Woolworths negotiated with food giant Nestlé to simultaneously raise the price of baby food and place it under a “Prices Dropped” marketing campaign — inflating the cost for three weeks before advertising it as a discount, a Federal Court has been told.
The revelation, made during a landmark consumer rights trial on Thursday, has cast a harsh spotlight on the pricing practices of Australia’s biggest supermarkets and raised serious questions about how much shoppers can actually trust the discount labels lining supermarket shelves.
At the heart of the allegations is Nestlé’s Cerelac baby rice — a staple product bought by thousands of Australian parents every week.
According to testimony heard in court, Woolworths agreed to include the product in its “Prices Dropped” promotion before it had ever been sold at the marketed “was” price. In effect, the discount being advertised was never a real one.
Woolworths baby needs category manager Stuart Robinson told the hearing that Nestlé had approached Woolworths with a proposal:
Increase the cost of the Cerelac product — with that increase passed directly onto consumers — and then offer funding for the product to be placed into the “Prices Dropped” scheme. Woolworths agreed.
The case is part of a broader joint action brought by the Australian Competition and Consumer Commission, which alleges that both Woolworths and Coles engaged in a systematic pattern of misleading consumers.
The ACCC claims both supermarket giants briefly and artificially inflated prices on a range of products before reducing them — but only to a level still higher than the original shelf price — then marketed those reductions as genuine savings.
Critics have long suspected supermarkets of gaming their own promotional systems, but this trial marks the first time such allegations have been tested in open court with sworn testimony from insiders.
The timing of the allegations could hardly be more uncomfortable for Australia’s supermarket duopoly. The case comes as millions of Australian households continue to feel the sustained pressure of a prolonged cost-of-living crisis, with grocery bills among the sharpest sources of financial stress for families across the country.
The average weekly grocery bill for a family of four has risen 11 per cent over the past year, climbing from $216 to $240 — putting annual household grocery spending at $12,480, almost $3,000 more than the equivalent figure in 2021.
And according to consumer researchers, those elevated prices are unlikely to come back down. “When you are getting a slight increase one year, unfortunately, those prices don’t go back down.
While the courtroom drama plays out, the price tags tell their own story. A single 120g pouch of baby food at Woolworths currently ranges from $1.00 for the supermarket’s own Smiling Tums label to $2.30 for popular brands like Rafferty’s Garden — with premium organic options such as Bellamy’s reaching as high as $3.95.
For parents buying multiple pouches a week, those figures add up fast. A family going through just four pouches weekly could spend anywhere from $200 to over $400 a year on baby food alone — before accounting for formula, cereals, and snacks.
It is precisely that reality that makes the ACCC’s allegations so pointed. If the “Prices Dropped” discounts parents were reaching for on the shelf were never genuine savings to begin with, families already stretched by the cost-of-living crisis may have been paying more than they ever realised — for food they had no choice but to buy.
Woolworths and Coles together control around 65% of Australia’s grocery market, a level of dominance that consumer advocates argue leaves shoppers with precious little choice. When the two major players move in the same direction on pricing, the majority of Australians have very limited alternatives.
Hunger relief charity Foodbank reported that rising inflation saw 77% of Australian households experience food insecurity for the first time in 2023, with families making sacrifices on the quality, variety and quantity of their weekly shop.
For parents of young children, the pressure is particularly acute — baby food and infant essentials are non-negotiable expenses with no easy substitute.
A federal inquiry into the supermarket sector, directed by the Treasurer in January 2024, has already put both chains under heavy scrutiny, and calls for stronger regulation and greater pricing transparency have been mounting in Canberra ever since.
For many Australians, the allegations now before the Federal Court are less of a shock and more of a confirmation of what they have long suspected — that the “specials” and “savings” prominently advertised on supermarket shelves may not always be what they appear.
Whether the court ultimately finds Woolworths liable, the reputational damage from the trial alone may prove difficult to shake at a moment when consumer trust is already at a historic low.
For many Australians already struggling with the cost of living, the idea that discount labels on essential products like baby food may have been engineered rather than genuine is likely to sting.
The ACCC’s case against Woolworths and Coles is being watched closely by consumer advocates, who argue that if the allegations are proven, it would represent one of the most significant breaches of consumer trust in Australian retail history.
The trial continues.
