INDEPENDENT grocers are calling on the federal competition watchdog to rein in Woolworths and Coles, claiming the retail duo are opening oversized, unprofitable stores in growth areas and rural centres that are killing off competition and obliterating local small business.
The independents are preparing a lobbying campaign against the supermarket chains amid mounting concern over their dominance of the grocery industry and their push into fresh food retailing, an acknowledged target of growth by Woolworths in particular.
They have been bolstered by a stinging Commonwealth Bank assessment of Woolworths' $1 billion-a-year growth plan and its development of stores in ''marginal'' sites, including regional centres such as West Dubbo, Ulladulla and Morisset.
''Many of the Woolworths developments have been in areas with marginal medium-term economics for supermarkets. We are concerned that in addition to the poor lending conditions Woolworths is not helping itself by developing marginal sites,'' the analysis says.
Together Coles and Woolworths plan to expand store floor space by more than 5 per cent a year in coming years, a rate almost three times that of population growth. In its report, the Commonwealth Bank queried Woolworths' ''exceptionally high'' forecast floor space growth of 3 per cent a year.
The bank assessment will be used by Master Grocers Australia to support its claim that the two majors are opening large stores in areas without sufficient population to support them.
''Master Grocers Australia believes the strategy is conscious, deliberate and intended to bring about a substantial lessening of competition in those local markets where over-large stores are developed,'' said a draft report that will be used to lobby the federal government and the Australian Competition and Consumer Commission.
Master Grocers, which represents the grocery industry including IGA and FoodWorks, believes the oversized stores are being cross-subsidised by the duos' vast operations which include liquor, hardware, office supplies and gambling.
''The effect is the elimination of competition in these local markets,'' the report said.
Among the stores, opened and proposed, identified as ''oversized'' by the Master Grocers are: Seville (population 1800), a proposed 3100-square-metre Woolworths store plus 17 shops; Koo Wee Rup (population 2803), a 2660-square-metre Woolworths store; and Bright (population 2100), a 2383-square-metre Woolworths store plus liquor store.
Yesterday a spokeswoman for Woolworths, Clare Buchanan, said her company's competitors would have no knowledge of the profitability of individual stores. However, she acknowledged that stores were often built in residential growth corridors that were populated over time.
''Developers look to incorporate amenities such as supermarkets in order to attract people to live in an area. This means we commit to a long-term investment in the future growth potential of a suburb.''
Australia has one of the most highly concentrated grocery markets in the world, with Coles and Woolworths taking almost 80c in every dollar spent on groceries in this country.
A spokesman for Coles, Jon Church, dismissed Master Grocers's ''oversized'' store claim as a ''nice conspiracy theory with no basis in fact''.
''We only open stores where there is a consumer need and we believe we can make a return on our investment.''