Supermarket Review

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Prepared by John Martin | Martin Stone Pty Ltd | September 2009

Review of ACT Supermarket

Competition Policy


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ISBN-13: 978-0-642-60519-1

ISBN-10:0-642-60519-X

Australian Capital Territory, Canberra 2009

This work is copyright. Apart rom any use as permitted under the Copyright Act 1968, no part may be reproduced

by any process without written permission rom the Territory Records Oce, Community and InrastructureServices, Territory and Municipal Services, ACT Government.

GPO Box 158, Canberra City ACT 2601.

Produced by Publishing Services or the:

Business and Industry

Chie Ministers Department

Enquiries about this publication should be directed to:

1800 244 650

www.business.act.gov.au

Publication No 09/1280

http://www.act.gov.au

Telephone: Canberra Connect 132 281


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Review o ACT Supermarket Competition Policy | Prepared by John Martin | Martin Stone Pty Ltd | September 2009

iii

Table o Contents

Foreword 1

Consultants Brie 2

Overview 3

1 Findings and Recommendations 10

1.1 Competitive Dynamics o the ACT Supermarket Grocery Sector 10

1.1.1 Price Competition 11

1.1.2 Non-Price Competition Factors 12

1.2 Likely Future Trends in the ACT Supermarket Grocery Sector 13

1.2.1 Trends in Shopping Centre Distribution 14

1.3 Adequacy o the ACT Governments Supermarket Competition Policy 15

1.4 Competition and Diversity Policy Initiatives 16

1.4.1 Role o the Trade Practices Act and the ACCC 16

1.4.2 Market Cap Proposals 17

1.4.3 Sources o Competitive Tension and Diversity in the ACT 181.4.4 New Entry Facilitation through Planning/Zoning Mechanisms and/or the 19

Direct Sales Process

1.4.5 Competition Analysis and Criteria in Assessing Candidates or New 21

Entry Facilitation

1.5 An Overarching Framework or Planning/Zoning Reorm and Coordination 24

1.6 Identication o New Entry Opportunities in Existing and Growth Areas 26

1.6.1 Growth Areas 26

1.6.2 Existing Areas 27

2 Process o the Review 29

2.1 Current Policy 29

2.2 2008 ACCC Inquiry Into Retail Grocery Competition 30

2.3 Review Schedule 31

2.4 Private Stakeholder Meetings, Submissions and Other Source Material 31

2.5 Public Consultation 31

3 Outline o ACT Supermarket Structure 32

3.1 Introduction 32

3.2 Unique Characteristics o the ACT Market 33

3.3 Distribution o Supermarket Activity by Centre Levels 33


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3.4 Floorspace by Operator 34

3.5 Supermarket Sales 38

4 Impact o the ACT Planning System on Supermarket Competition 41

4.1 How the Centres Hierarchy has Operated 41

4.2 Local Centre Supermarkets 43

4.2.1 Giralang Local Centre Woolworths Proposal 444.3 Fyshwick the Clearing House without a Supermarket 46

4.4 Group and Town Centre Supermarkets 46

4.4.1 Competition in the Group and Town Centres 47

4.4.2 Existing Group Centres, Kingston and Dickson Under Review 48

5 Current Competitive Dynamics o the ACT Supermarket Grocery Sector 49

5.1 Inuence o the Major Chains 50

5.2 Inuence o the Independent Sector 51

5.3 Inuence o Supabarn 53

5.4 Inuence o ALDI 53

5.5 ACT Price Comparisons 53

5.6 Non-Price Competition Factors 55

6 Approaches to Future Development and Re-Development Opportunities 59

6.1 Supermarket Competition Outcomes in the ACT 59

6.1.1 Impact o Planning and Site Allocation Policies in the ACT 62

6.1.2 Planning/Zoning Restrictions and Rigidities 62

6.1.3 Reorm o the ACTs Planning System and Direct Land Sales 636.1.4 Potential Conict Between Competition and Revenue Objectives 64

6.1.5 Importance o Coordination and Facilitation to the Supermarket 65

Competition Policy

6.2 The Challenge or Independents to Secure Competitive Wholesale Supply 65

6.3 Future Trends and How They are Likely to Play Out in the ACT 66

6.3.1 Socio-Demographic Trends in the ACT Population 66

6.3.2 Trends in the Grocery Market 67

6.3.3 Trends in Shopping Centre Development and Redevelopment 68

6.4 Measuring Adequacy o the ACT Governments Supermarket Competition Policy 69

6.4.1 The ACCC Recommendations on Planning and Zoning 696.4.2 Impact o Metcash Dominance o Wholesaling to the Independent Sector 70


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6.5 Policies, Procedures and Processes That Might be Applied on a Site By Site Basis 71

6.5.1 Competition and Diversity Policy Issues Relating to Facilitating New Entry 71

6.5.1.1 Role o the Trade Practices Act and the ACCC 72

6.5.2 Sources o Competitive Tension and Diversity in the ACT 73

6.5.2.1 Supply Chain Issues 74

6.5.2.2 Retail Market Competition Perormance 74

6.5.3 Market Cap Proposals 75

6.5.4 New Entry Facilitation Through Direct Sales 766.5.5 Framework o New Entry Opportunities in Existing and Growth Areas 77

6.5.5.1 Growth Areas 77

6.5.5.2 Existing Areas 79

6.6 Competition Analysis and Criteria to Assess Eligibility or Direct Sales 81

6.6.1 Market Denition 82

6.6.2 Competition Analysis 82

6.6.3 Eligibility Criteria 84

6.7 An Overarching Framework or Planning/Zoning Reorm and Coordination 84

6.7.1 Coordination Mechanism 85

6.7.2 Regular Review and Assessment 856.7.3 Applying Competition and Diversity Procedures and Criteria 85

6.7.4 Fast Lane Priority to Central Canberra Shortages 85

6.7.5 Other Group and Town Centre Reviews 86

6.7.6 Facilitating Sustainable Local Centre Competitiveness 86

Appendices 87

Appendix 1 2009 Update o Supermarket Retailing Floor Space in the ACT 88

Appendix 2 ACT Grocery Choice Price Comparisons November 2008 to June 2009 93

Appendix 3 List o Submissions 96

Appendix 4 Reports on Community Consultations 97


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FOREWORD

This Report is an edited version o a condential Report to the ACT Government based on a Review I undertook

o Supermarket Competition Policy in the ACT. The condential Report has inormed the ACT Governments

reconsideration o its Supermarket Policy.

This edited Report excludes commercially sensitive material that was provided by stakeholders and interested

parties. Otherwise it represents issues, data and analysis that were covered in the Review.

I would like to acknowledge the rank and open approach o stakeholders and community members who

participated in the Review and the input provided to me by ocers o the Chie Ministers Department

(CMD), ACT Planning and Land Authority (ACTPLA), Land Development Agency (LDA), ACT Treasury and

other agencies. In particular I would like to express my appreciation or the guidance and support rom CMD

personnelDavid Dawes, Ian Cox, Ross James and Heidi Stratord.

John Martin

Canberra

September 2009


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Consultants Brie

On 16 June 2009 the ACT Chie Minister and Minister or Business and Economic Development Jon Stanhope

announced my appointment as expert advisor to the ACT Governments Review o Supermarket Competition Policy.

I was required to report on:

the adequacy o the ACT Governments Supermarket Competition Policy in the light o the 2008

ACCC Inquiry into the competitiveness o retail prices or standard groceries, and the Commonwealth

Governments response to that report;

current competitive dynamics o the ACT supermarket grocery sector including the various players (the

major grocery retailers, the small and independent retailers, wholesale suppliers and so on);

likely uture trends in the Australian supermarket grocery sector and how they are likely to play out in the ACT;

ways the ACT Government can support efective and sustainable competition in the grocery sector over

the short, medium to longer term, taking into account the ndings and recommendations o the 2008

ACCC Grocery Inquiry;

the implications o government action or the wholesale sector;

an overarching policy ramework to guide the long run development o the supermarket grocery sector

in the ACT;

policies, procedures and processes that might be applied on a site by site basis to ensure site allocation

supports the ACT Governments longer term policy objectives;

the role o local planning authorities in supporting competition policy;

appropriate competition criteria that might be used in assessing the eligibility o applicants or direct sales; and

any other additional measures that might be considered by the ACT Government to acilitate a diverse and

competitive retail grocery sector.

