Australia's New Supermarket Pricing Laws Take Effect 1 July. The Story for FMCG Brands Isn't the One in the Headlines.
From 1 July 2026, Australia becomes the first country in the world to prohibit supermarket price gouging by statute. Coles and Woolworths face fines of up to $10 million per breach under a new excessive pricing prohibition enforced by the ACCC. The media coverage is focused squarely on shoppers. If you're an FMCG brand with product in either chain, the question that actually matters is what changes in the buyer room, not at the checkout.
Key Takeaways:
The ACCC's excessive pricing prohibition takes effect 1 July 2026, applying only to Coles and Woolworths, both of which exceed the $30 billion annual revenue threshold
Penalties per breach: $10 million, three times the benefit derived, or 10% of annual turnover, whichever is greater
When retailers face new constraints on consumer-side margins, that pressure doesn't disappear. It redistributes downstream to the supplier base through what we call the Margin Transfer Effect
The three channels: tighter cost-of-goods negotiations, range rationalisation, and increased expectations around promotional co-investment
Brands with above-market cost positions and weak velocity data are most exposed in the next review cycle
What the Law Does, and What It Doesn't
The ACCC's new excessive pricing prohibition, embedded in the now-mandatory Food and Grocery Code of Conduct, prevents Coles and Woolworths from charging prices that are "significantly excessive" relative to the cost of supply plus a reasonable margin. There is no fixed price ceiling. The ACCC will determine reasonableness case by case, product by product, using pricing data, margin information, and sales revenue it can demand directly from the chains.
The penalty structure is serious. Per breach: the greater of $10 million, three times the value of any benefit gained, or 10 per cent of annual turnover. For context, Woolworths' FY2025 group sales were $69.1 billion and Coles' were $44.3 billion, according to their respective annual results. Ten per cent of either number is not a fine. It's an existential conversation. The ACCC has already signalled that enforcement action is likely in the second half of this year.
What the law does not do is mandate lower prices or define what "reasonable" looks like. The ACCC will select an initial watchlist of focus products in the coming months, based on consumer and supplier reports as well as margin data obtained directly from the chains.
Neither retailer is taking this quietly. Coles publicly argued the new rules could place "upward, not downward" pressure on prices. That framing tells you something about how their commercial teams are thinking about this.
The Margin Transfer Effect
Here's the dynamic missing from the coverage. Retailers don't absorb margin constraints passively. When external pressure is applied to what they can charge consumers, the commercial response is structural, and from the supplier side of the table, it moves fast. Victor Simonovich and the MVRA team have seen this play out in multiple cycles across grocery, pharmacy, and specialty retail.
The mechanism flows through three channels. First, a harder line on cost-of-goods: retailers seeking to protect their margin envelope by reducing the input cost rather than adjusting the shelf price. Second, range rationalisation, the removal of slower-moving SKUs that contribute less gross margin per unit of shelf space. Third, increased expectations around promotional co-investment, shifting the funding of below-shelf-price activity from retailer margin to supplier contribution.
The Margin Transfer Effect is the mechanism by which regulatory or competitive pressure on a retailer's consumer-facing margin redistributes to the supplier base through cost, ranging, and trade terms. It is not a theory. It is how buying teams respond to a constrained P&L.
This isn't the first time this dynamic has run. It played out during the grocery price deflation cycle of 2014 to 2016, when both chains were under pressure from Aldi's expansion. It resurfaced during earlier ACCC scrutiny of supermarket conduct. The difference this time is the trigger is statutory, the ACCC will be monitoring margins in real time, and the commercial pressure is arriving all at once.
What Most Brand Teams Get Wrong
The instinct for many founders is to read this legislation as broadly positive for suppliers. Retailers constrained on pricing, promotional schemes under scrutiny, more transparency around margins. On paper it reads like a friendlier environment.
It isn't.
Category managers don't change their key performance indicators because a new regulation passed. Their function is still built around category volume, gross margin, and range productivity. The new law constrains how they manage the consumer-facing price. It does nothing to reduce the pressure on the cost line that sits beneath it. If anything, the scrutiny on retail margin makes the cost-of-goods line more important, not less.
The other misread is on promotions. The ACCC's Federal Court ruling against Coles in May, finding that the "Down Down" campaign misled shoppers through illusory discounts, had already begun to shift how promotional activity is structured. A similar case against Woolworths' "Prices Dropped" promotion is before the courts with judgment reserved. If self-funded retailer promotional activity draws closer regulatory scrutiny, the economics of supplier-funded co-investment become more attractive to buyers. For brands with thin promotional budgets, that's a direct cost exposure.
