As part of the review process of major acquisitions the ACCC consults with business and industry who are likely to be impacted by a proposed acquisition. In the case of Woolworths planned purchase of 65% of the total shares in PFD, the ACCC is calling for comment from interested parties by 9th October 2020.

The legal test which the ACCC applies is in section 50 of the Competition and Consumer Act 2010, which prohibits acquisitions that are likely to have the effect of substantially lessening competition in a market.

The ACCC is seeking to understand how the industry/market operates and the likely impact on competition if the proposed acquisition proceeds, including:

  • whether and how Woolworths and PFD compete in the supply of food and groceries
  • whether there are alternative wholesale suppliers of food and groceries with similar geographic reach and product range to that of PFD
  • whether the proposed acquisition will increase Woolworths’ position as a wholesale buyer of food and the possible impacts of this.

Below is Background Information and Items for Considerations that interested parties may wish to address where relevant to their business (these are a guide and are not mandatory).

Written submissions should be emailed to mergers@accc.gov.au by 5pm on Friday, 9 October 2020. Verbal submissions are also available by arrangement.

Any submissions to or discussions with the ACCC will be treated confidentially.

ACAPMA

Background information

Woolworths
Woolworths is an ASX listed Australian and New Zealand retailer. Its operations include supermarkets, liquor and general merchandise stores as well as licensed premises. Woolworths is Australia’s largest grocery retailer. It provides the retail sale of grocery products to consumers both in-store and online.
In addition to its retail operations, Woolworths also supplies food and groceries to businesses via its Australian Grocery Wholesalers business (Woolworths AGW) and the Woolworths at Work platform. Woolworths AGW’s customers include Caltex as well as charitable organisations and two ready meal/meal kit businesses in which Woolworths has a financial interest. Woolworths at Work is an online platform by which business customers can purchase products from Woolworths’ supermarkets. The platform allows for multiple shoppers from businesses to place orders, have multiple delivery locations and consolidated monthly invoicing.

PFD
PFD is a privately owned wholesale food distribution business in Australia.
PFD supplies and delivers an extensive range of fresh, frozen and dry goods to over 39,000 business customers across Australia. It services two broad customer groups: Quick Service Restaurants including major national franchisee brands; and other food service business such as hotels, supermarkets, restaurants/cafes, petrol and convenience, bakeries, airlines and institutions. PFD operates nationally via a network of distribution centres and its own logistics fleet.
In response to the short term impact of COVID-19, PFD recently launched an online service called PFD2Home, which allows non-business customers to purchase from it (with a minimum order spend of $200).

Considerations to address

  1. Please provide a brief description of your business or organisation, including any commercial relationship/s you may have with either of Woolworths or PFD.

    General
  2. Please discuss the extent to which you consider Woolworths and PFD to be competitors in the supply of food and groceries, or may be competitors in the future (without this proposed acquisition).
  3. Please explain who you consider to be the main competitors in the wholesale supply and distribution of food and groceries. If you consider that particular competitors have particular strengths or attributes (for example, the categories of food they distribute, their geographic reach, their pricing and terms of supply, etc), please describe those.
  4. Please discuss whether prices to Woolworths and PFD’s customers may increase, brand options may decrease, or service levels may decrease due to the proposed acquisition, for any food or grocery products you procure in Australia.
  5. Please discuss how Woolworths and PFD operate in their procurement of food from manufacturers and suppliers. What are the similarities and differences in how manufacturers and suppliers deal with Woolworths and PFD?
  6. Please discuss whether prices to Woolworths and PFD’s manufacturers and suppliers may decrease or required service levels may increase due to the proposed acquisition, for any food or grocery products you supply in Australia.

    Customers of PFD and/or Woolworths
  7. Please identify the categories of food and grocery products that you procure in Australia.
  8. Please identify your current suppliers of food or groceries. In your view, do your suppliers compete more with PFD, Woolworths, or both?
  9. Please describe how you procure food and groceries – for example, through purchase orders, formal tender or other methods. In your response, please state how long contract(s) are typically awarded for, the frequency at which you place orders, the size of the orders you place, and whether or not any discount is offered by the suppliers.
  10. Please identify the key alternative suppliers capable of servicing your needs. In your response, please have regard to factors such as the range of products, scale of supply, the geographic reach, delivery options, number and location of distribution centres etc.

    Manufacturers / suppliers / distributors to PFD and/or Woolworths
  11. Please identify:

    a. which of the following categories of food products you supply to Woolworths and/or PFD;
    i. condiments
    ii. frozen chips
    iii. fruit/vegetables tinned
    iv. pasta/noodles/soup
    v. poultry
    vi. pies/pasties/pastries
    vii. seafood
    viii. bakery/desserts
    ix. grains/sugar/nuts/spices
    x. dairy/eggs
    xi. any other (please identify)

    b. your annual supply, by volume and value, for each of the above categories
    i. in total (to all customers)
    ii. supplied to Woolworths
    iii. supplied to PFD
    iv. that would be supplied to an aggregated Woolworths/PFD

    c. any other food or grocery customer you supply to, and the categories of products you supply to those customers.
  1. Who are the main competitors to PFD in wholesale food distribution? How are they different from PFD, and what are their advantages and disadvantages compared to PFD? If you also supply to these other distributors, outline the nature of your supply arrangements with them and how it differs from your arrangements with PFD.
  2. Please describe your contractual arrangements with Woolworths and/or PFD. In your response, please outline how the contractual arrangements are negotiated, whether the arrangement is exclusive, whether any rebates or discounts are provided to the purchaser (and the basis for them), the typical duration of the arrangement, and when your contract with Woolworths and/or PFD is due to expire.
  3. Please discuss the extent to which the proposed acquisition may increase Woolworths’ position as a wholesale buyer of food and the possible impacts of this.

    Competitors of PFD and/or Woolworths
  4. Explain whether you compete with PFD, Woolworths, or both. If you compete with a Woolworths business other than supermarkets, please explain which business you compete with and what segment that business operates in.
  5. Please describe the:
    a. industry/market that you operate in
    b. geographic area you service
    c. types of customers you service
    d. range of products you supply and who your suppliers are.
  6. Please explain how easy/difficult it is to expand:
    a. the geographic area you service
    b. the types of customers you service
    c. the range of products you supply and the volume of products you supply
    d. your operations (if you are currently servicing only retail consumers or businesses) to servicing both retail consumers and businesses.
  7. Please explain the importance or otherwise of having national coverage in servicing your customers.
  8. Please describe how important distribution centres (and location) are in the way you supply your customers and compete in the market.
  9. Please explain whether any of your customers compete with both PFD’s customers and Woolworths’ regular supermarkets or ‘Metro’ stores.

    Other information or competition issues
  10. Please provide any additional information or comments relevant to the ACCC’s consideration.