I was also asked to advise on any current supermarket development proposals seeking ACT Government support.


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Overview

The ACT Government has a Supermarket Competition Policy(see Section 2.1)that seeks to maintain a

balance o competitive retail grocery perormance throughout the Territory in respect o keen prices, service

delivery, convenience, product diversity, innovation and adaptation to changing market trends.

The current Review aimed to establish a transparent and objective ramework and criteria or uture actions

under the policy. The Review was prompted in part by recommendations o last years national ACCC Inquiryinto the competitiveness o Retail Grocery prices. In my ormer role as an ACCC Commissioner I was a member

o that ACCC Inquiry.

The ACCC ound that zoning and planning regulations and decision-making processes can create barriers to

new supermarkets entering particular area markets and recommended that decisions afecting additional

supermarket space should take into account the impact on competition between supermarkets in an area.

In addition the ACCC also ound that i independent stores could achieve better wholesale terms o supply

or dry groceries that, combined with their existing quality and keen pricing o resh produce, could make the

larger independent stores in particular, a more telling orce against the major chains.

The ACCC ndings placed a ocus on the activities o the dominant national wholesaler o groceries, Metcash,

in its dealing with independent retailers when they sought alternative sources o wholesale supply. In the ACT

there are many small independent supermarkets but ew larger independent stores.

The Review sought to establish the adequacy o the current approach to supermarket competition policy, the

efect o likely uture trends in the sector and recommendations or an overarching policy ramework to create

competition and diversity.

How the Review was Conducted

A ull outline o the process ollowed in the Review is set out in Section 2.1.

My approach was to talk in-depth to key industry stakeholders, ACT planners and other arms o government

and to seek submissions to establish how planning regulations, decision-making and development acilitation

afecting retail grocery competition has worked in the ACT. Generally the condential responses rom industry

stakeholders and agencies were rank and orthcoming.

In addition considerable efort was placed on inorming the community o the competition issues being

reviewed. The consultant undertook a range o radio, television and newspaper interviews.

Five Community Consultations were conducted in each o the our town centres (Tuggeranong, Woden,

Gungahlin, and Belconnen) and in the City Centre. The Consultations were an opportunity or members o the

public to gain an understanding o the process and to make comments on their own experiences with the

ACT supermarket sector.


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Material relating to the Supermarket review including a lmed version o the Consultants presentation at the

Gungahlin community consultation was also presented on YouTube and MySpace.

Submissions were ormally accepted up until 24 July 2009 although some were inormally accepted as late as

3 August 2009.

Outline o the ACT Grocery Market

The ACT has a rigid retail hierarchy comprising local centres, group centres and town centres in which

supermarkets have played a key role as anchor tenants.

In the ACT region specialty grocery and resh ood retailing (i.e. other than supermarkets) make up a smaller

proportion o the total than in other capital cities apart rom Darwin.

Overall the independent supermarkets (like IGA) in the ACT have a greater share o supermarket space compared to

other parts o the country. This derives rom the domination by independent supermarkets o local shopping centres

in the ACT. Local centre supermarkets account or just over 25% o total supermarket space in the ACT in 2007.

However, since 1980 local centre share o total Canberra retail sales declined rom 14 to 11%. This decline is

considered to result rom actors including extended trading hours at higher-level centres, the populations

preerence to undertake supermarket shopping (based on range and price) at larger centres, the small population

catchments o some local centres and the increased workorce participation o women.

In response to these trends ACTPLA has stated local centres in developing areas are either being spaced more

widely to provide a greater population catchment to assist their viability or the lease conditions, while requiring

commercial space, do not mandate the requirement or the provision o convenience retailing.

The independent supermarkets are generally much smaller than the major chains. The IGA type and smaller

stores are typically in the range o 200 to 800 m2 with a ew exceptions. This compares to the major chains that are

almost universally in excess o 2000 m2 and they have gone on record as saying they do not, as a rule, consider a

store o anything less than 2500 m2 as suitable to their business models.

The two major supermarket chains, Woolworths and Coles, have a substantial presence in the ACT. They compete

ace-to-ace in the our town centres (although neither has a presence in the City Centre). One o the major chains

operates in most o the Territorys group centres. Each group centre has only a single ull line supermarket. Woolworths

are in a particularly strong position in the ACT with 39.2% o supermarket oor space and 51.6% o turnover.

The only independent supermarkets in Canberra that operate in group or town centres which are in the larger

category are the Supabarn stores at Canberra City Centre, Wanniassa and Kaleen plus three smaller Supa IGAs atKingston, City Centre East and Hawker (the latter is currently being expanded to over 2200 m2 oor space).


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Until 1996 there were our additional independent Cannons group supermarkets in Calwell, Erindale, Kambah

and Kippax group centres. These were acquired by Woolworths in 1996 when Woolworths took over the

Cannons group in a deal approved at the time by the ACCC. Included in that acquisition was Cannons wholesale

distribution centre in Hume that Woolworths subsequently closed, cutting of an important alternative source o

wholesale supply to Canberra independent retailers. In addition the Franklins chain in its earlier orm exited the

ACT market when the sell-of to Woolworths and Metcash occurred in 2002.

Over recent years Australia and the ACT has seen the entry o an international player ALDI, as a substantial ourthorce in Australian supermarkets. ALDI operates a restricted selection per category, budget priced and mainly

own-label product range. It has established over 200 stores in Eastern Australia including seven stores in the ACT

region and has created competitive price pressure wherever it has located.

Planning Issues Raised by the Review

There has been ever rapid change to actors afecting the nature o grocery retailing product range, shopping

hours and workorce participation by women have extended markedly plus demographics have altered in

diferent areas. Equally there have been drastic changes afecting demand on retail space or eating out, ast ood

and other non-grocery shopping trends.

Submissions have called or the rigid planning hierarchy o retail shopping centres in the ACT, especially the mix

between local and group centres and between group and town centres, to become more exible. To some extent

actions under the ACT Governments retail planning policies have already seen that begin.

The Review received consistent comments that there is a case or some o Canberras 17 group centres being

upgraded including provision or a second large supermarket in a manner similar to the entry o ALDI stores at

Weston, Kippax and Jamison group centres.

Submissions were also received that some local centre supermarkets could be more competitive i they increased

oor space to the 800 to 1200 m2 range.

While the opportunity or this depends on space availability in various local centres, it does raise issues or uture

area developments and in the case o re-development, the challenge o urther rationalisation o the overall

number o existing local centres.

A signicant impediment to re-development in group and local centres is the ragmentation o ownership.

In some centres there has been a lack o coordinated efort by owners to upgrade and in other cases under-

investment in inrastructure by centre owners.

It has also been suggested by several stakeholders that these deciencies have been reinorced by therigidities and slow pace o the planning and zoning decision-making. Representatives o independent interests

commented that in gaining access to sites, direct land sales are a way round the deep pockets o major chains

and developer speculation that otherwise thwart competitive outcomes. ALDI was also critical o planning/zoning

restrictions in group centres and outside the main centres hierarchy.


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Others involved in shopping centre property development put an alternative view that ACTPLA will respond in

a market sensitive manner i a well argued case or additional supermarket space or change-to-lease-clauses is

put to them.

Current Competitive Dynamics

It was established that ACT grocery prices are generally in line with equivalent regions.

Price surveys such as Grocery Choice and ACT Treasurys Supermarket Survey indicate the two major chains are

5 to 10% cheaper than the larger independents in the ACT and even urther ahead o smaller independents. In

some categories such as resh ood the independents oten are price, and certainly quality, competitive.

ALDI with its more limited range is the most economic or a staples basket, almost 25% less than the two major chains.

Relative non-price perormance was more dicult to establish. Woolworths provided ACT supermarket monitor

reports that demonstrated good perormance in comparison to all its larger competitors except Supabarn

which was not included in the report. Supabarn provided its own independent Mystery Shopper assessment o

consumer satisaction. The survey conrms Supabarns own service, quality and ambience that includes a threeminute maximum wait time at check out.

It is also noted that successul smaller independents in local centres are able to secure competitive advantage

rom excellent personal service, utilising local suppliers, meeting special customer needs in terms o products not

supplied by the major chains and l inks to local community activities.

