Coles Supermarkets Australia Pty Ltd - proposed acquisition of certain Supa IGA Supermarkets in Western Australia (including two liquor licences)

Summary

Coles Supermarkets Australia Pty Ltd proposed to acquire four Supa IGA supermarkets located in Western Australia from Progressive Trading Pty Ltd:

- a Progressive Supa IGA supermarket located at Bunbury Forum

- a Progressive Supa IGA supermarket located at Dianella.

- a Progressive Supa IGA supermarket located at Halls Head, including a liquor licence

- a Progressive Supa IGA supermarket located at Busselton, including a liquor licence

This public register entry relates to the proposed acquisitions of the Bunbury, Dianella and Halls Head supermarkets only. Coles did not seek an ACCC view on the Busselton acquisition at the time the decision on the three other supermarkets was made, as Coles was seeking to provide further information to the ACCC. A separate public register entry for the Busselton supermarket will be prepared if the matter is considered further by the ACCC.

Market definition

The ACCC considered the competitive effects of the proposed acquisition of the Bunbury, Dianella and Halls Head supermarkets in the context of the following markets:
a. local markets for supermarket retailing in the areas surrounding each of the target stores;
b. a local market for the retail supply of takeaway packaged liquor surrounding the target store in Halls Head (the other supermarkets do not have liquor licences);
c. state-wide markets for supermarket and takeaway liquor retailing;
d. state-wide markets for the wholesale acquisition of products sold in supermarkets by supermarket retailers and wholesalers; and
e. state-wide markets for the wholesale acquisition of takeaway liquor products by takeaway liquor retailers and wholesalers.

Consistent with its past reviews of supermarket acquisitions, as a starting point the ACCC considered the impact of the proposed acquisition in the local markets by assessing overlap and competitors within 3-5km of the target stores. The ACCC did not consider it necessary to determine the precise geographic scope of these local markets, because it would not have been determinative of the ACCC's decision in relation to the three stores.

Competition analysis

The ACCC did not consider that the proposed acquisition of the Bunbury, Dianella and Halls Head supermarkets would substantially lessen competition in any of the relevant markets considered.

The ACCC considered that in the absence of the proposed acquisition, Progressive would be likely to exit the market at the expiry of its current lease arrangements at each target store (which ranged between 2017 and 2021), if not earlier.

The ACCC's inquiries also suggested that for each of the three target stores, in the absence of the proposed acquisition:
a. no alternative purchasers were likely to acquire the store before the expiry of the lease; and
b. no other independent supermarket was likely to be established at the target site once Progressive's existing lease expired.

Although each of the target supermarkets stocked a full range of products needed for a full weekly shop and a range of differentiated products, the ACCC considered that the offer of each target supermarket was likely to deteriorate over time, given that Progressive was unlikely to invest significantly in the supermarkets when they were expected to close in the coming years.

The ACCC also considered that, following the proposed acquisition, Coles' supermarkets in each relevant local market would continue to remain constrained by Woolworths and at least one large competitive independent offer. These were:
- Bunbury - Bunbury Farmers Market. This is a large and strongly trading local retailer with a broad range of fresh fruit and vegetables, meat, seafood, dairy, dry groceries, pre-prepared meals and baked goods. Despite this retailer not stocking all items that would be held by a full-line supermarket (such as soft drinks or general household products), ACCC market inquiries revealed that this retailer operates as a competitive constraint on other full-line supermarkets in Bunbury. This distinguishes the Bunbury Farmers Market from most other specialist retailers considered in other ACCC reviews of supermarket acquisitions.
- Dianella - Supa IGA Mirabooka and Farmer Jacks Morley (which the ACCC understands is due to open shortly).
- Halls Head - Farmer Jacks Halls Head.

The ACCC also took into account information that suggested that Aldi would be likely to enter some of the local markets for supermarket retailing in the coming years as part of its expansion into Western Australia.

The ACCC considered that the Coles owned liquor outlets in the relevant local market for the retail supply of takeaway packaged liquor in Halls Head faced competition from four Woolworths and five independent bottleshops operating under various banner groups (Cellarbrations, Bottlemart, Cape Cellers, Liquorstax and Liquor Barons). Therefore the effect of the proposed acquisition on this local takeaway packaged liquor market was unlikely to be substantial.

The ACCC considered that the volume of groceries and liquor sold through the three target stores are such that the transfer of these three supermarkets (and one liquor licence) would be unlikely to have a substantial impact on competition in the state-wide retail or wholesale markets with respect to supermarkets and/or liquor.

The ACCC has also considered Coles' proposed acquisition of the Progressive Supa IGA supermarket in Busselton. Coles did not seek an ACCC view on the Busselton acquisition at the time the decision on the three other stores was made, as Coles was seeking to provide further information to the ACCC. A separate public register entry for the Busselton supermarket will be prepared if the matter is considered further by the ACCC.