Coles - proposed acquisition of 9 Supabarn supermarkets

Summary

Coles Supermarkets Australia Pty Ltd originally proposed to purchase eight existing supermarkets, and one supermarket development site, from Supabarn Supermarkets Pty Ltd:
* Canberra Centre (ACT)
* Casey (proposed supermarket) (ACT)
* Crace (ACT)
* Kaleen (ACT)
* Wanniassa (ACT)
* Annandale (NSW)
* Five Dock (NSW)
* Sans Souci (NSW)
* Sutherland (NSW)

The proposed acquisition was modified during the course of the ACCC's review. The final proposed acquisition considered by the ACCC was the acquisition of five supermarkets:
* Canberra Centre (ACT)
* Kaleen (ACT)
* Wanniassa (ACT)
* Five Dock (NSW)
* Sutherland (NSW)
Each of these five supermarkets also either sells takeaway liquor on the premises, or from an attached or nearby dedicated bottleshop.

Unless otherwise noted, this public register entry only relates to the proposed acquisition of the five stores that are part of the final proposed acquisition (the target stores).

Market definition

When the ACCC reviews the proposed acquisition of a supermarket or chain of supermarkets, it considers various issues, including:
* The market(s) in which the target stores compete.
* Any competitive characteristics of the target stores that would be lost as a result of the proposed acquisition.
* The level of competition that would be provided by the remaining firms in the market, or potential entrants, if the proposed acquisition proceeded.
Further details about the ACCC's approach to merger reviews in local markets is available in the ACCC's factsheet
What You Need To Know About: The ACCC's Approach To Merger Reviews, Including Local Markets.

The ACCC considers that in retail markets involving chains or buying groups, competition may occur at more than one geographic level. While all retailers compete to attract customers from other similar retailers in the same local area, retail chains and multi-store brands also compete through elements of their retail offers that may be determined across a broader area.

In that context, the ACCC primarily considered the competitive effects of the proposed acquisition in the following markets:
a. a market for supermarket retailing in the Canberra region (including Queanbeyan, NSW)
b. local markets for supermarket retailing surrounding each of the target stores
c. local markets for takeaway liquor retailing surrounding each of the target stores

Competition analysis

Supermarket retailing in the Canberra region

Supabarn is a significant supermarket chain in Canberra. The ACCC received feedback from customers during the course of the review that Supabarn has a differentiated offer from the other major supermarket chains (including in terms of range and quality of products, and customer service), and that they valued this differentiation. For this reason, the ACCC was concerned that the original proposed acquisition may have had the effect of effectively removing Supabarn as an independent supermarket chain in the Canberra region.

With the revisions to the proposed acquisition, Supabarn would retain a material presence in Canberra after the acquisition completes. Therefore, the ACCC concluded that the final proposed acquisition would be unlikely to have the effect of substantially lessening competition for supermarket retailing in the Canberra region.

Local markets for supermarket retailing

Canberra Centre (ACT)
Coles does not presently have a supermarket in the immediate vicinity of the Canberra Centre. Its nearest current store is approximately 5km south, and across Lake Burley Griffin, in Manuka. However, Coles proposes to develop a supermarket approximately 3km to the north of the target store in Dickson.
The ACCC considered that following the proposed acquisition, Coles would continue to face competition from Woolworths in Dickson, Aldi in the Canberra Centre and a proposed Aldi store in Dickson (in the same complex as the proposed Coles), and Ainslie IGA (a strong local competitor approximately 2km north of the target store).

Kaleen (ACT)
The ACCC considered that following the proposed acquisition, Coles would continue to face competition from the proposed Woolworths at Giralang (if it proceeds), the supermarket that Supabarn is retaining at Crace, Woolworths and Aldi stores in the Belconnen and Gungahlin town centres, Woolworths at Dickson, and the Aldi at the Jamison group centre.

Wanniassa (ACT)
The ACCC considered that there is limited overlap between the customer catchments of Supabarn Wanniassa and Coles supermarkets in surrounding suburbs. Accordingly, the proposed acquisition of Supabarn Wanniassa by Coles would be unlikely to substantially lessen competition in the area.

Five Dock (NSW)
The ACCC considered that there is limited overlap between the customer catchments of Supabarn Five Dock and Coles supermarkets. Accordingly, the proposed acquisition of Supabarn Five Dock by Coles would be unlikely to substantially lessen competition in the area.
The ACCC noted that Coles would operate three liquor outlets in relatively close proximity following the proposed acquisition of the Five Dock Supabarn. However, the ACCC concluded that it would continue to face local competition from Woolworths-owned and independent liquor retailers.

Sutherland (NSW)
Coles proposes to develop a new supermarket at the Kirrawee Brick Pit, which is 1-2kms east of the target site. The ACCC had preliminary concerns that the proposed acquisition would lessen competition in this market by eliminating competition that otherwise would have existed between Supabarn Sutherland and Coles Kirrawee. However, the ACCC ultimately concluded that following the proposed acquisition Coles would continue to face competition from other supermarkets, including an IGA located in close proximity to Supabarn Sutherland (the IGA is complemented by a butcher/deli and fruit shop located in the same small complex), Flemings (Woolworths) at Jannali, a possible Woolworths development at Flora St in Kirawee (if it proceeds) and an Aldi that is also proposed to be developed at the Kirrawee Brick Pit with Coles.

Other markets

In each of the other local markets for takeaway liquor retailing, the ACCC considered Coles would face competition from a variety of other retailers.

The ACCC also had significant concerns about the impact of the original proposed acquisition on supermarket retailing in local markets surrounding Supabarn's supermarket in Sans Souci, and its development site at Casey. However, as these sites were not part of the final proposed acquisition, the ACCC did not need to reach a concluded view on those markets.