The main competition deciency in terms o choice and diversity is within the market or ull line supermarket

services. Also o concern or competitive dynamics has been the slow pace in adding new supermarket capacity

in areas o apparent under supply in central Canberra and Gungahlin.

Future Supermarket Trends

The current pattern towards larger ormat outlets complemented by ALDI at the price sensitive end o the market

is likely to continue. That trend complements the conglomerate strategy o the major chains linking to their liquor,

petrol and their other electronics, hardware and general merchandise interests.

The dominance o the ull line sector by the major chains is likely to be strengthened unless planning and

development authorities take some pro-competitive initiatives.

Smaller independent supermarkets will continue to ll an important convenience shopping niche and arecontinually looking or more competitive wholesale supply sources.


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There are signs o new types o specialty grocery outlets entering centres, a major redevelopment o the resh

ood market in south Canberra and emergence o other armers markets. These developments will bring urther

competitive responses rom the supermarkets.

What We Sought rom Community Consultations

The consultations provided an opportunity or consumers to comment on how they rate supermarketcompetition in the ACT.

Efective competition is not just measured by prices although prices are the biggest actor or most consumers.

The Review encouraged submissions that provide survey inormation on wider consumer satisaction measures.

The community consultations were an opportunity or comment and suggestions relating to:

ease and convenience o shopping experiences;

service levels, presentation, standard o acilities, queue times and complementarities to other (non

supermarket) shopping needs;

product ranges and diversity, innovation and adaptation to changing market trends;

the Review sought in these consultations, community views on what drives peoples grocery shopping

preerences and suggested responses to some o the ollowing issues;

should there continue to be a supermarket in every suburb or is there a preerence or larger, more

competitive supermarkets (and possibly additional retail and service outlets) in targeted local centres;

should there be a more exible approach to group centre development to enable the provision o additional

supermarket operators (not just the expansion o an incumbent supermarket) in certain existing group

centres; and

is the best competition outcome in some group centre developments or upgrades achieved by restricting

the entry o additional supermarkets (via the direct land sale process) to new entrants such as an ALDI and/

or a large ormat independent supermarket chain, provided that could be achieved through a transparent

and objective process.

A wide range o comments and questions were made at the consultations as listed in Appendix 4 o the Review.

There was recognition o the competitive contribution o ALDIs entry but statements that this took competition

only so ar because o ALDIs restricted range and hours o operation. There was strong support or more

independent ull line supermarkets.

Some issues raised ell outside the ambit o a competition policy review. These included suggestions that there

should be control o trolley usage, opposition to pay parking at town and group centres and problems ordisadvantaged consumers having to pay higher prices at local centre independent stores because they are unable

to travel to larger ormat supermarkets.


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Adequacy o Current Supermarket Competition Policy

It is apparent that the ACT Government has taken initiatives in recent years aimed at achieving a better acilitation

o potential shopping centre modernisation and expansion while not prejudicing sound urban planning

procedures. This has involved a series o direct sales to enable ALDI entry in two group centres and expansion by

Woolworths, Coles, Supa IGA and Supabarn in existing group centres.

In 2008 the ACT Government established new legislation to acilitate reorm o the ACTs planning systemand introduced changes to the statutory ramework or granting leases, including the direct sale o land.

Administrative changes have been developed to complement the legislative reorms and signicantly improve

the timeliness o direct sales through a more efective, streamlined process.

There are indications that ACTPLA has become more exible in recent years to respond to market demands

and issues o competition. This and the establishment o the LDA along with the eforts o the CMD projects

acilitation arm have provided support to new entry.

However, the supermarket competition policy in the ACT requires substantial overhaul to address:

impediments in the planning and development regime;

a present shortage o ull line supermarket capacity particularly in central Canberra and Gungahlin; and

the projected population growth o 50,000 in the ACT between 2007 and 2019.

A ramework taking competition actors in account is required to:

ree up retail zoning provisions particularly in group centres;

better reect evolving consumer and market needs; and

address the barriers to new supermarket entrants at the retail and wholesale levels identied in the ACCC

Retail Grocery Inquiry.

Specic Policies and Procedures

The Review considered a range o suggestions in respect o how a targeted promotion o new entry could be

justied on the basis o market and competition analysis and related eligibility criteria. The implications o the

Trade Practices Actwere considered and it was established that the ACT government is not constrained by recent

clearances o Woolworths proposals or site acquisitions in Kingston and Giralang, to seek a better competition

outcome or those markets.

One approach suggested to restrict entry was to set a cap on market share in the ACT to act as a line in the sandin respect o urther group centre development. Based on current data such a cap (depending on what basis and

at what level it was set) would most likely impact on Woolworths because o its dominance o ACT supermarket.

On the other hand a cap would not afect Coles.


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The Review accepted the many sound arguments put against introducing a market share cap as distorting

the operation o the market place and unduly punishing Australias most popular and ecient supermarket

chain. However, grounds were identied or concrete action by the ACT Government to acilitate entry o truly

independent larger ormat supermarkets.

The Review recommends processes, procedures and competition criteria to enable the government to acilitate

entry o independent ull line chains in suitable new and redeveloped group centres to secure a better balance o

competitive tension, choice and diversity. The ACT is in a unique position to achieve this objective because o itsextensive ongoing ownership o land within centres.

The Review sets out recommendations or the application o limited tender direct sales or possible use o zoning

provisions to acilitate a series o identied opportunities or entry by a truly independent ull line supermarket chain.

Apart rom the major chains it is recommended that applicants such as Supa IGA under the control o the dominant

wholesaler Metcash should also be excluded rom the process. It is proposed that the initial approach and the

associated eligibility criteria be reassessed within a three year period under an overarching supermarket ramework.

Development o an Overarching Policy Framework

The review has identied an overarching policy ramework to guide reeing up retail zoning provisions and direct

sales processes applying the recommended competition processes, procedures and criteria.

The proposed ramework builds on the current ACT Supermarket Competition Policy to provide:

an efective coordination mechanism to oversight planning/zoning reorm and direct sales initiatives;

a regular assessment orum between government and stakeholders;

identication o immediate priorities in existing and growth area group centres;

a review o other existing group and town centres over time; and

acilitating local centres competitiveness.

The ndings and recommendations are set out in Section 1 o this Review.


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1. Findings and Recommendations

The ndings and recommendations cover:

competition and diversity perormance and uture trends;

adequacy o the current policy;

proposed competition and diversity policies, procedures and criteria; and

planning and zoning reorm and coordination.

1.1 Competitive Dynamics o the ACT Supermarket Grocery Sector

For the purpose o assessing competitive dynamics in the current ACT supermarket regime, data and denitions

applied by the market players were utilised to arrive at the ollowing current competitive break down o

supermarket operations based on the oor space data in Appendix 1.

ACT Supermarket Share o Floor Space and Turnover 2009

Group Floor Space % Turnover %

ALDI 7.5 8.7

Coles 21.0 20.6

Supabarn 7.0 7.7

Woolworths 39.2 51.6

IGA and other smaller independents 25.3 11.4

The ACT has placed emphasis on ensuring provision o local centre convenience supermarket shopping. Hencethe high proportion o oor space going to IGA and other independents. However, these smaller independents

wherever they are located do not compete on price with larger supermarkets that in Canberra have traditionally

been housed only in the group and town centres.

In the past 15 years there have been dramatic shits in this larger end o the market with the exit o two

independent chains Cannons and Franklins that operated ull line supermarkets rom the ACT. Countering the

adverse impact o these larger independents exiting the market saw the emergence o a new hybrid, the limited

range, keenly priced ALDI stores. This has meant that competitive pressures have been increased around centres

where ALDI has located.

It has meant that a aw has developed in competition or the ull line supermarket sector with Woolworths

dominant at 59% o that market, Coles 31% and Supabarn the only independent chain operating at that level


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in Canberra with 10%. There are signs that Supa IGA are tentatively moving into this space with a Supa IGA at

Hawker group centre expanding into a ull line service ollowing a similar (but smaller) venture at Karabar in

neighbouring Queanbeyan.

The combined 90% share o this sector in the ACT held by the two major chains is slightly above the national

average o 87% identied in the 2008 ACCC Grocery Report.

