Will Woolworths PFD acquisition hurt small businesses?
A $552 million deal struck by Woolworths with PFD Food Services in August, has raised concerns for competitors who claim the stress their businesses have felt during COVID lockdowns will be exacerbated by a competitor backed by a supermarket giant.
If the deal goes ahead, it would see Woolworths take a 65 per cent controlling interest in PFD, after owner Richard Smith agreed to sell Woolworths a 65% stake.
Under the arrangement, the Smith family who are the current owners, will retain 35 per cent holding in PFD.
PFD is a wholesale food distribution business that supply pubs, restaurants, bakery chains, fast food outlets, hotels, hospitals, retirement homes, prisons, airports and cruise liners around Australia.
Ombudsman Kate Carnell opposed the deal in a letter to the Australian Competition and Consumer Commission (ACCC), saying it would be detrimental to small food distribution businesses and the economy more broadly, labelling it as ‘opportunistic’.
Woolworths outlined the proposed acquisition earlier this year. The extension of its strategic partnership with the foodservice network, would see it acquire 26 freehold properties used as distribution centres by PFD.
“Now that Woolworths has exhausted opportunities in the large supermarket space, it is moving into the smaller supermarket arena. Allowing Woolworths to buy PFD would significantly improve its competitive position against other smaller supermarket operators. Claims by Woolworths about plans to establish Chinese walls to prevent PFD passing on information about small supermarket competitors is questionable,” says Carnell.
Carnell showed her concern that this deal would significantly impact the food distribution market that is made up of many small and family businesses, particularly in regional areas. It would also cause many job losses as the smaller distributors would have to compete with a giant such as Woolworths.
The ACCC announced last month that it would review the acquisition and focus on the potential impact on small businesses along with Woolworth’s overall position post acquisition.
Carnell said, “I share ACCC Chair Rod Sims’ concerns about companies that have too much market power. Independent Food Distributors Australia (IFDA) estimates Woolworths – which already accounts for about a third of supermarket sales – would pick up a large chunk of the food services market as a result of this deal, setting smaller competitors up to fail.”
Irit Jackson, 26th October 2020
