Dom Knight:
Now, I wonder whether you’ve ever had an experience my family had on Monday night. Got a little after dinner treat – a box of mini ice creams from a well‑known supplier, and open up the mini ice creams. We thought, ‘Have these gotten more mini? Smaller than they used to be!’ Now look, maybe I at least probably benefit from that in terms of waistline, but it’s not necessarily great in terms of value.
This is a thing called ‘shrinkflation’. I’m not sure if they were smaller. They just seem smaller. But this is something that’s been happening for years. The price cost the same, but the items get smaller. The federal government wants to do something about it. They’re going to strengthen the so‑called Unit Pricing Code, and there’s a plan to name and shame brands that do this – reduce the size but keep the price the same. Andrew Leigh is the Assistant Minister for Productivity, Competition, Charities and Treasury. Good morning Assistant Minister.
Andrew Leigh:
Good morning Dom, how are you?
Knight:
I’m very well thank you. Now, before we get into this, I hear you’re running the marathon tomorrow?
Leigh:
I am! I’m looking forward to lining up. It’ll be my fourth Sydney Marathon, so always a wonderful race over the bridge at the start, finishing at the Opera House and a good 42 kilometres in between.
Knight:
Well, it’s the first time it’s an official majors, so it’s an exciting day for marathon fans?
Leigh:
It’s fabulous, yes. So, it’ll be a good run. It’s been a little bit more competitive. It used to be anyone could just get an entry but these days you’ve got to get lucky in the ballot.
Knight:
You’re doing pretty well when you’ve got a room for 35,000 people and you’re turning people away. Anyway, look all the best with that tomorrow. But let’s get on to this question of shrinkflation. What are you planning to change to try and get this well, at least more transparent, even it doesn’t stop it?
Leigh:
Dom I thought your example of the ice creamwas a perfect one. And we’re seeing this in all kinds of different products. Freddo Frogs have shrunk in size. Pringles have shrunk in size. Used to be most beers were 375 mL – a lot of them are dropping down to 330 mL. Now, wine makers are sometimes selling in 700 mL bottles, rather than the usual 750 mL.
Pippa Malmgren, a US economist has dubbed it shrinkflation when the size goes down, but the price goes the same. So, we want to make sure that consumers have the information they need in order to make informed decisions at the checkout. And that means knowing when shrinkflation is going on in front of you.
Knight:
So we know that work’s been done on unit pricing. I find it quite helpful in comparing things like source sizes or nappy pricing. You can actually work out the price per unit, or per 100 grams, or whatever it might be. What’s the plan to change how this stuff works to try and make things more transparent?
Leigh:
Well, one thing is about making sure we’ve got readability right. Some of the consumer groups have criticised the way in which pricing is done on the shelf. We’re considering expanding the scope of retailers covered by the Unit Pricing Code. One of the recommendations that the competition watchdog came back to us with in their supermarket inquiry was that supermarkets should be required to publish notifications when package sizes change in a way that’s adverse to the consumer. So all of that’s open for consultation. Consultation will kick off on Monday and run for a couple of weeks.
Knight:
Yeah, look that’s the interesting thing. I mean, comparing pack sizes is enormously useful – doing the division that most of us can’t do in our heads. Perhaps you can as an economist, but I find it a bit tough at times. But tracking the change over time is what’s interesting as well. To get a sense of, well have they actually changed the pack sizes? And we know that different supermarket chains tend to negotiate their own custom pack sizes with different suppliers, which makes it even harder tofollow?
Leigh:
Yeah, exactly. So, you can’t always be guaranteed to get the same thing. Aldi has got its own distribution chains, which are sometimes separate from the Coles and Woolworths ones. And of course, we’re doing a whole lot more in the supermarket space, not just on shrinkflation, but also giving the competition watchdog more resources to address harmful and misleading conduct, funding CHOICE so that they can do quarterly grocery price monitoring, making supermarket price gouging illegal. All of it is focused on making sure that people get a fair deal at the checkout, following on from the work that we did to make sure that farmers get a fair deal through the supermarket code.
Knight:
Not surprising that you’d be funding the ACCC on this. But I don’t recall CHOICE being funded to do this kind of work before, which is really interesting. I’m wondering if they should have a role in testing sun creams, given what’s happened recently in that space. But is this the first time that CHOICE has received direct government funding to do what it does?
