Fewer Supermarket Options, Higher Prices: Australia’s Cost Crisis

In 2017, in an advertisement for Australian supermarket Coles, chef Curtis Stone bought beef mince, potatoes and other groceries from Coles for less than $10 and cooked a meal for a family of four. But in 2025, it would cost around $24 to buy all the ingredients from Coles according to his recipe.

For consumers, rising grocery prices are a symbol of a broader affordability crisis. In Australia, this crisis is also accompanied by a lack of choice.

When Australian residents want to go to the supermarket, the choices they have seem to be very scarce. In fact, Australia has one of the highest concentrations of supermarkets among developed economies, with just two large chains – Coles and Woolworths – accounting for 67% of the industry’s market share.

Unlike the US, which has multiple brands such as Kroger, Walmart, and Costco, and the UK, which is dominated by Tesco but also has competitors such as Sainsbury’s, Asda, Morrisons, and Lidl, ALDI, the third largest player in Australia’s supermarket brands, only has a 9% market share, while Metcash, a representative of independent supermarkets that it supplies, has a 7% market share.

In this situation, people can only flip through supermarket discount information brochures and choose between the two supermarket giants that are constantly raising prices to buy daily necessities.

Even if there is outrage, the claim that supermarkets are raising prices is untenable

Since the COVID-19 pandemic, prices, especially grocery prices (as represented by CPI food and non-alcoholic beverages), seem to be rising endlessly. In the midst of the cost of living crisis, every Australian feels the anxiety and anger of the rising numbers on their bills.

Woolworths and Coles, which have been widely accused of price gouging on social media, also made the top two of Australia’s least trusted brands. However, after a 12-month investigation, the Australian Competition & Consumer Commission (ACCC) came to a helpless conclusion: it failed to conclude whether the supermarket giants were price gouging.

In the 441-page report of the ACCC, it was mentioned that the increase in profit margins of supermarket giants was roughly synchronized with the increase in prices, which seemed to provide evidence to convict supermarket brands. But at the same time, the report gave more arguments to prove their “innocence”:

1. No systematic violation of pricing policy was found, indicating that the prices actually paid by consumers were basically consistent with the pricing policies publicly stated by the supermarkets.
2. Coles and Woolworths said that most of the price increase requests from suppliers have been approved, which means that most price increases are not driven by pure profits, but are related to the increase in their costs (raw materials, transportation, labor, etc.)
3. Due to the complexity of commodity types and profit structures, it is impossible to determine whether supermarkets are over-profitable only from prices or profit margins.

In short, the existing evidence is insufficient to support the regulatory authorities’ determination that supermarkets are raising prices. But this does not mean that Australians are not paying more than they can afford, nor does it mean that market dynamics are fair.

Rising living costs and limited choices have left Australians exhausted

Over the past five years, grocery prices in Australia have risen by about 24%, completely outstripping wage growth. Several surveys on Australia’s cost of living crisis have shown that falling living standards are a core concern for many Australians. The lack of competition in the supermarket industry has further limited residents’ choices, and together with rising living costs, has left Australians exhausted.

Fiona Shen, an international student at the University of Sydney, cooks at home and goes shopping at the Woolworths supermarket in Mascot two or three times a week. “When I lived in Central,” she recalls, “Woolworths, Coles and ALDI were all within walking distance. I also often went to Paddy’s Market on Sundays to buy discounted vegetables and fruit.”

Since moving to Mascot, where there is only one large supermarket nearby, Fiona says her monthly living costs have risen by more than $10. “Part of this is due to rising prices,” she points out, “but it’s also because I’ve lost the ability to shop around.”

For students like Fiona and countless Australians living with limited retail options, the lack of competition is not only inconvenient but also costly.

Factors contributing to food price pressures

Grocery price increases in Australia are driven by a combination of global and domestic factors.

Internationally, supply chain disruptions following the COVID-19 pandemic, the war in Ukraine and agricultural shocks related to climate change have pushed up the cost of producing and transporting food around the world. But this has also exposed the fragility of the country’s food supply system, which has put too much pressure on shoppers.

Domestically, the structural problems of Australia’s retail grocery market – a duopoly and logistical challenges – have left consumers facing high prices with few viable alternatives.

Industry concentration has created significant barriers for players outside the duopoly. The ACCC said ALDI took 20 years to reach 9% of retail share in Australia and held only 13 undeveloped plots of land, making it less likely to develop new stores than Woolworths’ 110 and Coles’ 42. This situation has disadvantages for supply chain fairness, price transparency and market differentiation.

In remote areas and communities, high costs and concentrated choices combine to make residents in these areas face a more serious cost of living burden. 56% of consumers in remote areas said that there are only a few grocery options near them. This exposes a clear gap in the spatial fairness of the current food supply system.

What to do next? Who should take action?

Clearly, blaming supermarkets alone will not solve the problems of Australia’s grocery industry. What is needed is coordinated policy reform, market diversification and consumer empowerment.

At the government level, the ACCC should continue to investigate anti-competitive behavior, observe the profitability compliance of large supermarkets in the complex retail logic, and encourage them to improve pricing transparency.

Long-term solutions may include encouraging independent grocers, supporting community stores in remote areas, regulating supplier pricing, and even providing food subsidies during peak inflation. At the same time, public information campaigns on seasonal food and rational shopping can help consumers understand the production, transportation and sales logic of groceries and manage their spending more effectively.

Consumers can also take some small but meaningful measures, such as supporting local farmers’ markets, participating in community food initiatives, and sharing price information, to enhance collective resilience.