Prime Minister Anthony Albanese has officially invited the Emirati retail giant LuLu Group to establish a presence in Australia, aiming to introduce significant competition into the local supermarket sector. Mr. Albanese was given the invitation on a whistle-stop visit to the United Arab Emirates. He got these details checked with Yusuff Ali, chairman, LuLu Hypermarket. The very objective of this legislation is to chip away at the chokehold of the Australian supermarket behemoths Coles and Woolworths on the nation’s groceries.
The invitation comes amidst the implementation of a new Australia-UAE free trade agreement. This free trade deal will remove tariffs on 99 percent of Australian exports to the Middle Eastern country. Most importantly, it will lead to deeper economic integration between the two nations. In addition, it is forecast to draw up to $A50 billion in investments by UAE sovereign wealth funds into multiple sectors in Australia’s economy.
A Competitive Landscape
The Australian grocery market is facing competition investigations for its highly concentrated nature. A recent review by the Federal Competition and Consumer Watchdog found that Coles and Woolworths face a “limited incentive” to compete on price. In March, when this review was originally commissioned, those price increases were generally considered not excessive.
Critics from across the political spectrum contend that the present market structure has become overly concentrated. Just two dominant players control over 80% of the market. The Coalition listened to that feedback and responded. They suggested bringing in break-up powers as a measure of last resort, forcing Coles and Woolworths to divest sections of the supermarket chain. This common-sense proposal, supported in principle even by fellow travelers the Greens, was greeted with derision by Mr. Albanese.
“Mr Albanese mocked that proposal, saying last year that Australia was ‘not the old Soviet Union’ and he would not forcibly break up the supermarket giants.”
Recognizing these challenges, Mr. Albanese called for greater competition in the industry. He stated,
“One of the great things about the [LuLu Group] chairman’s company, there are 300 supermarkets just like this one. I have encouraged him to come to Australia as well; we need more competition in the Australian supermarket sector, and we have had a little discussion about that.”
Future Prospects
The arrival of a retailer like LuLu Group would have the market buzzing, with the potential to completely change the grocery landscape. The Emirati chain operates over 300 supermarkets across the globe. Its entrance into Australia could potentially make life harder for its new competitors and even get incumbents to reconsider their pricing strategies and value proposition.
The free trade agreement not only eases trade between Australia and the UAE but sets a precedent for future international partnerships aimed at stimulating competition across various industries. Investment from UAE sovereign wealth funds could do even more to strengthen Australian businesses, increasing long-term economic growth and job creation.
As negotiations move forward, Mr. Albanese has definitely set the bar high. He will consider the introduction of an “excessive pricing regime,” to be policed by the competition watchdog. This whole initiative is about making sure people are being charged a fair price in the supermarket industry and not getting gouged.
