Roundtable: How Oligopolies Shape Australian Industries

From beer taps to bank branches, supermarket aisles to funeral homes, market concentration defines much of Australia’s commercial landscape. Across multiple sectors, a handful of major players control production, distribution and pricing power, creating efficiencies that can stabilise markets but often at the expense of competition and innovation. To unpack how these dynamics play out across the economy, four IBISWorld analysts share their perspectives on the effects of oligopolies in their respective industries:

• Michael Doyle: Beer Manufacturing
• Matthew Reeves: National and Regional Commercial Banks
• Jayson Cooke: Supermarkets and Grocery Stores
• Andrew Ledovskikh: Funeral Directors, Crematoria and Cemeteries

Together, their insights reveal how concentration shapes not just profitability, but the competitive and regulatory future of Australian industries.

Do oligopolies in your sector/industry lead to greater efficiency and stability or do they reduce competition and innovation?

Michael Doyle: While oligopolies in the Australian Beer Manufacturing industry lead to some efficiency and stability, they also reduce competition and innovation from smaller manufacturers.

Major players Asahi and Lion achieve solid economies of scale in production, distribution and marketing, with both companies investing heavily in automation to replace labour with technology. These investments reduce per-unit costs and enable competitive pricing on mainstream products. Larger brewers' scales enable strong investments in brewing technology and marketing that smaller brewers may struggle to match.

These efficiency gains come at a competitive and innovative cost. Tap contracts let dominant brewers control between 85% and 90% of beer taps through lucrative contracts that include rebates, cash incentives and upfront payments in exchange for long-term exclusivity arrangements. These contracts have been criticised for limiting independent brewers’ access and reducing competition and consumers’ choice. While major brewers invest in product development, innovation is often driven by independent brewers, who’re more likely to use experimental brewing techniques. Although, as these brewers face barriers from the oligopoly's control over distribution and retail shelves, innovation in the industry is limited.

Matthew Reeves: For banks, the dominance of the Big Four (CBA, NAB, Westpac and ANZ) contributes to high levels of stability in the National and Regional Commercial Bank industry. The high level of concentration implies that each bank has a large customer base of households and businesses with diversified portfolios like home mortgages, commercial mortgages, other business loans and trading and investment securities. Due to their dominance, the major banks can maintain high and stable profit margins. Strong profitability then allows them to grow their asset base.

As the last major bank collapses occurred in the early 1990s, the industry is now highly stable, though the oligopolistic nature of the industry has reduced efficiency. This means higher fees and slower innovation. Due to the Big Four’s dominance, they've less incentive to introduce new products.

Jayson Cooke: Australia’s supermarket industry is dominated by Coles and Woolworths, with ALDI, Costco and IGA (owned by Metcash) serving as smaller competitors. This oligopolistic structure delivers efficient supply chains and consistent nationwide service, driven by the scale and rivalry that historically led to retail innovations like self-checkouts and large-format stores.

According to the ACCC’s 2024 Supermarkets Inquiry report, Coles and Woolworths show little incentive to compete on price, often mirroring each other’s pricing, which discourages direct competition.

In practice, the market’s strength in logistics and stability comes at the cost of meaningful price competition and bold retail innovation, leaving the longer-term path for competition unresolved.

Andrew Ledovskikh: While there are some efficiencies in terms of larger entities’ stronger buying power, the most significant impact is reduced competition in the funeral industry.

The issue is that the Funeral Directors, Crematoria and Cemeteries industry operates an oligopoly by stealth. The two largest players make regular bolt-on acquisitions of funeral homes, but often either maintain the brand or roll the acquired business into one of the dozens of national or state chains they operate. This creates an environment where customers may shop around between different brands, not realising they’re getting quotes from the same company. It would be like realising both Coles and Woolworths are owned by the same company – it raises questions about the level of competition and how prices are being set, and prices for funeral services have outpaced inflation consistently for decades.

Where, if at all, do consumers gain advantage in oligopolistic markets in your industry? 

MD: Consumers benefit from lower prices on mainstream products and consistent supply stability. The dominance of the two major brewers, Asahi and Lion, enables them to engage in aggressive pricing on mass-market lagers. Particularly at major retailers like Dan Murphy's, owned by Endeavour Group, and First Choice Liquor, owned by Coles Group. This price competition provides savings for consumers prioritising affordability and familiarity. A stable supply is another benefit to consumers, as the major brewers’ nationwide distribution networks ensure reliable availability, helping them weather disruptions better than smaller operators.

