing director, Dr Tim Cooper, gave evidence saying Coopers is also having its shelf and floor space for packaged beer cut back by liquor retailing giants Endeavour Group and Coles.

Speaking to Brews News about his appearance at the hearings, Dr Cooper said his research showed that the major retailers had between fifty-five and sixty percent of the packaged beer market and their increasing focus on private label brands was worrying.

“We find that challenging because we think that the retailers have got lots of good, proprietary brands available to them from the major brewers and from the craft brewers,” he said.

“It’s challenging because first of all, it sets them up,  our customer, is setting themselves up as competitors to us. So that’s clearly how we see it.

“And I think, in turn, they can see us as a competitor to their own product.”

Dr Cooper also said while the retailers charged suppliers like Coopers a range of warehousing and distribution fees “rolled up into one and called trading terms” he wonders whether they are applied to their private label products.

“Would the private label have the same cost requirements put on the products as the manufacturers or the proprietary suppliers?” Dr Cooper mused.

“So one ponders whether the suppliers to the nationals are effectively funding the warehousing and distribution system and all the back office arrangements, and then [the retailer’s] products are just being sold on a margin over the actual purchase costs.”

In his evidence before the Committee, Dr Cooper said that his brewery’s share of packaged beer sales in independent liquor stores in Australia was between 7 and 8 per cent, but at the two large retail operators, it was just 4 per cent.

Referring to Dr Cooper’s evidence, Committee Chair Dr Daniel Mulino MP asked Richard Adamson if independent brewers had seen the same.

“I believe our numbers collectively as an independent industry mirror Cooper’s quite closely,” he replied.

“Anecdotally, we’re seeing that one in five to one in four shelf spaces for beer is now one of their privately owned private label brands.

“So, we are getting squeezed out of the major retailers shelf space at the same time.

“Twenty years ago the supermarkets weren’t in the beer space. And they’ve developed their own brands and taken advantage of the interest in craft beer.”

Dr Cooper told Brews News this was an issue for his brewery as well, with the floor space dedicated to home-brand beers being an issue.

“Their pricing is one thing, but I think it’s the fact that you basically almost trip over the floor stacks of private label and controlled brands to get to the product that you actually want to purchase.

“For a proprietary brand [from independent brewers] that makes it rather challenging to find the product you’re looking for because there’s so much forward stock weight of the private label stuff.”

The evidence from Coopers and the IBA was given as part of the Committee’s inquiry into competition and dynamism.

In a media statement about the hearings Committee Chair, Dr Daniel Mulino, said this week’s hearing had a specific focus on the supermarket and alcohol sectors, amongst others.

“The grocery retail sector is fundamental to the everyday lives of Australians,” he said.

“There are also high levels of market concentration in the sector, so it’s vital that we better understand the effects such concentration have on competition, particularly around price, for consumers.

“The supermarket sector also has a strong hold on the packaged alcohol market, which again has implications for consumers around price and on smaller players in the sector.

“So we will be probing this area as well,” Dr Mulino said, “especially with the local craft beer industry gaining in popularity. Australia’s independent brewers are renowned for their innovation so the committee is eager to ensure diversity in the beer industry and that our home-grown companies can continue to thrive.”

Included in the Committee’s terms of reference is the extent to which anti-competitive behaviour and changes in industry structures have contributed to rising market concentration in Australia.

In April Federal National leader David Littleproud called for ‘regulatory guard rails’ in the form of a compulsory code of conduct to protect suppliers.

“This is something where we need regulatory reform when three of the big supermarkets in this country run 74 per cent of retail, that is market power that needs regulatory guide rails, and it doesn’t have at the moment,” he told Brews News.

Endeavour Drinks Group response

An Endeavor spokesperson said the company “won’t comment on commercial terms with majors like Coopers, but we proudly have dedicated shelf space for genuine small producers who are constantly innovating to meet changing customer tastes.”

“We’ve recently made 14-day payment terms for small suppliers permanent after introducing them during the pandemic, as we know cash flow is vital for them.”

“Our customers are increasingly seeking out local and independent producers that offer something new to discover.”

The company has said it has 1700 small suppliers in its network with BWS having dedicated shelves now for local producers from a store’s area. The company said this was a response to high customer demand for local and small producer options.

It did not comment on the impact of the growth of its private-label products, though has previously celebrated its growing Pinnacle range with 530 new private-label products added in the 2021 financial year.

Coles Liquor response

A spokesperson for Coles Liquor said that company’s “vision is to be a simpler, more accessible, locally relevant drinks specialist, and as our customers continue to seek local craft products we have continued to expand our range of beers.”

“We currently offer our customers more than 800 different craft beers, which is an increase of 11% compared to the last financial year.

“Our range of beer across Liquorland, First Choice Liquor Market and Vintage Cellars has increased by 9% compared to last financial year as we strive to provide great value and locally relevant options.

“We support the industry by getting behind events such as the GABS Hottest 100 beer festival for which First Choice Liquor Market is the platinum sponsor, and partnering with the Independent Brewers Association at next month’s BrewCon.

“Earlier this month our range of local craft beers at First Choice Liquor Market increased thanks to an exclusive partnership with Australian online craft beer retailer, Beer Cartel, bringing a selection of craft beer packs to online customers in New South Wales.”

Coles Liquor Group said it currently has 178 suppliers that provide beer products.

Kirin and Asahi did not give evidence at the Inquiry.

This article was updated at 11.53am following a response from Endeavour Drinks Group, and further updated at 2.32pm following a response from Coles Liquor.

More of Brews News’ coverage on the issue of competition in retail can be read below:

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