Coles is dropping the price of over 300 products and adding more own brand and bulk offerings as part of a refreshed “value strategy”.
The price cuts cover a wide range of supermarket categories from the bakery to the meat section, with a big investment in lowering the price of poultry, the number one dinner protein choice for customers.
Following in the footsteps of US giant Costco, Coles is introducing big value packs of staple items such as tea, coffee, tomato sauce, olive oil and rice, and adding hundreds of new own-brand products.
The supermarket giant said this is its biggest investment in value in recent years, and is aimed at lowering the cost of meal times for customers.
“We’ve been reviewing the products our customers are buying every day and determining where we can really make a difference to their cost of living. Our vision is to be the most trusted retailer in Australia and we must take a customer obsessed approach to value,” Coles chief marketing officer Lisa Ronson said in a statement on Friday.
Retail expert, Professor Gary Mortimer told Inside FMCG that Coles’ strategy will mean, “short term gain, but long term, unsustainable pain,” as competitors match prices and demand patterns return to normal.
“Price is the easiest, most replicable marketing strategy,” Mortimer said.
“In an oligopolistic market, dominated by three or four major players, price cuts trigger price wars. While there will be an initial short term kick to sales at Coles in the coming weeks, as Woolworths and others follow, sales stabilise and return to normal.”
“Short term price strategies lack sustainability, particularly in fresh foods, such as meat, fresh produce and delicatessen,” he added.
Woolworths might be reluctant to engage in these “price wars” however, having announced in May that it was moving away from the discounting model, to focus on every day better value for customers.
Speaking at the Australian Food and Grocery conference Woolworths’ director of buying, Peter McNamara, highlighted the importance of “value beyond price”, saying that customers want to feel like they are getting the best deal and that they can trust this is what they are getting from the retailer.
“We want to be competitive in the marketplace, customers expect us to be competitive,” McNamara told conference attendees. “Price trust is consistently one of the key metrics of store choice.”
The retailer is hoping that its strategy of providing “good food, good prices, good acts,” will help it to grow sales in the increasingly competitive market.
Point of difference
Mortimer believes that finding a point of difference is a better strategy than engaging in “price wars” particularly with the impending entry of more international players in the market.
“With Kaufland less than 18 months away from launch, it is interesting to see a supermarket push a low price message. Going head to head on price with [Kaufland] is not a smart move,” he said.
“Adopting a point of difference is much smarter, and we have seen both Coles and Woolworths move in this direction.”
Both Coles and Woolworths have announced changes to store format this year, with Coles planning to reformat around 200 stores to focus on convenience, and Woolworths returning its focus to fresh, customer service and convenience.
This story first appeared on sister site, Inside FMCG.