We measure industry concentration as the average percentage of sales captured by the four largest firms in each ‘class’ within an industry or subindustry. For example, industry concentration in beverage and tobacco manufacturing would be the average percentage of sales captured by the four largest firms across soft drink, beer, spirit, wine and tobacco manufacturing.

This approach follows Andrews et al. (2023), and is required to avoid breaching ABS data confidentiality rules. See methodology section for more detail.

High or rising industry concentration indicates less competition, because where a small number of firms capture most of the sales, it suggests that:

• customers may have less choice
• firms may not need to compete as fiercely to win or keep customers
• it may be hard for smaller firms to enter or grow to compete with larger firms; or
• workers in the industry may have fewer options about who they work for (OECD, 2021).

However, industry concentration can sometimes be high in industries with fierce competition, for example in industries where firms need scale in order to produce efficiently, such as car manufacturing (OECD, 2021).