But isn’t that simply an ongoing subsidisy from food to drink? Doesn’t that then take it out of the realm of “true” predatory pricing. Also, is there really an “extra” margin on food – i.e. do they set the margin on food higher to compensate for the loss on alcohol? Or do they rely on volume?

it is abuse of significant market power.

@ matt

liquor outlets weren’t making any money, hence we saw progressives buy liquor king (i think it was that chain), and they are certainly looking at other liquor acquisitions as liquor outlets are strugging to compete with supermarkets.

On the otherhand what we are seeing now might be because the predatory pricing strategy has failed as the market has become more contestable than when the strategy of discounting wine started. Dairy’s often sell wine now as a competitive fringe, and do quite well.

Alternatively, maybe they have been successful and have now reached a reasonalbe outcome. perhaps they realise now they can’t price most of them out of the market, but they have priced low enough to become the dominant players and now its time to increase prices again. In terms of wine and beer, what we have now is a cozy duopoly with a competitive fringe from dairy’s and liquor stores.

1. producers are no fans of competition – in fact they despise it

2. why competition matters for consumers

The Left think of the pro-competition reforms of the 1980s and 1990s as being producer-friendly. Nuh uh.

Indeed very true.

If this is the case though we should have seen supermarkets start in increase prices by now surely? As the purpose of predatory pricing is to reduce competition so as to increase prices in the future.

As you say – the market is probably fairly contestable (as are most retail subsectors) so this explanation probably wouldn’t roll 🙂