Australian Supermarket and Grocery Store Industry

Running head: AUSTRALIAN SUPERMARKET AND GROCERY STORE INDUSTRY
Australian Supermarket and Grocery Store Industry
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1AUSTRALIAN SUPERMARKET AND GROCERY STORE INDUSTRY
Table of Contents
Major characteristics of Australian Supermarket and Grocery Store Industry..........................2
Market structure of supermarket and grocery industry..............................................................4
Economics and pricing policies in the industry.........................................................................5
Factors determining product pricing of Woolworths.................................................................7
Conclusion................................................................................................................................10
References................................................................................................................................12

2AUSTRALIAN SUPERMARKET AND GROCERY STORE INDUSTRY
Major characteristics of Australian Supermarket and Grocery Store Industry
Concentrated Market:
The Australian Supermarket and Grocery Store Retail Industry is highly concentrated.
The four largest operators Woolworths, Coles, Metcash and Aldi account for over 80% of
industry revenue of which Woolworths and Coles accounts more that 65% of the industry
revenue and the rest of 20% of the market is shared among the retailers, stores, cafes and
warehouses (insidefmcg.com.au 2018).
Figure 1: Market share of different firms in the supermarket and grocery
industry
(Source: uwj.com.au 2018)
Price and Cost:
The forces of demand and supply in the market, determines the market price of a
given product. In the grocery supermarket of Australia, price is used as an important tool to
compete with the new entrants. Whenever there is an entrant the existing firms reduce their
prices.

3AUSTRALIAN SUPERMARKET AND GROCERY STORE INDUSTRY
In Australian Supermarket, retailers compete for sales as they get high incentives so
they compete for the maximum amount of sales. If there is threat on volume in a combination
of dynamic market and price sensitivity of consumer then there is aggressive competition on
price (Devin and Richards, 2016).
Cost of production is defined from the cost of input factors like raw materials, labour,
capital, rent, electricity and transport. In the Australian grocery supermarket, input factors
like electricity, labour and rent is high. Due to soaring electricity price the total o production
is high. For Woolworths highest cost is electricity price after rent and wage of the labour.
This is the major reason of increases in the cost of production of the grocery industry.
Demand and Supply:
Demand is an economic principle which means a desire or need of a consumer for
which the consumer is willing to pay a price for a specific goods or service. There is an
increase in demand for gourmet or premium food products in the grocery market among the
consumers. So, there is an increase in price of that food products and the firms are focusing
on the production of that good.
Supply is nothing but the quantity of the product being produced by the seller or firm
to meet the demand of the market. In the specific trend of increasing demand of gourmet, the
firms of Australian grocery supermarket is focusing on the quality of the product to compete
the international brands.
Elasticity of Demand:
Elasticity of demand is defined by the change in quantity due to change in price. If
there is relatively high change in demand due to change in price of the product then the
product is price elastic. If there is relatively less change in demand then product is price
inelastic. The price elasticity of demand for milk is unit elastic and margarine is inelastic.