Shopper dockets? Not great, not bad, just yesterday

Terry McCrann
July 12, 2017
Herald Sun

DO the supermarket petrol “shopper dockets” deliver cheaper petrol or have they actually made it more expensive? And what impact do they have on prices in the supermarkets?

In the 21 years since Woolworths kicked them off at a single “Woolies” service station in regional NSW, no one — not even the ACCC competition tsar — has really given a satisfactory, far less convincing, answer to these and related questions. 

In the early days of this century — Woolies sealed its relationship with Caltex in 2003 and Coles followed suit with Shell the same year — it seemed like the big two of supermarkets were going to extend that dominance into petrol retailing. 

The interplay sparked by the “shopper docket” seemed likely to be inevitable and inexorable. 

It would send shoppers into a Woolies/Coles supermarket to get a docket — especially when they were offering discounts as high as 14c a litre — and then send them to, and only to, the related Caltex/Coles petrol site.

How could smaller retailers compete? How could even the other giant global petrol companies compete, except by cutting their prices and their profit margins below those of Shell and Caltex?

More broadly, how could anyone compete effectively and, even more, sustainably over time against the ability of Coles and Woolies to cross-subsidise between the two; to decide which customer — petrol or supermarket — would actually “pay for” the 4c.

Indeed, that the supermarkets could actually shift the cost on to suppliers, not of petrol but of product into the supermarkets.

With the “end point” that when the two dominated both supermarkets and petrol they could then oligopolistically raise prices in both.

The ACCC, under chairman Rod Sims, banned ‘super dockets’. Picture: Josie Hayden

Well, the one thing that is absolutely and undeniably clear now that the dockets have officially “come of age” (under the old definition) is that it hasn’t worked out anything like what was feared. The “big two” haven’t driven all other supermarkets out of business, leaving them free to lift their prices. The exact opposite has been the case. 

For most of the period since they joined with their petrol partners in 2003, the big two have been cutting prices, and cutting them on average right across the supermarket year after year.

In both Coles and Woolies the basket of goods that cost you $100, say, 10 years ago, now costs you less than $90. Two big forces have been at work instead. One was the deliberate campaign started by the post-GFC new owners of Coles to “take on” Woolies on price — captured in (and started with) the famous, or infamous, $1-a-litre milk.

The second was the arrival of Aldi. In its early days it was scorned by the big two. Now it poses the sort of systemic threat that IGA never did; it certainly will keep the big two irreversibly “honest”.

Maybe you could throw in a third — the move by the ACCC to ban those 14c “super dockets”. The answer on that is complicated: maybe if they’d continued, we would have seen fewer price cuts in supermarkets; maybe they would have self-ended because of those in-store price cuts.

While the ACCC’s banning of the “super dockets” might have been a “two-fer” — not only helping supermarket competitors but also petrol competitors — it’s also complicated with the latter.

That’s because there’s a second interplay at work within the petrol site — the petrol and the convenience offer; and that has also played back into the functionality of the big two and their petrol offers.

The “other” petrol retailers haven’t only managed to survive; they’ve rationalised and got stronger. Indeed, arguably stronger than the two that were supposed to become the elephants tromping all over them.

Do the supermarket petrol ‘shopper dockets’ deliver cheaper petrol or have they actually made it more expensive?

Caltex has carved out its own petrol and convenience offer separate from Woolies and its 4c, while continuing to supply petrol to Woolies. 7-Eleven consolidated its convenience offer by adding (Exxon) Mobil. And BP carried on — and grew — right through all the turmoil.

Far from “world” or just Aussie domination, Woolies is seeking out of petrol — by selling to BP (with those BP stations continuing to be supplied by Caltex!?), while continuing its docket offer.

So far Coles has continued with the Shell brand — under its “new ownership” by the unknown (in Aussie) Vivo.

The one clear lesson out of all this is to be careful of even just predicting the future far less assuming its inevitability. Indeed their assumption of growing dominance might have been the worst thing Coles and Woolies ever “got”. 

Two things are now coming down the pike which make that future — and especially the supermarket-petrol interface — not just more uncertain but uncertainly troubling.

One is electric or more (and less petrol-consuming) hybrid cars. 

The second, much, and far more potently, quicker is Amazon. Not Amazon dot com. But Amazon dot com dot au. 

The big two didn’t take Aldi seriously; they sure as hell are more fearful about Amazon. But what to do about it? Ah, that’s a much tougher and just maybe unanswerable question. 

The central problem with Amazon is that its “business model” does not require it to make a profit; just to grow and generate more and more cashflow. And it doesn’t have to take 10 years to roll out stores like Aldi did before it’s “big enough to matter”.

In this sort of dynamic turbulent future, 4c at the pump — around $2 a tank — is all-but totally yesterday.