The main competition deciency in terms o choice and diversity is not between other retail grocery sources andull line supermarkets but within the market or ull line supermarket services. Also o concern or competitive

dynamics has been the slow pace in adding new supermarket capacity in areas o apparent under supply in

central Canberra and Gungahlin.

1.1.1 Price Competition

The Review drew on an ACT Treasury Survey o May 2009 and the November 2008 to June 2009 Grocery Choice

National Survey as an indication o price competiveness among supermarket operators in the ACT and between

the ACT and other regions. The Review also received price comparison inormation rom the major chains.

The two independent surveys came up with reasonably similar outcomes and demonstrated that the ACT market

is reasonably competitive. Both surveys have deciencies associated with static and limited collections o price

inormation. Based on the most recent price surveys the ollowing limited points can be made:

ALDI has lower prices or a basket o basic staples around 25% less than the major chains but once again

there are deciencies in ensuring comparison o like with like. The ACCC had reported that proximity to ALDI

stores by the major chains tended to result in lower prices by the chains but the Treasury survey ound no

compelling evidence that proximity to ALDI impacts on prices charged by other supermarkets.

Coles and Woolworths have generally similar prices across stores in the ACT with only very small price

diferences where they are co-located in Town Centres.

Supabarn, the only independent chain operating larger ormat supermarkets (at three locations) in the ACT,

appears to be in the range o 5 to 10% above the major chains or the Grocery Choice summation o baskets

and the basic staples basket. However, the ACT Treasury Survey demonstrates that in comparison to some

individual Coles and Woolworths stores the diference or the basket is o the order o 3 to 5%.

Grocery Choice also indicates that ACT grocery prices are on a par with most surrounding NSW and Sydney

metropolitan regions or the two major chains and ALDI.

Franklins the larger ormat NSW independent not tied to Metcash rates slightly ahead o the prices o its ACT

equivalent, Supabarn. The biggest diference is in the general independents/IGA category where the ACT appears

to be less competitive than other NSW regions. This would reect the act that the ACT does not tend to have

larger ormat independents such as Supa IGAs and virtually all ACT independents are below 800 m2 in oor space.


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1.1.2 Non-Price Competition Factors

There are approximately 50 independent supermarkets in the ACT in the smaller (under 1000 m2) category. The

main banner group by ar is IGA but other independent banners represented include Friendly Grocer, Foodworks

and Five Stars.

These smaller independents are generally located in local centres or industrial areas. They are owned and

operated by small entrepreneurs and are generally regarded as convenience retailing. They have approximatelythree to ve thousand lines per store. The successul independents competitive advantage derive rom excellent

personal service, utilising local suppliers, meeting special customer needs in terms o products not supplied by

the major chains and links to local community activities.

As the only ull line competitor to the two major chains in the ACT, Supabarn maintains its claim to have a

signicantly wider and diverse range than Woolworths. This claim was disputed by Woolworths but it is not or

this Review to adjudicate on these relative claims. However, as an independent ull line operator, Supabarn has an

impressive number o lines.

Further, Supabarn submits that its independent Mystery Shopper Surveys demonstrate levels o service, range,

quality o resh produce and presentational points o diference that put their three ACT stores ahead o the majorchains and other supermarkets in terms o consumer satisaction. The Supabarn benchmark is a maximum o

three minute waiting at check-out counters

Throughout the Review and particularly during the community consultation what appeared to be neutral

comments were received as praising the Supabarn shopping experience.

Based on Roy Morgan Supermarket Monitor ACT data rom June 2007 to May 2009, Woolworths perorm ahead o

other competitors in the majority o questions. However, the Roy Morgan Survey paradoxically does not include

Supabarn because it claims their sample size in Canberra is insucient to pick up the three Supabarn stores.

Given that the Supabarn Independent Mystery Shopper Survey has been applied to some o Supabarn

competitors it is the only comparative indicator available.

Woolworths submits it perorms very well in terms o customer satisaction measures, such as convenience o

trading hours, availability o parking, location and range o brands. They suggest diferent responses also give strong

evidence o the way in which the diferent competitors contribute to customer choice. For example, the diversity

allows customers whose sole ocus is low price, to shop at ALDI, whereas customers who want to balance broader

range, a stronger resh produce ofer, convenience and good value, can choose to shop at a ull line supermarket.

Woolworths pointed to eforts to introduce more express lanes to deal with the large number o smaller basket

shoppers in some stores. Woolworths also pointed to the sel-serve check-out systems they are tr ialling thatappear to be another solution.

Each o the main stakeholders pointed to their contribution to employment in the ACT and eforts to improve

environmental impacts o their operations.


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1.2 Likely Future Trends in the ACT Supermarket Grocery Sector

Likely uture trends are that the major chains will continue to expand their grocery, petrol, liquor, electronics

and general merchandise conglomeration to the extent allowable under Section 50 o the Trade Practices Act.

Woolworths has demonstrated world class supply chain management and wil l continue to set the pace in

supermarket development.

There are signs Coles/Wesarmers are liting their supermarket perormance. Whether this will alter the

competitive stalemate the ACCC identied between the two chains remains to be seen. The ACCC observed that

the lack o incentives or Coles and Woolworths to compete strongly across the board on prices reects the high

levels o concentration in the industry and requent monitoring o competitors prices.

Evidence indicates that i one player attempts to lead prices down, the other will ollow, making it extremely

dicult or either to win signicant numbers o customers rom the other through an aggressive pricing strategy.

The third major orce, the independent grocery retail sector supplied by wholesaler Metcash is likely to continue

to be constrained by Metcashs domination o the supply chain. However, Metcash is a very ecient operator and

expansion o alternative independent wholesale supply (beyond Franklins current arrangements) could provide

benecial competitive outcomes.

The opportunity or the ACTs own Supabarn to be part o an expanded alternative wholesaling operation may be an

extra justication (beyond that o diversity and choice) to acilitate urther Supabarn entry into retail outlets in Canberra.

Unless a similar style overseas competitor also enters the Australian market ALDI can anticipate continuing to

penetrate its niche in the market as a complement rather outright competitor with ull line operators.

Recommendation 1

The Review recognises that while there is reasonable supermarketcompetition in the ACT region retail grocery market, there is aneed to address:

a shortage o larger ull line supermarket capacity generally in

central Canberra and Gungahlin; andthe benets o encouraging urther ull line independentsupermarket chains to expand in the ACT to provide competitionand diversity and potentially support an alternative source owholesale grocery supply that could contribute to the pricecompetitiveness o independents including smaller retailers.


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One potential new entrant to the ACT in time may be Costco which is in the process o introducing a new style o

big box retailing to Australia.

Costco is only open to members, ofering business and individual memberships. Currently, the annual ee or

membership in Australia is $60. Costco is due to open its rst Australian store in Melbournes Docklands precinct

mid August 2009. Costco will occupy a 14,000 m2 warehouse ormat store in the Docklands. It is expected to stock

about 4000 product lines o groceries, whitegoods, electronics, cosmetics, jewellery, hardware and urniture.

Given its diferent ormat, the extent to which consumers view Costco as a substitute to a ull service supermarket

remains to be seen.

Neither this Review nor the ACCC Inquiry ound evidence o any marked shit to on-line grocery shopping

although this is a market channel that warrants monitoring.

1.2.1 Trends in Shopping Centre Distribution

Over time population growth, changing demographics and liestyles have resulted in changes in the role and

unction o Canberras hierarchy o commercial centres.

Group centres were introduced in Canberra in the 1960s in response to the emergence o supermarket retailing

and have subsequently also become a ocal point or ast ood, cofee shops, restaurants, bars and speciality stores

such as DVD Rental.

This has put pressure on many local centres some o which have declined but many o which are able to

reinvent themselves in some cases with the local centre independent supermarkets able to expand capacity and

competitiveness with ull line stores in the group and town centres.

In response to these trends, local centres in developing areas are either being spaced more widely to provide a

greater population catchment to assist their viability or the release conditions, while requiring commercial space,

do not mandate the requirement or the provision o convenience retailing. In the latter case, generally adopted

to serve areas with a small population catchment, planners are leaving it up to the market to determine the mix o

commercial uses at the centre.

ACT consumers will continue to preer supermarkets to cover of most o their needs but the trend to patronising

specialty stores and resh ood markets is likely to continue albeit with solid competitive response rom the supermarkets.