Leigh:
Not sure about that. But you know, one of the reasons that I was so keen on that measure Dom, was because CHOICE’s information is fantastic, but it’s normally locked behind a paywall because they’ve got to pay the bills. So what we did by funding them to do quarterly grocery price monitoring was to allow them to do it more frequently – because they’d been doing it every couple of years before that – and allow all Australians to have access to information on where to get the cheapest basket of goods, that’s broken down by state and territory. People getting information that’s relevant to their shopping decisions clearly puts pressure on supermarkets to offer people a better deal.
Knight:
Well, transparency is always a good thing, particularly when one is comparison shopping. One of the things that you’re looking at doing I see here is addressing inconsistency in units of measure across retailers or across products. What’s an example of that if one comes to mind?
Leigh:
It would be a product which is being offered in one place per 100 grams and in another place per kilo. That often makes it hard to compare. I get that there’s not always an obvious way of doing this, but if you’re looking across the shelf, you should be comparing apples with apples.
Knight:
We’ve got Dr Andrew Leigh with us, who’s Assistant Minister for Productivity, Competition, Charities and Treasury talking about the Albanese government’s changes to supermarket pricing transparency and trying to crack down on things like shrinkflation at 16 minutes past 7 here on 702, ABC Radio Sydney.
Now the question of price gouging is an interesting one. I know this is something that the ACCC was directed to do by your government last year. After 12 months, based on the ABC report from earlier in the year anyway, from March the conclusion was that the ACCC couldn’t conclude whether price gouging was actually taking place. What’s your government’s perspective on what supermarkets are doing? Do you think they’re doing the wrong thing here?
Leigh:
Well, we certainly saw their margins increase over the last couple of years, and there was clear evidence coming out of the ACCC inquiry of some coordination in price cycles. So, I remember for example, for a certain soft drink, it would be on special at Coles one week; Woolies the next week, Coles one week; Woolies the next week. It just seems to oscillate over the 2 supermarkets.
So, those sort of things did raise a couple of eyebrows among many people looking what the supermarkets were doing, and we’ll be announcing shortly exactly how we go about implementing the government’s commitment to crack down on price gouging.
Knight:
So, I mean is there a formal definition of when someone’s gouging and when someone isn’t? I’m just wondering what the yardstick is for trying to assess what’s going on?
Leigh:
Yeah, there’s a bunch of different international approaches. Some countries and states focus on emergency price gouging. Others focus on the margins. So, we’re looking at all those different approaches, and we’ll have more to say about exactly how we’re going to tackle price gouging. The issue of fairness at the supermarkets has been a big one for Australians.
People want farmers to get a fair go. That’s why we updated the Food and Grocery Code of Conduct. People want their groceries to be fairly priced, and we’ve got one of the most concentrated supermarket sectors in the world. So, we’ve got to put more scrutiny on. As they say in Spider‑Man, with great power comes great responsibility, and they have a lot of responsibility to look after shoppers.
Knight:
Yeah, Spider‑Man’s position on competition policies are well worth bearing in mind. But it is true, isn’t it – globally speaking it is a very concentrated sector and curiously enough, you know, Woolies didn’t do very well with its profits recently. So, who knows what will go on in the sector, but we’ve seen Aldi emerge in recent years as a third player. Is the government keen for more entrants to perhaps challenge the ColesWorth duopoly?
Leigh:
Yeah, we’re certainly keen for more. I mean, we had Kaufland – the German retailer, eyeing off the Australian market a couple of years back. It made some tentative moves in, but decided it couldn’t make things stack up. We have seen the entry of Aldi has welcomed competitive pressure, but it’s come at the same time as IGA has decreased its market share. So, if you look back at the period when Aldi came in, the Coles and Woolies combined market share hasn’t changed. Aldi goes up, IGA goes down. It’s a big challenge, and being open to those additional competitors coming into the market I think is really important for Australian shoppers.
Knight:
And finally, this habit of locking up property which they tend to do if they don’t build on it. Is it that something you’re looking at as well?
Leigh:
Yeah. So, the ACCC inquiry looked pretty carefully at land banking and how that might be addressed. It found there were around 100 sites which had been held for extended periods, and we need to think about how that land banking regime might work. It gets trickier there of course Dom, because you’re dealing with state, local and territory rules, but we need to work across government in order to get maximum competition in the sector.
Knight:
Thanks for your time and good luck in the marathon!
Leigh:
Thanks Dom, take care.
Knight:
Andrew Leigh there, Assistant Minister for Productivity Competition, Charities and Treasury.