MR: Less competition within the banking industry means consumers face higher fees. Banks are also able to offer lower deposit rates and higher lending rates, meaning it costs more to borrow and less is received in interest, which boosts profitability.

On the other hand, the high stability of the industry and the status of the Big Four as ‘too big to fail’ means the risk of a major banking collapse is extremely low. As a result, customers can have high confidence that they won’t lose access to their funds.

JC: Consumers have a mixed experience under Australia’s supermarket oligopoly. Coles and Woolworths offer extensive product variety and national coverage, providing a convenient one-stop shop. Competition from ALDI has spurred Coles and Woolworths to introduce private-label options and weekly promotions, forcing some price restraint, especially on staple items.

Coles and Woolworths don’t compete aggressively on price, individually maintain stable profit margins and don’t always pass on savings to consumers. In areas without ALDI or independent supermarkets, shoppers have few alternatives and see little meaningful price relief or innovation. Although the current structure provides convenience, stability and range, it limits genuine competition and keeps grocery prices higher than they might otherwise be for consumers.    

AL: In the current state of the funeral industry, there’s little advantage to the customer.

If anything, the hidden oligopoly creates an information asymmetry that makes it hard for customers to get a good deal. Companies operating multiple brands in specific regions can engage in price discrimination, limiting competition and driving up costs for consumers. This tactic also discourages companies from providing customers with the best service, as companies know that even if they lose a customer, the funeral services company that customer engages next will likely be another of their brands.

The ACCC’s 2021 Funeral Services report states that the industry is rife with poor practices, with multiple findings against companies for misleading claims and poor pricing transparency over the past decade.  

How does Australia’s level of industry concentration compare to international comparisons? 

MD: Australia's beer industry is highly concentrated compared to many international markets. The Independent Brewers Association (IBA) states that the country’s beer sector is among the world’s most restricted and its beer market is among the world’s most profitable due, in part, to the Asahi and Lion duopoly.

The United States and Canada exhibit similar structures in their beer markets⁠, with Anheuser-Busch and Molson Coors controlling 52.6% and 75.1% of the market, respectively. On the other hand, the United Kingdom presents a more fragmented, competitive landscape. Its market includes four major brewing companies competing more evenly for market share, with Heineken holding 20.7%, AB InBev holding 18.2%, Molson Coors holding 16.6% and Carlsberg holding 15.4%. This distribution creates a more balanced oligopoly with no one dominant player as seen in Australia or Canada. The United Kingdom’s beer market remains highly competitive among major players, with the craft and real ale segments offering genuine alternatives.

MR: When looking at market share in the banking industry, it’s better to look at asset share rather than revenue because the latter can be affected by differences in margins. Based on asset size, the market share concentration of Australian banks is comparable with concentration in other countries. In 2021, the top five banks in Australia account for 91.2% of industry assets, compared to 87.8% in New Zealand, 84.8% in Canada, 86.1% in Ireland and 94.2% in Germany. Although, this is lower in the United Kingdom and in the United States at 59.9% and 49.7%, respectively. The United Kingdom has a very outward-looking economy, which has encouraged multiple financial institutions to exist and prosper. The banks’ lower market share concentration in the United States can be attributed to the country’s vast population, large number of states, sizeable geographic area and substantial economy. 

JC: Australia’s supermarket industry is among the world’s most concentrated. Woolworths and Coles’ market share at just over 68% of the entire market in 2025-26. With ALDI, IGA and Costco’s market share at just over a collective 20%. This level of dominance is rarely seen in other developed countries. The United States’ top four supermarket chains hold just under 40% of the market share. In the United Kingdom, the top four supermarket chains account for around 65% of the market share – far less than the combined share of Australia’s top two.

Australia’s supermarket concentration has clear effects. Coles and Woolworths now post profit margins higher than almost all their global peers –⁠ a significant change from 2008, when their margins were far closer to the United States’ and the United Kingdom’s. This mainly stems from the economics of the situation –⁠ weak competition can enable the big two to mirror each other’s prices and sustain higher mark-ups, while more fragmented markets tend to see lower prices and tighter margins through competition.

Reduced rivalry limits supermarkets’ incentives to compete on price. Although, while profit margins are higher than those of international counterparts, the ROI is often lower, as Australia's geography makes set-up more expensive.

