Co-op supermarket competition thrives overseas, why not in regional Australia?

07 April 2025

Op-ed by Melina Morrison, The Land

The ACCC’s recent report on supermarket competition only reinforced that the horse has well and truly bolted on lower prices for Australian consumers and fairer treatment for suppliers.

There was, however, a small nugget for consumers living in regional, often poorly serviced, markets.

Incentives to encourage other retailers, with a different business objective, namely putting consumers first, to set up stall in country towns, are one panacea the ACCC says could alleviate the monopoly power of the big supermarkets.

After all, who really thinks that the convenience of one-stop shopping is a substitute for great choice and lower prices? Most Australian consumers are not mugs. Even those of us with limited international travel know that we don’t have great choice. Prices are pretty much the same wherever we shop, and the appetite of big chains to get an increasing share of our wallets appears insatiable whether through so called ‘land banking’ according to the ACCC, or the retail omnibus that effectively competes with the mum and dad cafes, bakeries and bottle-os next door.

If we’re serious about supermarket competition we’re going to need a better strategy than shuffling the same deck chairs around the same deck. We’re going to need some new deck chairs. And to get things rolling, the ACCC chose as its first recommendation to lay out an idea for new players — co-operative supermarkets.

If this is the first you’re hearing about the community-owned structure in retail, that’s largely because of the blind spot we have for competition between business models in this country.

Far from being a welfare case needing propping up, co-operative supermarkets are some the world’s largest and yes, ‘shockingly’, most profitable, retailers, as any visitor to the UK or Europe will know, from shopping at The Co-op, Migros, or Le Clerc. Even Waitrose bends to ‘co-op’ with its employee owned structure.

Approximately 30 per cent of supermarket retail across Europe is co-operative, with consumer-owned retail co-ops holding substantial market shares in Finland (36 per cent), Sweden (20 per cent) and Switzerland (70 per cent).

In the US grocery market, food co-ops, while smaller in scale have a significant presence, with combined sales exceeding $2.5 billion annually.

In Australia, by comparison, less than 1 per cent of the market is held by cooperative retailers, with combined annual revenues below $700 million.

What makes the difference overseas is a policy environment in which competition between business models, not just competition between businesses, is encouraged.

In these settings, businesses like co-operatives formed to only benefit consumers and local producers, because they are owned by them, thrive and compete with business models with the objective of shareholder profits. This acts as a counterbalance to the profit maximising instincts of shareholder firms, shaping markets in the interests of consumers and suppliers.

Co-ops are mavericks in the market, inverting the logic of shareholder returns, opting instead for customer benefit. They encourage competition with other players. Take the Barossa Co-op, which dominates the retail footprint in the charming town of Nurioopta, 80km out of Adelaide.

When the community owners of the Barossa co-op supermarket, wanted access to the bulk discounted goods and the middle aisle ‘pick and mix’ of the Aldi chain, the co-op voted in favour of leasing space to the supermarket giant right across the mall, which incidentally the co-op also controls as landlord, from their own supermarket.

The result was more choice and better prices for the locals and also a bigger bottom line for the co-op. By offering space to Aldi, the co-op attracted even more shoppers to the town, and more discretionary spending on higher margin, often locally produced products from the co-op.

More choice, better prices, real competition, what’s not to like?

The ACCC got it right: “In remote areas where choice is limited, community-owned stores (which may be run as co-operatives) are reported to offer better prices and quality than privately owned supermarkets. As such, supporting existing – and new – community-owned stores in remote areas that would otherwise be unserved or underserved may be an effective way to address some of the issues that result from lack of competition in those areas,”

What we need now is policy platforms and access to capital to encourage the growth of co-operative supermarkets in regional areas.

With the federal election underway, the major parties are agreed on the need to scrutinise and act on unfair pricing in the supermarket sector. It is about time that the co-op sector had a direct role in the push for equity in the sector, hence our call for the Albanese government to include a representative from the co-op movement on the grocery prices taskforce that will combat price gouging.

Our voice should be heard, especially in regional Australia.