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1.3 Adequacy o the ACT Governments Supermarket Competition Policy

The ACTs unique planning centres hierarchy has created a systematic structure or supermarket and broader

retail development that at times has exhibited considerable rigidity. Yet there is also considerable support or theefectiveness o the hierarchy in creating balanced socio economic outcomes. Further, it should be noted at the

outset that the issue o an adequate retail grocery ofering in the ACT cannot be articially de-coupled rom the

wider question o retail competition policy.

The main ongoing impediment to supermarket competition and diversity is the legacy o an immutable one ull

line supermarket per group centre throughout the ACT.

Despite a statement as ar back as 1999 in a CMD policy paper on retail planning that the concept o a rigid

retail hierarchy will be replaced by a more exible and dynamic structure which better reects changing and evolving

consumer and market needs the most requent comment in submissions and during discussions ocussed on the

adverse impact o planning hierarchy rigidities.

Sometimes this rigidity combined with pressure rom interested parties, has stied adequate supply o

supermarket capacity particularly in central Canberra and Gungahlin and new entry by supermarket competitors.

A problem in many o the group and local centres in the ACT is the disparate and ragmented ownership,

including diferent strata ownership within particular centres and the ailure by many o those owners to re-invest

to keep the centre up-to-date and competitive.

The existing Territory Plan appears to respond poorly to demands o the market. In particular planning rules or

group centres concentrate on micro managing land without due regard to emerging market trends and it hasbeen suggested the various zoning categories should be deregulated and the whole centre zoned core to allow

greater density development or mixed commercial and residential uses.

Recommendation 2

Given the trends identied, planners and decision makers in theACT need to ensure there is an adequate response to market andcompetition signals demanding larger ormat supermarkets relativeto the overall size o centres. This includes reinorcing eforts to ensurelocal centre viability by enabling some local supermarkets to expand.

This should be complemented by a more fexible approach to allownew entrants into new area development and in existing group centres.


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There are indications that ACTPLA has become more exible in recent years to respond to market demands and

issues o competition. This and the establishment o the LDA along with the eforts o the CMD Strategic Project

Facilitation has provided ad-hoc support to new entry and expansion o existing capacity.

New legislation reorming the ACTs planning system and changing to the statutory ramework or granting

leases, including the direct sale o land came into efect in 2008. Administrative changes have been developed

to complement the legislative reorms and signicantly improve the timeliness o direct sales through a more

efective, streamlined process.

1.4 Competition and Diversity Policy Initiatives

1.4.1 Role o the Trade Practices Actand the ACCC

The ACCC considered that the challenge o reeing up planning/zoning impediments to achieve improved

retail grocery competition could not be let solely to its role in enorcing and promoting compliance with the

Trade Practices Act.

The Trade Practices Actsets ground rules where commercial activity may become anti competitive through

collusion in price xing or market sharing, misuse o market power, certain exclusive dealing and acquisitions

or mergers that result in a substantial lessening o competition in a market. However, not running oul o the

Trade Practices Actdoes not mean that the actions o a corporation are positive or competition.

For instance, ACCC clearance o a proposal by a major supermarket chain or a particular site acquisition meansthat it is unlikely to substantially lessen competition and thereore is not illegal. A decision by the ACCC not

to intervene does not imply there is no alternative outcomes that would increase competition, nor that the

acquisition will not result in some lessening o competition, albeit a lessening that alls short o being substantial.

Recommendation 3

The supermarket competition policy in the ACT requiressubstantial overhaul to address impediments in the planning anddevelopment regime.

A ramework taking competition actors into account is required toree up retail zoning provisions particularly in group centres, tobetterreect evolving consumer and market needs and address the barriersto new supermarket entrants at the retail and wholesale levels.


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In the case o some recent clearances by the ACCC o proposed Woolworths acquisitions o potential supermarket

sites in the ACT at the Kingston group centre, it would be open to the ACT Government to orm a view that a

restricted allocation o a site to a new or less dominant entrant through a direct sale or some modied orm o bid

process would result in an increase in supermarket competition.

The ACCC in applying a with and without test to an acquisition is constrained by the legal denition in Section

50 o theTrade Practices Act i the proposed acquisition would lead to a substantial lessening o competition in a

market. Acquisition decisions by the ACCC under the Trade Practices Actcan be contested in the Federal Court.

Over recent years the ACCC has extended and rened its analysis o sectors with sensitive degrees o market

dominance, links to market power in related sectors and concerns over creeping acquisitions.

The ACCC decision in 2008 to oppose a proposed Woolworths acquisition o an independent store site at

Karabar in Queanbeyan, NSW (just over the south east border o the ACT) demonstrated the extent o market and

competition analysis applied to the with and without testing o independent acquirer alternatives or the site.

An implication or ACT region supermarket competition is that two earlier ACCC clearances are likely with the

benet o hindsight, to have been rejected under current intensive analyses. In these instances Woolworths

acquired, rstly our group centre independent Cannons store sites in 1996 (three in Tuggeranong and one atKippax) and, secondly an IGA store site at Charnwood group centre in 2004.

This has created the situation where the ACT currently only has three independent ull line supermarkets

compared to 21 run by the two major chains.

1.4.2 Market Cap Proposals

The Review received a range o suggestions as to how improved competition and diversity outcomes might beachieved including calls or a cap on market share. This included proposal o a oor space dominance test set at

25% o the oor space owned or managed by a single retail operator within both regional catchments and within

the ACT overall.

Recommendation 4

The ACT Government note that it is in no way constrained romintervening through the planning and land allocation system toachieve increased supermarket competition at sites where proposedacquisitions by a major chain have received inormal ACCC clearance.


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However, many sound arguments were put against introducing a market share cap o any kind. Apart rom the

denitional and measurement problems it was regarded as distorting the operation o the market place and

potentially punishing success o Australias most ecient and popular supermarket chain.

1.4.3 Sources o Competitive Tension and Diversity in the ACT

The ACCC in its Inquiry ound that new ways o incorporating competition analysis into planning decisions should

be considered as a means o overcoming the high barriers to entry in supermarket retailing particularly the

diculty o new entrants to an area obtaining suitable sites.

It does not require sophisticated competition analysis to demonstrate that planning/zoning approaches in the

ACT have let some regions decient o competition in a quantum sense and that because o the rigidity o the

planning hierarchy there has been a structural competition issue (in group centres) that has only begun to be

addressed in recent years.

In the ACT the only real competitive tension and diversity comes rom ALDI and the ull line independent

chain Supabarn.

Local IGAs and other independent stores and the ew Supa IGAs in Canberra while also providing diversity are

basically convenience outlets. They are so dependant on the high cost wholesaler Metcash that they are notgenerally considered price competitive.

The lack o price competitiveness o local centre independents is ofset by their greater personal attention,

preparedness to supply o unique products and links to the local community.

Metcash is now purchasing and developing supermarket sites, unding their IGA operators into supermarket

development on the basis that the supermarket operation is tied to IGA and trading terms are dictated by

Metcash to the operator or the duration o the supermarkets trading lie.

It is also known that Metcash have taken an ownership position in certain independent retail chains which

operate some larger independent supermarkets in diferent parts o the country.

Recommendation 5

Any orm o cap on the market share o participants should be rejected.


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The vertically integrated ALDI has achieved a remarkable competitive impact as a ourth orce in the sector. ALDI

has indicated its urther entry intentions in the ACT and removing barriers to that entry should be acilitated

where possible. Whether that needs to extend to direct intervention through urther direct sales should be

assessed on a case by case basis.

Supabarn is an independent chain that sources a lower proportion o its supply rom the wholesaler Metcash in

comparison to other independent retailers. Many independents source 70 to 80% rom Metcash.

In becoming less dependent on Metcash, Supabarn has traded of better direct deals with suppliers and greater

variety against poorer terms o trade with Metcash. Any expansion by an independent opens up the possibility o

it becoming a wholesaler and hence becoming a competitor in a market that needs competition.

As the ACCC Report identied the opportunity exists or the entry o a second wholesaler to compete with

Metcash. That could also provide an alternative source o wholesale supply or smaller ACT independents. The

most obvious scenario could involve a strategic alliance with the only vertically integrated ull line independent

chain Franklins which currently has 80 stores in NSW.