AL: In terms of oligopoly, the funeral industry isn’t regularly discussed so it’s harder to gauge whether other countries have similar issues. IBISWorld research shows that the top companies in the United States and the United Kingdom maintain approximately 10% market share compared to InvoCare’s share of over 25% in Australia. In turn, Australia’s issues seem to be an extreme example. By its nature, funeral services tend to be fragmented. Companies in the industry are often intergenerational family businesses, with small businesses scattered across different regions and cities. There aren’t significant economies of scale in the industry, so consolidation hasn’t been a common trend worldwide. While there might be similar issues overseas, Australia is a standout for the scale of its market share concentration.

What role does regulation (e.g. the ACCC) play in shaping the balance of power in your sector/industry?

MD: The ACCC plays a crucial role in monitoring the beer industry to promote competition and consumer protection. Although, critics argue that its actions have been insufficient in balancing power against the oligopoly.

The ACCC's tap contracts investigation examined exclusivity provisions and volume requirements at 36 venues, concluding in July 2017 that they weren’t likely to lessen competition. Criticised by the IBA, the decision allowed contracts to continue and maintained the major brewers’ control of around 85% of on-premise taps.

The ACCC’s approval of mergers has been criticised for increasing the industry’s market share concentration. In 2020, the commission approved Asahi's acquisition of CUB. The ACCC also approved Lion's 2021 acquisition of Fermentum, allowing the major brewer to absorb a smaller craft competitor. Polling shows that over 50% of Australians support an ACCC inquiry into the duopoly, reflecting consumers’ awareness of the beer market’s industry structure.

Beyond the ACCC, excise tax regulation influences competition. The excise remission cap is the maximum amount of excise duty that a beer manufacturer can claim back each year under the government’s alcohol tax relief scheme. Currently set at $350,000, the cap will increase to $400,000 from July 2026. The cap benefits small and independent brewers, aiming to level the playing field by reducing the tax they pay on production, freeing up cashflow for reinvestment or profit.

MR: Regulation plays a crucial role in shaping the balance of power of the National and Commercial Bank industry. Introduced by the Labor Government in 1990, the four pillars policy bans the merger of the country’s four largest banks. This policy isn’t legislated and is up to the government of the day to uphold. Australia’s banking system is regulated by the Australian Prudential Regulatory Authority (APRA). Under APRA rules, the banks are subject to rigorous liquidity, capital and governance rules that make it difficult for new competitors to enter the industry. While Judo Bank has successfully entered the business banking space, targeting small and medium enterprises, other neobanks like Volt and Xinja have exited after being unable to meet APRA’s capital requirements. 

JC: Regulation is central to shaping Australia’s supermarket industry and curbing Coles’ and Woolworths’ dominance. In March 2025, the ACCC claimed it needed more power to scrutinise supermarket mergers and the acquisition of retail sites with the aim of stopping the big chains from quietly expanding their control. Since 2019, Coles and Woolworths have purchased around 260 sites.

The ACCC also investigates market behaviour. Both Coles and Woolworths have faced scrutiny and legal action for mistreating suppliers and misleading discount pricing. As a result, the Food and Grocery Code of Conduct was introduced to protect suppliers' rights. Despite this, the ACCC’s latest inquiry found that many suppliers continue to report pressure from the supermarket giants.

The ACCC’s Supermarket Inquiry report outlined 20 recommendations, like mandatory online price transparency, increased oversight of loyalty programs, stricter reviews of pricing tactics and planning reforms to support new competitors. The commission also advocated for providing stronger support to independent and community supermarkets to boost local competition. While regulation can’t create new rivals directly, it can hold the industry accountable and seek to level the playing field. The future balance of power for Australian supermarkets will hinge on whether these recommendations are implemented, whether international supermarkets join the fray and intensify competition, and the extent of further measures to promote greater rivalry among existing supermarket chains.

AL: The ACCC has clamped down on the funeral industry in recent years, undertaking a review of the sector in 2021. The review included negative findings around price transparency and misleading advertising, creating a strong impetus for reform and civil penalties. The ACCC also set up an enforcement program to monitor the sector on an ongoing basis, undertaking multiple proceedings for misleading advertising and unfair contract terms and pricing practices over the past five years. The ACCC’s investigations and reporting seem to have put a dent in pricing growth, narrowing the gap between funeral costs and CPI growth. The report has also driven some state governments to increase regulation of the sector in an effort to address the identified issues. In 2020, New South Wales updated its regulations to increase price transparency in the industry. Western Australia passed new laws to do the same in 2021, followed by Queensland in 2022, South Australia in 2023 and Victoria in 2024.