This is the Profitability vs Volume Paradox at its sharpest. Your buyer needs to demonstrate margin discipline to the regulator, hit volume targets to protect category share, and fund promotional activity to maintain shelf relevance. Those three objectives don't resolve in the same direction. If you walk into a commercial conversation without understanding which lever they're prioritising right now, you're negotiating blind.
What to Do Before Your Next Range Review
Review your cost-of-goods position relative to category comparables. If you're above market on COGS and your velocity data doesn't compensate, you're carrying commercial risk into the next ranging cycle. The MVRA approach to range review preparation and outsourced account management starts with this audit, not the pitch deck.
Lock in your category contribution story. The ACCC will focus its monitoring on products where excessive pricing causes the most consumer harm. Retailers will protect high-velocity, high-margin SKUs first. Slow movers in developing categories are the first candidates for delisting when rationalisation pressure increases. If your category contribution data isn't presentation-ready, it needs to be before your next buyer meeting.
Get clarity on your promotional terms before any co-investment discussion is raised by your buyer. Understanding what your buyer is trying to achieve in the current regulatory environment, and what compliance constraints they're managing, gives you the context to negotiate from substance rather than react to pressure. Our earlier post on how to read a buyer's commercial priorities before the meeting covers the mechanics in more detail.
For international brands preparing to enter the Australian market, the regulatory shift adds a layer of commercial complexity to the ranging conversation that domestic brands are already navigating. Before approaching a buyer this year, understanding the current landscape is foundational. The MVRA Retail Readiness Checklist walks through the key commercial criteria. Our earlier analysis of the regulatory trajectory that produced these laws, including the ACCC's enforcement history with Coles and Woolworths, is also worth reviewing before any commercial meeting this quarter.
For a structured commercial preparation framework, the MVRA Retail Readiness Guide covers the full commercial criteria for national distribution in Australia.
One broader point. This legislation is world-first for a reason. Australia is the test case for statutory price regulation in a highly concentrated grocery market. Regardless of how enforcement plays out, the direction of travel is clear: greater transparency around retail margins, supplier cost data, and promotional pricing. For well-prepared brands with clean data, competitive cost positions, and a genuine category story, that transparency is ultimately a structural positive. Opacity has historically protected underperforming suppliers as much as it has protected retailers.
FAQ
Q: Does the new law mean Coles and Woolworths will reduce the shelf price of my product?
A: Not automatically. The ACCC monitors whether pricing is excessive relative to cost of supply plus a reasonable margin. The law doesn't require retailers to lower prices, only to justify them. Your product's shelf price is determined by a commercial negotiation between you and the retailer, and that process doesn't change under the new prohibition.
Q: If retailers face margin scrutiny, does that give FMCG suppliers more leverage in cost-of-goods negotiations?
A: In most situations, the opposite. When external pressure is applied to a retailer's consumer-side margin, the first commercial response is typically to tighten the cost-of-goods line. That usually means increased scrutiny of supplier pricing, not more generous terms. Leverage shifts in your favour only when your product has demonstrably strong velocity and genuine, quantified category contribution.
Q: Which products will the ACCC focus on first?
A: The ACCC will select its initial watchlist of focus products in the coming months, drawing on consumer and supplier reports as well as pricing and margin data obtained directly from Coles and Woolworths. High-volume categories where sustained price increases have demonstrably harmed consumers are most likely to be in scope.
Q: Does the excessive pricing law apply to Aldi, Costco or other major retailers?
A: No. The prohibition only applies to supermarkets with annual revenue exceeding $30 billion. Only Coles and Woolworths currently meet that threshold. Aldi, Costco, IGA, and other chains are not captured by this legislation.
Q: Can FMCG suppliers report concerns to the ACCC under the new framework?
A: Yes. The ACCC has explicitly invited suppliers to report concerns about excessive pricing. Supplier reports will help identify products for closer examination. If you have concerns about pricing conduct in your category, MVRA recommends documenting the commercial context carefully and consulting with a qualified adviser before lodging a report.
July 1 doesn't alter how Coles and Woolworths fundamentally make ranging and commercial decisions. It shifts the regulatory environment those decisions are made within, and that shift will reach the supplier base before it benefits shoppers at the checkout. The brands that prepare now, with clean cost positions, strong velocity data, and a clear category story, protect their ranging position through the next review cycle. The ones that assume the law makes the landscape easier are the ones who will be surprised by their next buyer conversation.
If you're working through how the new regulatory environment affects your commercial position, book a strategy call with the MVRA team.
About the Author: Victor Simonovich is co-founder of MV Retail Advisory, with senior leadership experience across Coles, Woolworths, and Sigma Pharmaceuticals. He has managed commercial strategy, ranging negotiations, and category reviews from both sides of the buying table, across grocery, pharmacy, and specialty retail. Learn more about the MVRA founding team.