Metcash is a very ecient operator and an expansion o alternative independent wholesale supply could provide

considerable competition benets. The opportunity or an expanded alternative wholesaling operation is an extracompetition justication (beyond that o retail diversity and choice) to acilitate urther truly independent entry

into retail outlets in Canberra.

1.4.4 New Entry Facilitation through Planning/Zoning Mechanisms and/or the Direct Sales Process

Given the ACT Governments unique degree o ongoing land ownership within and adjacent to community

centres, direct land sales ofer an ecient and transparent way o short circuiting planning and redevelopment

constraints to enable new entry or expansion o existing supermarkets. Any actions by the ACT Government

to support retail diversication over time through site acilitation, involves consideration o localised issues and

actors as well as broader competition issues. It also needs to consider the integration o the new supermarket

into the overall amenity and attractiveness o a centre.

The 2008 ACT planning reorm has signicantly improved the timeliness o the direct land sale process.

Recommendation 6

An alternative source o wholesale supply would be encouragedby a restricted approach or particular sites that precluded Metcash

controlled ventures as well as the two major chains.


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In the last ve years, direct land sales related to supermarkets involved new ALDI stores at Conder and Kippax

and expansion to existing supermarkets at group centres in Curtin (Coles), Mawson (Woolworths), Calwell

(Woolworths) and Wanniassa (Supabarn).

There was strong support through submissions and consultations or concrete action by the ACT Government to

acilitate entry o truly independent larger ormat supermarkets.

ALDI and the independent locally based chain Supabarn both put in submissions in support o pro-competition

government intervention. The major chains, particularly Woolworths oppose use o direct land sales in thismanner unless it is based on an open tender. Yet the major chains have themselves been the beneciary o direct

land sales to acilitate expansion o capacity in existing group centres. Those acilitated expansions while avouring

incumbents have been good or overall competition.

The economic argument in avour o an open tender is that it allows the market to determine what the true

value o a site is and returns the maximum revenue to the community. The counter argument is that a participant

aiming to maintain a degree o market power may be willing to pay well in excess o the market value (sometimes

reerred to as deep pockets or whatever it takes syndromes). In order to get the best competitive outcome it may

be necessary to apply some restrictions.

Processes and procedures involving consistent market and competition analysis and eligibility criteria coulddetermine suitable new entry candidates tor some centre developments.

Recommendation 7

Processes, Procedures and Criteria

Establish and regularly review processes, procedures andcompetition criteria to enable the government to acilitateentry o suitable independent ull line chains in suitable new

and redeveloped group centres to achieve a better balance ocompetitive tension, choice and diversity.

The approach could involve either limited tender direct sales orappropriate clauses in the lease requirements i it was consideredmore appropriate to ensure ownership integration in the sale o anew group centre (possibly even a single developer).

Special zoning mechanisms or this purpose could be cumbersomeand vulnerable to legal challenge in contrast to the targeted, site bysite and transparent direct land sales process. The redevelopment o

existing group centres is where exibility in approach is most likelyto be required to secure the best overall outcome in collaborationwith property owners.


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1.4.5 Competition Analysis and Criteria in Assessing Candidates or New Entry Facilitation

The criteria recommended to assist new independent supermarket entry through the planning and land

distribution needs to be based on transparency and objectivity.

The approach adopted should be consistent with broad market denition and competition analysis applied by

the ACCC in its assessment o acquisition proposals. These parameters are set out below.

Market Denition

a) Potential Parties

Analysis o the potential supermarket companies likely to bid or a site.

b) Site Details

Identication and description o the characteristics o the potential site.

c) Market Participants

Competitors.

Potential competitors.

Customers and consumer representatives.

Wholesale suppliers.

Government bodies.

Other interested parties.

d) Market sizeThe ACCC generally consider a local retail supermarket area o 3-5 km radius.

ACCC uses a orward looking purposive approach taking into account that a new supermarket may

attract customers rom urther aeld.

ACCC also takes into account the state wide wholesale market.

e) Liquor markets

Local market or retail sale o liquor.

Statewide wholesale market or liquor.


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Competition Analysis

a) With/without test

In assessing a merger pursuant to section 50 o the Trade Practices Act, the ACCC must consider

the efects o the transaction by comparing the likely competitive environment post merger i the

transaction proceeds (the with position) to the likely competitive environment post merger i the

transaction does not proceed (the without position).

This tool has been used by the ACCC in measuring competitive impacts in supermarket competition.

b) Price competition

Competitive analysis o relative prices provided by the potential competitors in other markets.

Use o promotions.

Ability to shop around or the best prices at diferent supermarkets.

c) Range o products

Diferences in the composition and range o products ofered.

d) Fresh produce

Examination o supply chains or resh produce.

e) Levels o service

Numbers o staf per customer.

) Liquor

Combined oferings o supermarket and liquor.

g) Other competitive responses

Additional promotional activity.

h) Local considerations

Road access.

Other development in the area.

i) Wholesale markets or ood

Impact on competition at the wholesale level.


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j) Wholesale market or liquor

Impact on wholesale competition.

Eligibility Criteria

Criteria or a suitable operator could be adopted along the ollowing lines:

A ull line retailer and competitor to the major supermarket chains as identied by the ACCC inquiry Report

and not controlled by a major wholesaler.

A minimum o 10 years trading history in ull line supermarket.

Demonstrated ability and inrastructure to run several ull line supermarkets.

Demonstrated nancial capacity.

Acceptance o restrictive conditions i resale o the site occurs within a period o 15 years.

Additional weight be placed on potential or the site acquisition to improve the applicants capacity to operate at

the wholesale level through the establishment o a supermarket warehouse in the ACT which would be availableto all independent operators.

They are applicable to the growth area centres and appropriate existing centres as identied through the

overarching planning and zoning ramework examined in the next section.

The use o direct sales o sites or ALDI entry in growth centres and expansion o existing centre supermarkets

should be acilitated on a case by case basis where there appear to be to be undue market impediments.

The above analytical ramework and criteria should be reviewed within a three year period to assess impact

on supermarket competition and diversity and any necessary adjustments made to this element o the

competition strategy.

Recommendation 8

The ACT Government endorse the above market and competition

analysis approach together with the adoption o suitable eligibility criteria

to identiy and acilitate entry by new ull line supermarket competitors.


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1.5 An Overarching Framework for Planning/Zoning Reform and Coordination

Based on inormation and analysis put to the Review, an overarching supermarket competition ramework

requires a transparent coordination mechanism, regular review and assessment and priority initiatives including

the approach to acilitating new entry o ull line supermarket competitors.

The elements o that ramework are covered in the ollowing recommendations.

Recommendation 9

Coordination Mechanism

Establishing a ormal coordination mechanism between ACTPLA,LDA, ACT Treasury and the acilitation arm o CMD to create acohesive and transparent approach to planning and competitionissues in growth areas and existing centres addressing:

zoning reorm in group and town centres;

the evolvement o local centres;

acilitation o new supermarket entry on a site by site basis; and

maintaining up to date data and analysis o the sector.

Recommendation 10

Regular Review and Assessment

CMD establishing and chairing a orum between the key agenciesand industry stakeholders to periodically (at least yearly):

review planning/zoning processes;

assess progress on the supermarket competition ramework;

identiy changes required to the ramework;

ensure processes are updated to respond to changes in groceryretailing development; and

make recommendations to the ACT Government onpossible changes.


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Recommendation 11

Urgent Attention be Given to Central Canberra Shortages

Addressing the shortage o ull line supermarket capacity andcompetition in some existing central Canberra group centres (southCanberra/Kingston, north Canberra/Dickson).

Utilising a combination o direct sales (consistent withrecommended procedures and criteria) and zoning exibility intandem with the ongoing ACTPLA planning ramework reviews oDickson and Kingstown town centre precincts.

Recommendation 12

Other Group and Town Centre ReviewsThe ACT Government should progressively review other group andtown centres, moving away rom the one size ts all approach,learning rom and drawing on redevelopments such as Jamisonwhere new entry and expansion o existing supermarkets hasimproved competition.

