Small business groups are urging the competition regulator to block Woolworths’ proposed acquisition of family-run PFD Food Services.
In a letter to the Australian Competition and Consumer Commission (ACCC) seen by SmartCompany, five food service and retail industry organisations have called on the regulator to stop the $552 million merger, which they say will boost “the already unfair” market power held by the supermarket giant.
The merger would see Woolworths Group acquire 65% of PFD Food Services.
The Smith family would retain 35% of its shareholding and continue to operate as a standalone business while partnering with Woolworths.
Council of Small Business Organisations Australia (COSBOA) chief executive Peter Strong signed the letter, noting the acquisition would result in a distribution chain “dominated” by a Woolworths-owned entity, which would inhibit small businesses along the supply chain.
“At the moment, we have a more diverse distribution system, which means the smaller players get to have a business model that works for them,” Strong tells SmartCompany.
Strong says a diverse distribution, production and manufacturing sector allows small businesses to more easily expand their products and find outlets to sell to.
“Our experience with Woolworths is that they limit the number of goods that they sell, and they use their dominance to corner the market and inhibit innovation and growth,” Strong says.
Executives from the Independent Food Distributors Australia (IFDA), The Australian Convenience and Petroleum Marketers Association (ACAPMA), the Master Grocers Association (MGA) and the Australasian Association of Convenience Stores (AACS) joined Strong in signing the letter.
These business groups say Woolworths’ acquisition of PFD Food Services would reduce distribution choice for some suppliers, and for many smaller suppliers, it would “completely remove their route to market”.
“This move by Woolworths is … one that will likely have a significant adverse impact on the businesses in the Australian food supply chain — from growers, to manufacturers, to distributors, and ultimately flowing through to food service retailers and independent grocers,” they said.
Woolworths is Australia’s largest food and grocery distributor in the $12 billion sector, while PFD is the second-largest wholesale food distributor.
PFD purchases a wide range of food products from manufacturers and distributes them to food service businesses such as restaurants, cafes, fast-food franchises, hotels and clubs.
The ACCC made public in December its concerns about Woolworths’ proposal to acquire a majority of PFD Food Services.
“The ACCC is concerned that the proposed acquisition seems likely to increase Woolworths’ already substantial bargaining power in its dealings with food manufacturers,” ACCC chair Rod Sims said.
Woolworths Group acknowledged the competition regulator’s announcement, saying the company had been closely working with the ACCC to address the issues it had.
“We see no reduction in competition, in any relevant markets, from our proposed partnership with PFD,” Woolworths Group chief executive Brad Banducci said in a statement.
“We remain confident that we will address any outstanding potential concerns so that we can progress the proposed partnership,” Banducci said.
Woolworths must receive clearance from the ACCC in order to successfully acquire PFD Food Services.
The ACCC’s final decision will be announced on April 22, 2021.