The Coles and Woolworths duopoly explained
Coles and Woolworths control 65% of Australian groceries. Here is how their market power affects what you pay and what you can do about it.
Pinch tracks real grocery prices at Coles, Woolworths, ALDI, and Harris Farm, with 52 weeks of price history on 74,000+ products.
What is a duopoly?
A duopoly is a market controlled by two firms. In Australia's grocery sector, Woolworths and Coles control approximately 65% of supermarket sales. According to the ACCC's 2025 Supermarkets Inquiry Final Report, this is the breakdown:
The remaining 17% is scattered across Harris Farm Markets, specialty grocers, and independent stores. This concentration means Coles and Woolworths face minimal competitive pressure from rivals who serve 10% or less of the market.
How duopolies affect prices
When two firms dominate a market, they don't need to compete aggressively on price. The ACCC found that Coles and Woolworths share similar product ranges, set similar prices, and offer similar loyalty programs. This is the opposite of real competition.
The ACCC also noted that Coles and Woolworths can increase retail margins when wholesale costs rise, meaning they pass on cost increases to customers without losing sales to a cheaper competitor. In a genuinely competitive market, they would have to absorb some of the cost or lose customers to rivals. They don't have to here.
Profitability among global peers
The ACCC found that Coles, Woolworths, and ALDI are among the most profitable supermarket businesses in the world. Moreover, their average product margins have increased over the past five financial years. Higher margins and rising profitability during inflationary periods suggest pricing power, not market-driven cost recovery.
Monopsony power: squeezing suppliers
A duopoly on the retail side creates a monopsony on the supplier side. Suppliers (farmers, food manufacturers) have only two major buyers. If Coles and Woolworths demand lower prices or better terms, suppliers have few alternatives.
The ACCC found that Coles and Woolworths exercise monopsony power, particularly over fresh produce suppliers. Suppliers report being forced to accept thin margins, absorb cost increases, or risk losing shelf space entirely. This squeezing reduces the incentive to invest in quality, sustainability, and new product development.
Why ALDI matters
ALDI has 10% market share, which sounds small. But ALDI's pricing and product range force genuine price competition on staples. When you compare Coles and Woolworths prices to ALDI, you see the difference: Coles and Woolworths are systematically more expensive on identical items like milk, bread, and meat.
ALDI succeeds because it operates on a different model: fewer SKUs, private-label brands, lower marketing spend, and lower staffing. This efficiency translates to lower prices. For staple items, ALDI is consistently 5-15% cheaper than Coles or Woolworths.
If ALDI grew to 25% or 30% market share, the duopoly would become a true oligopoly with real competitive tension. But with only 10%, most Australians still do most of their shopping at Coles or Woolworths out of convenience or loyalty.
Regulatory response: not enough
The ACCC's inquiry led to two regulatory changes: the Mandatory Food and Grocery Code (2023) and the price gouging ban (2024). Both are intended to address duopoly pricing power.
The Mandatory Food and Grocery Code requires Coles and Woolworths to negotiate fairly with suppliers and provide written terms. The price gouging ban prevents retailers from raising prices during natural disasters or emergencies without justification.
However, neither regulation addresses the core issue: market structure. Coles and Woolworths still control two-thirds of the market. The Code and price gouging ban operate at the margins but don't disrupt the pricing power that comes from controlling 65% of all sales.
What shoppers can do
Know your baseline prices
The best defense against duopoly pricing is knowledge. If you know milk costs $2.80 on average and it's marked at $3.99 as a "special," you can walk away. Shoppers who don't know baseline prices are easier to manipulate with discount stickers.
Compare across retailers
Coles and Woolworths are more expensive on average than ALDI. They also differ from each other on the same products by 10-30%. You don't have to shop at one place. Build a basket across the store that gave you the best price on that week's categories.
Check 52-week price history
Coles and Woolworths use hi-lo pricing: products cycle between inflated prices and discounted prices every 4-8 weeks. A price that looks like a "special" might be the normal price. By reviewing 52 weeks of history, you can tell whether a price is low or inflated relative to the full year.
Support alternatives
ALDI, Harris Farm, and independent grocers don't have duopoly market share. Supporting them (even for a category or two each week) increases competitive pressure and signals demand for alternatives. The more consumers shift, the harder it becomes for Coles and Woolworths to maintain inflated prices.
Track real prices, beat the duopoly
The ACCC proved that market concentration drives higher prices. Duopolies don't compete, they coordinate. The best weapon against it is information: knowing what things actually cost, where they're cheaper, and whether a discount is real.
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