Recommendation 13

Facilitating Local Centre Competitiveness

Drawing on Recommendation 2, no articial constraints should beplaced on supermarkets in appropriate local centres to expand in away that is consistent with public amenity and enables those storesto provide a more competitive ofer against ull line stores in largercentres. Local centre independent stores could be boosted i movesto increase independent wholesale competition are successul.

Reinorce ACTPLAs approach to allow the market to determinethese parameters in existing local centres and to space local centresin developing areas either more widely or apply more exibleconditions subject to regular market eedback.

For existing local centres acing sustainability pressures, solutionsshould be based on conversion to intense, multi - story residentialusage combined with a proportionately scaled commercial andconvenience usage.


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1.6 Identication o New Entry Opportunities in Existing and Growth Areas

The ollowing scenarios developed by the Review are indicative only, are subject to the criteria described in

Section 1.4.4 and are scheduled in a loose ashion or potential assessment and ollow through in the context o

the overarching policy ramework outlined in Section 1.5.

1.6.1 Growth Areas

The only ull line supermarkets in Gungahlin are in the town centre with the predictable combination o Coles

and Woolworths plus an ALDI. There are presently no group centres operating in Gungahlin. The proposed group

centres are Casey, Amaroo, Kenny and Moncrief.

The Casey and Amaroo Centres will be released in 2010/11. The Moncrief and Kenny centres are scheduled to be

released in accordance with population growth. Reecting a more exible approach ACTPLA consider the Casey

and Kenny sites will be o sucient size to accommodate two large supermarkets.

Recommendation 14

Growth Area Initiatives

New approaches will be needed in Gungahlin and Molonglo. Theollowing options are based on the present proposed group centreconguration and the two major chains position in the town centre.

Amaroo consideration o ull line independent plus a possibleALDI (released in 2010/11).

Casey one o the two ull line supermarkets to be an independentplus a possible ALDI (released in 2010/11).

The uture multiple supermarket group centre developmentin Molonglo ofers a urther opportunity to acilitate specicindependent entry but the approach should be inormed onprogress in Gungahlin and some existing centre gap lling underthe overarching approach to supermarket competition policy.


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1.6.2 Existing Areas

The options in existing areas lie in shiting over time rom the one size ts all approach in the 17 group centres

that has efectively precluded the introduction o a second ull line supermarket until recent precedents have seen

centres like Jamison re-invented largely through planning exibility and the collaborative eforts o investors.

Central Canberra

Immediate opportunities arise in the inner north and south o Canberra and justiy some direct sales to jump start

and guide the process.

There is a strong case on competition and diversity grounds or a ull line independent store that meets the

criteria being established in the Kingston/South Canberra centre renewal. This case is based on:

Woolworths current dominance in north Canberra;

Coles dominance in south Canberra; and

the expectation that at least one o the majors will be able to establish a urther ull line store in Canberra City.

The two ACTPLA Urban Planning Framework Reviews or Dickson and Kingston/south Canberra present an

immediate opportunity to apply the overarching supermarket competition policy ramework proposed by this

Review including the competition criteria linked to direct land sales.

ACTPLA have been responsive to supermarket competition aspects o these two reviews. The scenarios are quite

diferent and it is reassuring that ACTPLA has recognised the constraints on a re-developed Kingston centre to

accommodate appropriate ull line supermarket and ALDI entry consistent with suitable ambience, amenity and

inrastructure perormance. Canberra consumers would be concerned i mistakes o the Manuka re-development

were to be repeated.

Accordingly, the Kingston review has embraced a more lateral approach that could result in the re-developmentbeing ocussed in the Eastlake/Fyshwick market area where considerable scope would appear to exist or a ull

line supermarket and an ALDI at more realistic market entry costs.

While Dickson is ar less constrained, ACTPLA has indicated that all options are on the table to ree up zoning

restrictions within and to the east o the current centre precinct to acilitate a possible additional ull line

supermarket and/or expansion o Woolworths and certainly entry o ALDI. A second ull line supermarket in

Dickson could be justied rom a competition perspective but it is dicult to see a basis or excluding Coles rom

contesting the entry stakes given Supabarns presence in Canberra City and Kaleen.

The eventual capacity and mix at Dickson will have an impact on the demand or and nature o an additionallarge ormat store in the Canberra city town centre which the market will determine when the Canberra Centre

lease restrictions run out in a ew years.


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Other Group and Town Centres

Over time it would be appropriate under the overarching rame-work to review other group and town centres by

region, drawing on experience rom successul redevelopments such as Jamison and central Canberra as it unolds.

Local Centres

ACTPLAs stated approach is to:

allow the market to determine how existing local centres expand in a way that is consistent with public amenity

and enables those stores to provide a more competitive ofer against ull line stores in larger centres; and

space local centres in developing areas either more widely or apply more exible conditions.

This seems to combine competition and planning requirements. For existing local centres acing sustainability

pressures, the most suitable and least distortive approach is proposed in the submission by the Greens

spokesperson based on local centre conversion to intense, multi-story residential usage combined with a

proportionately scaled commercial and convenience usage. These processes should be subject to regular market

eedback and monitoring within the supermarket competition ramework.

Recommendation 15

Existing Area Redevelopment

Dickson and Kingston Group Centres

As a priority pursue the immediate opportunities ofered by thetwo ACTPLA Urban Planning Framework Reviews or Dickson andKingston/South Canberra to apply the overarching supermarketcompetition policy ramework proposed by this Review includingthe competition criteria linked to direct land sales.

Other Group and Town Centres

Over time it would be appropriate under the overarching rameworkto review other group and town centres.

Local Centres

As stated in Recommendation 13, reinorce the ACTPLA marketdriven approach to new local centre renewal. For declining local

centres acilitate conversion to intense, multi-story residentialusage combined with a proportionately scaled commercial andconvenience usage.


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2. Process o the Review

This assessment o Supermarket Competition Policy in the ACT, results rom the ACT Governments desire to

review its current Retail Supermarket Competition Policy to make provision or recent market developments and

in particular to take into account the implications o the 2008 ACCC Retail Grocery Inquiry.

Following political debate including a motion in the Legislative Assembly by the Greens Party, along with ongoing

dialogue with supermarket industry representatives, the ACT Government is seeking to develop an over-archingpolicy ramework including competition criteria that could determine circumstances where a direct land sale

approach to allocation o supermarket capacity would be merited.

The consultancy review has covered assessment o:

adequacy o the current policy;

the current competitive dynamic o the players in the ACT market;

likely uture trends in supermarket supply and demand;

ways the ACT Government can support sustainable competition at both retail and wholesale levels or the

region (including bordering NSW markets);

specic competition criteria in assessing individual proposals; and

any additional measures that can be undertaken by the ACT Government.

2.1 Current Policy

The current ACT Government policy or supermarket competition established in 2008 aims at achieving a

competitive and diverse sector to provide consumer choice and convenience. It is expressed in the ollowing terms:

The ACT Government believes that Canberrans are best served by a diverse and competitive retail grocery

supermarket sector that supports consumer choice and convenience. In considering the use or sale o land or

grocery supermarkets, the ACT Government will take into account the capacity o a retailer to access suitable sites

as well as the nature o the benefts a particular type o supermarket may bring, such as product diversity, quality

o service, environmental gains, integration with existing retail/commercial centre, ootprint and car parking.

Taking into account some o the above actors rom the Supermarket Competition Policy the ACT Government

may consider direct land sales to acilitate entry o new supermarkets in a manner similar to two direct sales o

sites in 2004 to enable ALDI to set up supermarkets in the Kippax and Conder group centres.


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2.2 2008 ACCC Inquiry into Retail Grocery Competition

In its 2008 review o the Australian grocery retailing sector, the ACCC ound that while the sector is workably

competitive there are a number o actors that currently limit the level o price competition, including:

high barriers to entry and expansion, particularly in relation to diculties in nding new sites or development;

the limited incentives or Coles and Woolworths to compete aggressively on price;

limited price competition that Coles and Woolworths ace rom the independent sector. Independent

supermarkets tend to ocus on convenience and service. A key actor inhibiting price competition rom the

independent retailers is the wholesale prices o packaged groceries supplied by Metcash;

price competition is strongest on promotions o key value items (which are products known by the

supermarkets to be used by consumers to assess value); and

ALDI has been a vigorous price competitor since its entry into Australia and has the incentive and ability to

engage in sustained price competition. This has had a dynamic impact on the grocery sector and brought

about competitive responses rom Coles and Woolworths on many products.

