Like Foster’s, I too was intrigued by the offer by a local liquor outlet of Penfolds Bin 389 at under $40 a bottle. 389 is a fine $40 bottle of wine that sadly these days retails for a lot more than that, so I don’t normally buy it.
Apparently that low price so outraged Foster’s that they’ve dispatched employees to buy up cases of 389 at the cheap price. It’s reminiscent of how Scientology in pre-internet days would send members to US courthouses to check out embarrassing documents filed in legal actions all day so no one else could read them. Ain’t no one going to enjoy cheap 389 if Foster’s can help it.
Discount wine, and yesterday’s claims about, egad, discount beer, which angered Foster’s too, also appears to have infuriated politicians. The Greens and Nick Xenophon and both Liberal and National politicians were quick to suggest there was something untoward about cheap alcohol and that there needed to be better regulation.
Hmmm.
There’s a theory that there’s an infinite number of universes, generated by quantum uncertainty. For many years I’ve been mildly obsessed with the idea that, by some freak accident of physics, I might slip into an alternate universe that is almost exactly the same as this but for one tiny, perhaps trivial, detail, and I might not know it until, as per a Twilight Zone episode, I stumble upon that one tiny but telltale difference. I call it quantum OCD.
And clearly my obsession is justified, because apparently it has indeed happened. Until a few weeks ago, I’m positive there was considerable angst about the rising cost of living, with politicians all expressing concern about rising prices, despite official inflation figures telling a quite different story. Joe Hockey would come out and declare that the CPI might be low but households still faced rising costs in important areas. Wayne Swan would come out and declare that the Government understood households were “doing it tough”.
Yup, doing it tough with low inflation, near-full employment and a resources boom. OK. But anyway.
However, that was presumably an alternate universe, because for several weeks there’s been considerable anger at the supermarket changes for lowering the price of milk. There is even a Senate inquiry into it, to investigate this outrage. And now there’s a problem with cheap beer, and threats to investigate that as well.
Australians complaining about cheap beer. Now I must really be in a different universe.
It’s not just politicians. I mean, they’re fickle, changeable creatures who would jump on any passing bandwagon if they thought it would round up some votes. But it’s the media, too. The Fairfax press has been in the thick of it. It rolled out a series of articles about the outrage of cheap milk, like how it doesn’t froth properly for baristas (finally an issue to unite farmers and latte-sipping inner-city elitists), that it will lead to the end of fresh milk, even that cheap milk is contaminated by, um, dairy products.
Now it’s led the way on the outrage of cheap beer, complete with “public health concerns”. Someone from the preventative health industry was brought in to demand a legal minimum price for beer.
The hysteria flies in the face of evidence from the ACCC to the Senate inquiry, that there was no evidence of predatory pricing by Coles, which initiated the milk price war. But at least the milk war is portrayed as a clash between the evil grocery duopoly (that’s only half-joking) and dairy farmers doing it tough.
But Coles and Woolies versus Foster’s? That would be the billion dollar transnational Foster’s, being done over by Coles and Woolies?
For a society that prides itself on its open economy in which “bureaucracy” and “red tape” are regularly attacked, it seems the commitment to free markets is awfully thin, and not just among journalists and editors but among politicians. It’s not just that the party of free markets and individual choice is backing government winner-picking as its approach to climate change, or the self-declared party of micro-economic reform continues to pump billions into the local manufacturing industry. The urge to Do Something about anything and everything still runs deep in politicians of all persuasions.
Luckily, I got in quick and bought a case of 389 for $38 a bottle, before Foster’s, or a politician, could stop me. Marvellous thing, competition.
The reason this issue got so much popular support is most likely that people implicitly understand the concept of predatory pricing and the consequences of it. That is, lower the price below the competition (i.e. independent liquor outlets), hold out for a few weeks while they starve and eventually go broke or stop stocking those lines, and then set an even higher price than before with less competition.
Really, if anything, people don’t want to *pay more* for alcohol because there is no competition left in the market.
I think this is even more pertinent in a market with limited liquor licences available to retailers, which could more easily be seized by the majors if an independent went broke and prevent new retailers from starting up. Its really like a boozed up game of Monopoly.
Personally, I want cheaper bananas. Or more expensive ones. Whatever. I’d decided that $10 per kilo was my limit, and for the past few weeks, they’ve been $9.98 a kilo.
Bernard
Re your comment “For a society that prides itself on its open economy in which “bureaucracy” and “red tape” are regularly attacked, it seems the commitment to free markets is awfully thin,”
The Coles/Woolies duopoly is not a free market or an open ecomomy. Predatory pricing is as hard to prove as conspiracy so it is hardly surpring that the ACC didn’t have any evidence.
Having dealt with bakers, transport firms,manufacturers, farmers & others who have repeatedly suffered as a consquence of this concentration of retail power.
One of the reasons that they can supply cheaply is that they have moved their transport costs to the consumer. It used to be you could pop down to the local shop & pick things up. Now you have to drive miles to the super shopping center, park miles away to get to the supermarket. Frankly ( & I hold shares in Wesfarmers ) I use IGA. The prices are slightly higher but overall its cheaper beacsue they are in a small accessible strip shopping centre
For example I refuse to believe the constant fluctuations in fuel prices during the week are as a result of market forces in an open & competitive enviroment because if they were they show a remarkable symetry with prices rising in the lead up to the weekend.
Walmart has nowhere near the market share in the USA that either Coles or Woolies do & would never be permitted to. I think the USA recognised the issue years ago hence teir legislation.
BTW if you’re paying $38 for a bottle of drinkable booze you’re paid too much or not looking hard enough. There’s oodles of class wine available as a clean skin available for pennies. That’s a competitive open market & the proper forces are in effect.
The Pav,
Actually, I cycle a kilometer past the local IGA store to the local Woolworths. I actually save time, because the IGA has fewer checkout queues, so I have to wait much longer. Also the Woolworths has a self-serve checkout so I can pack my single bag myself (important since it all has to go into the bike carrier). Admittedly, it means I have to shop more frequently, but I’m getting exercise, the fuel is dirt cheap (I think I get 10 km per potato) and parking is dead easy. And there’s one less idiot driving on the roads … Woolworths sends me a quarterly statement showing me how much money on petrol I’ve saved (I only use Woolworths petrol stations); December 0, January 0, February 0.
I’m surprised that when Fosters bought up 60% or so of Bin 389 at $38 (when they’d wholesaled it for $44) and Coles asked pretty please if they couldn’t buy it back again, that Fosters didn’t do just that.
They could run forklifts over to the liquor stores to take pallets of cases from the checkouts straight around to the delivery dock at the back… endless recycling. Would make a nice profit boost for Treasury Wine Estates before they get rid of it…
Oh, and by the way, bananas at the markets a week ago were 80c/kg. Even while the duopoly were charging $10 or so. Now there’s a profit margin.