ACCC decision on PFD sale to Woolworths looms

This week the Australian Competition and Consumer Commission received proposed enforceable undertakings from Woolworths to secure 65 per cent of shareholding in PFD Food Services Pty Limited.

The proposed acquisition, announced in September last year, is worth $552 million and includes 26 freehold properties used as distribution centres by the PFD business.

The competition regulator is currently conducting a review of Woolworths’ move into wholesale food distribution in which a final decision is anticipated to be made on 4 April.

As Woolworths and PFD both acquire food and groceries from suppliers such as frozen food manufacturers, dairy processors and manufacturers of pasta and sauces, a review was in order given the likelihood of the supermarket giant increasing its already substantial bargaining power in its dealings with food manufacturers.

“The ACCC is concerned that the proposed acquisition would remove PFD as an important alternative customer in the food sector, reducing the number of buyers and increasing Woolworths’ relative size as a customer of food manufacturers and suppliers,” said ACCC Chair Rod Sims.

“The dominance of Coles and Woolworths in food retail means that wholesale food distribution is an important alternative customer channel for manufacturers,” he said.

Another issue raised by the proposed megasale is whether Woolworths acquiring a company which supplies its competitors would lead to risks of foreclosure.

The extent to which Woolworths at Work and AGW compete with PFD at the moment or are likely to compete with PFD in future had also come under scrutiny by the ACCC.

Opposition to Woolworths takeover bid of PFD Food Services meanwhile continues to grow as markets show slow signs of recovering from lockdowns.

Recently CEO of Australasian Association of Convenience Stores (AACS), Theo Foukkare, in an online opinion piece for Convenience and Impulse Retailing, noted the ‘shop local’ initiatives to have emerged from last year’s coronavirus lockdowns would unravel should the ACCC approve the majority takeover.

“If the ACCC approves this proposed acquisition, there will be major impacts to competition, supply and prices – ultimately setting Woolworths up to further expand their already strong share of retail sales in Australia,” he said.

“While so many industries have suffered during the pandemic, the major supermarkets have delivered record sales and unprecedented demand for their products,” said Foukkare.

“And now, they are trying to disrupt the food service distribution community, which is made up of more than 200 Australian family-owned and operated small businesses. The same businesses that have done it tough, that tried everything to survive and remain competitive, and employs many thousands of Australians, is under threat.”

Back in October, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell formally opposed Woolworths’ proposed acquisition saying it would be detrimental to small businesses in the food distribution space and the economy more broadly.

“Woolworths has described its push into the food services sector as a ‘strategic investment’ but the timing is opportunistic at best,” Carnell said.

“As a major beneficiary of COVID restrictions, Woolworths’ supermarket operations saw a significant upswing in sales, while independent food distributors struggled,” she said.

“We share the ACCC’s competition concerns as detailed in its preliminary statement ahead of its final decision next year.”

Next year is now this year and with many independent businesses involved in the $18 billion food service distribution sector awaiting the ACCC’s decision, many of whom are small supermarket operators based outside the major cities.

Swiss bank UBS reported last October that billionaires increased their wealth by more than 27.7 per cent during during the height of the COVID-19 crisis between April and July amid ongoing extreme wealth concentration globally.