Canberra's independent supermarket, Supabarn, is thumbing its nose at heavyweight rival Woolworths, trumping its 85¢ a loaf of bread with an 80¢ loaf.
Independent senator Nick Xenophon has warned Woolworths' latest discount, introduced at the weekend, will deal a death blow to independent retailers.
However, Supabarn appears happy to take on the major chain.
"We are surprised that this price [80¢] was not matched," a spokesman said. "We have sold bread at 50¢ a loaf previously on our market days as a special."
IGA operators and their industry association say Woolworths' latest discount, while legal, is predatory and will distort the market.
IGA City West and Forde operator Domenic Costenzo said: "This will hammer us, but what can you do? It is the same with big ones overseas. They just squeeze the little guys."
IGA Ainslie's Manual Xyrakis said he would not even try matching Woolworths.
"People on a budget, or with big families, may be taken in. It is just wrong. It is silly. They should not be allowed to manipulate the market," Mr Xyrakis said.
He said major supermarkets were trying to corner markets from mobile phones, to banking and insurance.
However, as Woolworths had shown after buying up Cannons stores in the late 1990s, price increases soon followed in Canberra, Cooma and Batemans Bay.
Master Grocers Australia chief executive Jos de Bruin said Coles and Woolworths had 85 per cent of the full-line supermarket business in Canberra, and were setting their sights on Supabarn, IGA and smaller independents in suburban shopping centres.
"Sure, the independent sector, all the IGAs and Supabarn and Foodworks in Canberra are able to match [85¢], but they will run at a substantial loss doing it. If Woolworths are selling 85¢ bread, someone along the line is losing," he said.
"If it is Woolworths, they will cross-subsidise with additional margins with other products they sell or they are pushing back on suppliers, which they are pretty good at, or cross-subsiding through their poker machines or whatever it might be."
Mr de Bruin said independent retailers did not have enough power to push back on a supplier.
Consumers may welcome the discounts but should realise in the long run it would lead to fewer supermarkets and less competition.
"Somewhere along the line, other businesses will say 'Stop, I can't do this any more. It is just not worth my family, my asset, the stress on my life to make no money, to lose money'," Mr de Bruin said.
He said independent operators selling bread for $1 a loaf were not making a profit.
"But at 85¢, that changes the game," he said.
Mr de Bruin believed Woolworths would have spent $2 million promoting cheap bread, but when members of his association went into Woolworths shops, they could not find the discounted loaves.
"If you are going to put a full page in the newspaper advertising bread at 85¢ a loaf, you would fill half the store up, wouldn't you?
"It didn't quite happen that way, so consumers were going into those stores and there was no stock."
No business other than Woolworths and Coles had the market power to sustain such a discount, therefore it was predatory, Mr de Bruin said.
"Legally, it may be right; morally, it is wrong."
Senator Xenophon wants anti-competitive price discrimination laws that were repealed in 1995 reinstated to counter extreme discounting.
