Bare shelves in major supermarkets underscore the problem with the "oligopolistic" structure of Australia's grocery industry, experts say.
Coles and Woolworths control 66 per cent of Australia's grocery retail market — more than Aldi, IGA and independent outlets combined.
The duopoly has exacerbated the disruption caused by the rapid Omicron outbreak, according to Macquarie Business School senior lecturer Prashan Karunaratne.
"Perhaps it's not beneficial to Australia in the long term if we are reliant on these concentrated supply chains which don't deliver when such shocks hit," he said.
New Zealand is considering ways to break its supermarket duopoly, so should Australia do the same?
Supply chain disruption
Surging Omicron infections in nearly every state and territory have crippled supply chains by forcing workers in processing and packaging, transport and distribution, and supermarket staff who fill shelves into isolation.
Consumers have responded to bare shelves by panic buying, going without, or looking for alternative supplies.
Dr Karunaratne said Australia's supermarket duopoly put consumers in a precarious and unique position compared to other developed economies.
"The usual supply chain issues, during some sort of crisis or otherwise, are a little more pronounced in Australia's case because we have a more concentrated market structure in this grocery chain space," he said.
Coles and Woolworths rely on "economies of scale" and funnel produce and products through central processing and distribution centres, then freight them across the country.
"They have an over-reliance on central facilities and therefore we have less of them in Australia," Dr Karunaratne said
Independent retail thrives
National Farmers Federation president Fiona Simpson says the supply chain story is entirely different for independent retailers, butchers, and grocers.
"At the moment, a lot of the independent retailers and smaller fresh food markets and butchers are doing much better than the bigger supermarkets," she said.
Bevan Betros runs a family-owned grocery store, Betros Bros, in the Queensland town of Toowoomba, 120 kilometres west of Brisbane.
Aside from some top-brand toilet paper, his shop shelves are full.
"I think there's next to no lines we're out of as far as fruit and veg goes," he said.
Mr Betros said smaller retailers had flexible supply chains and local farmers even delivered produce themselves.
"There's no shortage of anything really," he said.
"It's all to do with distribution systems."
Changing competition policy
Ms Simpson said the comparative success of smaller and more nimble supply chains during COVID highlighted the need for more competition.
"For us, that's a reflection on competition policy, which, for a while in Australia, has had the supply chain being focused in the hands of a couple of very big players," she said.
Dr Karunaratne said there was no quick solution to fix Australia's grocery "oligopoly".
"Given a small manufacturing sector, given a concentrated market structure in the packaging industry, given a concentrated market structure in the grocery industry, these are systemic structural issues that will take long-term micro-economic reform to address," he said.
Policy reforms could include incentives for smaller players like farmers' collectives and independents to expand and take up a bigger market share.
Across the Tasman, the New Zealand government is considering breaking the duopoly of Woolworths and Foodstuffs in its $22-billion grocery industry.
That is in response to the NZ Commerce Commission's draft report on grocery competition, which found competition was "not working well for consumers".
The commission's recommendations included making it easier for new competitors or existing independent retailers to expand and creating a further major grocery retailer to stimulate competition.
"I guess watch this space with what NZ does, with what they've recently announced, and perhaps Australia could monitor the cost benefit analysis of that solution," Dr Karunaratne said.
The ABC has contacted Coles and Woolworths for comment.