The ACCC Report recommended actions to lower barriers to entry and expansion in both retailing and

wholesaling to independent supermarkets and potential new entrants. The ACCC considers more regard should

be had to competition issues in considering zoning or planning proposals. The specic recommendation rom its

report in this respect is:

All appropriate levels o government consider ways in which zoning and planning laws and decisions in respect

o individual planning applications where additional retail space or the purpose o operating a supermarket

is contemplated, should have specifc regard to the likely impact o the proposal on competition between

supermarkets in the area. Particular regard should be had to whether the proposal will acilitate the entry o a

supermarket operator not currently trading in the area.

The ACCC also ound that i independent stores could achieve better wholesale terms o supply or dry groceriesthan those currently supplied by the national wholesale distributor, Metcash that, combined with their existing

quality and keen pricing o resh produce, could make the larger independents in particular a more telling orce

against the major chains. The ACCC expressed the view that Metcashs wholesaling arrangements with suppliers

could make direct dealing between suppliers and independent retailers economically unattractive and enable

Metcash to inhibit competitive supply. In response, Metcash inormed the ACCC in December 2008 that it was

amending its agreements with suppliers.

The Commonwealth Governments response to the ACCC Inquiry Report was to reer the zoning and planning

issues to a meeting o COAG to review the anti-competitive impact o state and local planning laws.


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2.3 Review Schedule

The review took place between 9 June and 7 August 2009 and involved inter alia:

development o a methodology and consultation plan;

private meetings with and submissions rom key stakeholders;

public consultation including submissions and ve community meetings;

nal date or submissions 24 July (although several were received and accepted in the subsequent week); and

Drat Report on 7 August 2009.

2.4 Private Stakeholder Meetings, Submissions and Other Source Material

Private meetings were held with a series o stakeholders and interested parties. The stakeholders covered most

interest in the sector although supplier representatives did not make a submission on the grounds that their

issues had been raised during the ACCC Inquiry and that given the sensitivity with major retailers they did not

wish to go over old ground o grievances they had already raised during the ACCC Inquiry.

The review received submissions and background material rom 19 stakeholders. It should be noted that much o

the material provided was Commercial-In-Condence.

2.5 Public Consultation

Community Consultations were conducted in the week beginning 13 July 2009 at Tuggeranong, Woden,

Gungahlin, Belconnen and Canberra City. Reports on the consultations are set out at Appendix 4.


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3. Outline o Supermarket Structure in the ACT

3.1 Introduction

Regional retail grocery markets such as the ACT have undergone signicant transormations over the past

50 years as a result o socio - economic inuences relating to car usage, higher real disposable incomes, expanded

household buying and storage patterns, eating out and consumption o personal services.

These and other socio-economic changes including longer retail trading hours, reduced average household size,

increased labour orce participation o women and the growth o e-commerce have led to decentralisation o

grocery retailing, the ever increasing inuence o supermarkets as they took over rom small convenience centres.

Two key characteristics o grocery retailing has been the increased concentration o ownership with two dominant

vertically integrated chains now operating throughout the country including the ACT and increased size o

supermarkets particularly at the group and town centre level, as resh ood elements have been incorporated.

ACTPLA pose the question How should new orms o retailing that widen consumer choice and increase competition

be accommodated without compromising objectives related to equity, accessibility and the environment?1

According to ACTPLA2 the provision o retailing in Canberra occurs in the context o a metropolitan structure

based on accommodating growth by the development o separate urban districts. The associated centres

hierarchy o Civic, town, group and local centres is designed to ofer residents o each district convenient and

equitable access to goods, services and acilities.

The hierarchy was based on meeting the three basic types o shopping trips trips to local centres to provide goods

bought daily; trips to group centres or weekly grocery shopping and trips to town centres to primarily meet the

needs or higher order goods which were bought less requently and or which customers would travel urther.

Currently there are town centres in each o the new towns o Woden-Weston Creek, Belconnen, Tuggeranong andGungahlin, 17 group centres, over 70 local centres and retail components in the industrial estates.

The hierarchy has been regarded by ACTPLA 3 as an important management tool or allocating commercial activity

to achieve retail objectives. Its intention has not been to protect individual businesses rom competition but to

provide certainty to commercial investors about where to invest; to ensure good accessibility to retail acilities, to

coordinate inrastructure and to provide certainty to home occupiers that the amenity o their residential area will

not be threatened by retail and commercial developments that have unacceptable noise and trac impacts.

ACTPLA4 indicate the hierarchy has not remained static and has been modied to respond to social and economic

changes. Changing retail ormats such as large supermarkets have been accommodated. ACTPLA note that

except in some local centres, retailing blight has been avoided.

1 Retailing in Canberra ACTPLA Background Paper, June 2009.2 Ibid.3 Ibid.4 Ibid.


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3.2 Unique Characteristics o the ACT Market

Woolworths point out the ACT is distinct rom other states or being well connected by roads. There is a backbone

o our lane highways linking each one o the ve regions, enabling shoppers to move easily across the ull range

o ood and grocery oferings. The ACT has a car-based culture, and parking is cheaper and more readily available

than in other metropolitan areas such as Sydney and Melbourne.

Not only is there a range o supermarket and specialty ood and grocery options in each o the ve ACT regions,each o the regions is a 10 to 15 minute drive rom the closest o the other our regional centres. Estimated

travelling time between each o the ve regional centres is set out below.

Travelling Times Between ACT Relevant Shopping Centres

Point A Point B Distance Time

Tuggeranong Hyperdome

49 Anketell St, Tuggeranong

Westeld Woden

Keltie St, Phillip

11 km 12 min

Westeld Woden

Keltie St, Phillip

Canberra Centre

Bunda St, Canberra City

10.6 km 13 min

Canberra Centre

Bunda St, Canberra City

Westeld Belconnen

Benjamin Way, Belconnen

9.1 km 11 min

Westeld Belconnen

Benjamin Way, Belconnen

Gungahlin Marketplace

33 Hibberson St, Gungahlin

11 km 12 min

Westeld Woden

Keltie St, Phillip

Woolworths Queanbeyan

Craword St, Queanbeyan

15.2 km 15 min

3.3 Distribution o Supermarket Activity by Centre Levels

Inormation in this section has been provided by ACTPLA outlining the existing provision and trading

perormance o supermarkets in the ACT5.

Appendix 1 identies the existing supermarket space (Gross Floor Area) by centre. It should be noted that the

ACTPLA material is based on stocktakes in 2007. The material in Appendix 1 has been updated to 2009 drawing

on inormation provided by ACTPLA and industry participants. This data includes any outlet that could be loosely

described as a supermarket, whereas the tabular and graphical material set out in the remainder o Section 3 is

based on the 2007 Stocktake. Subsequent upgrades and corrections o data will only have a minor efect on the

trends noted.

5 ACTPLA Supermarket Retailing in the ACT Background Paper June 2009


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Table 1 below indicates the supermarket space by district and hierarchy level while Table 2 indicates the share o

space by district and hierarchy level.

Table 1: Supermarket Floor Space at Centres 2007

Town Town Centre Group Centre Local Centre Total

Canberra Central 5173 8227 8149 21549

Belconnen 9238 14963 6174 30375

Woden-Weston Ck 8878 6575 4114 19567

Tuggeranong 10800 14751 4833 30384

Gungahlin 10109 0 1794 11903

Total 44198 44516 25064 113778

* In addition to supermarket space at centres, there is a limited amount o supermarket space in Mitchell (288 m),

Fyshwick (55 m), the ANU (56 m) and the University o Canberra (196 m).

Table 2: Supermarket Floor Space at Centres 2007 Per Centage

Town Town Centre Group Centre Local Centre

Canberra Central 24.0 38.2 37.8

Belconnen 30.4 49.3 20.3

Woden-Weston Ck 45.3 33.6 21.0

Tuggeranong 35.5 48.5 15.9

Gungahlin 84.9 0 15.1

Total 38.8 39.1 22.0

O the supermarket space, 40% is at town centres, 38% at Group Centres, 21% at local centres, and 0.6% elsewhere.

3.4 Floor Space by Operator

Figure 1 indicates the location o supermarkets in Canberra

Documents

Supermarket Review