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SME industry bodies label Woolworths acquisition a power grab

Adrian Flores
Adrian Flores
16 December 2020 2 minute readShare
Woolworths acquisition

Peak industry bodies have called to stop the Woolworths acquisition of PFD Food Services, labelling it a power grab that will reduce thousands of businesses and jobs in the food services and distribution sector.

The ACCC already flagged concerns surrounding the proposal from Woolworths to acquire 65 per cent of PFD Food Services.

In response, Australian Small Business and Family Enterprise Ombudsman Kate Carnell described the timing of the proposed deal as “opportunistic at best”.

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“This deal would dramatically impact on the food distribution market — many of which are small and family businesses — especially outside the major cities,” Ms Carnell said.

“I am also concerned about the potential for significant job losses as smaller suppliers and distributors would have a battle on their hands to compete, particularly if a major player like Woolworths moves aggressively into this sector.

 

“Australian small businesses have been hit hardest by the COVID crisis and now is not the time for opportunistic takeovers by large corporations.”

Further, peak bodies the Council of Small Business Organisations of Australia (COSBOA), the Independent Food Distributors Australia (IFDA) and MGA Independent Retailers have demanded a Statement of Issues to be prepared by the ACCC which would allow further analysis of the merger and its implications for small businesses.

The industry bodies said they believe the acquisition will:

  1. Reduce choice and increase cost for consumers.
  2. Reduce distribution choice for some suppliers, and completely remove the route to market for many.
  3. Increase cost for suppliers by leveraging both retail and wholesale trading terms to significantly reduce their market pricing and profitability.
  4. Force suppliers to reduce food manufacturing and production innovation due to a reduction in profitability, further eroding choice and variety for consumers.
  5. Further the already unfair market power held by Woolworths, which will enable it to pursue its self-interest without regard to consumers, other businesses, or the overall needs of our communities, especially in regional areas.
  6. Signal the end of a vibrant and diverse distribution ecosystem that services a vibrant and diverse production and manufacturing sector.

COSBOA chief executive Peter Strong said the likely effect will be the removal of smaller food producers and manufacturers (suppliers) and their distributors.

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“Eventually, consumers will see a reduction in choice and an increase in price; by that time, it will be too late,” Mr Strong said.

“The merger is predatory and opportunistic, and if it proceeds, Woolworths will have a large share of the domestic food supply chain in Australia, from the farmer to the end user. This market power gives Woolworths the ability to compete unfairly with small businesses across the country.

“The government supports competition, as we all do, but supporting complete market dominance by one player is not how competition policy should operate.”

IFDA chair Richard Hinson said Woolworths is clearly not content with “being one of the biggest beneficiaries of the pandemic with a net profit of over $1 billion”.

“Woolworths now wants to expand its food service and distribution market to over $3 billion in the next two years, filling in the final piece of the puzzle in its food business aspirations,” Mr Hinson said.

SME industry bodies label Woolworths acquisition a power grab
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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