Supermarket price war pushing out small businesses

A Queensland Liberal MP says the escalating price war between Woolworths and Coles is squeezing out small businesses, many of which are struggling in the aftermath of floods.

Scott Buchholz, Liberal MP for the food-stricken seat of Wright, told Parliament small businesses in his electorate have suffered a 30% drop in trade since milk hit the shelves at $1 a litre in the major supermarkets.

“We operate in a free market and it’s the right of any company to turn a profit… but not at the hands of smaller business,” Buchholz said.

Nationals MP Bruce Scott has also expressed his concern over the price war, claiming low milk prices are harming dairy farmers in addition to small businesses.

“I call in this Parliament to make sure [Coles and Woolworths] are on the side of family-owned businesses, dairy farms and also those many small communities,” Scott said.

Woolworths has admitted the milk price war is unsustainable and will inevitably hurt dairy farmers. However, community relations manager Simon Berger says that’s “the nature of a competitive industry”.

“But we are very forthright in saying that this is not a price war we would have started… and it’s a price war we do have some concerns about,” Berger says.

Consumer group Choice says there is no need for Woolworths to engage in a price war with Coles. Spokesperson Christopher Zinn says competition should be based around alternative offerings rather than price matching.

Brian Walker, managing director of The Retail Doctor, says small business will need to “weather the storm” until the price war subsides, and agrees competition means creating a point of difference.

“Outside of Woolworths and Coles, if [independent food retailers] don’t have a differentiated offer… they probably don’t have a very competitive offer,” Walker says.

Walker says with regard to small businesses, “everything old is new again”, which means customers should know the merchant by name and receive a highly personalised service.

“Small retailers can’t compete on range and they will struggle to compete on price so they have to compete on these other differentials,” he says.

Meanwhile, a Senate inquiry is examining the impact of the supermarket price war.