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Woolworths, Coles, Aldi and Metcash are doubling down on initiatives to maintain sales momentum and lock in customers they acquired in 2020.
The initiatives include changes to store formats, overhauling product ranges, expanded home brand offers, further investment in online platforms and technology, including data analysis projects, and environmental policy commitments.
A renewed price war between the two supermarket goliaths is creating concern for suppliers as much as the Metcash independents who have shared the spoils of the 2020 disruption in the retail and hospitality industries.
Coles’ third-quarter supermarket sales to March 31 this year were $7.72 billion, representing a 6.1 per cent fall in revenues to the same period in 2021 when panic buying by consumers fuelled sales.
Coles management and investors expected this decline, but it was cushioned by successful customer retention from 2020 trading and operational initiatives, including the refresh of the chain’s “Down Down” campaign.
Two key elements underpinning a solid third quarter were a 49 per cent boost in Coles Online e-commerce sales and the addition of more than 260 new home brand lines generating sales of $2.5 billion in the third quarter, effectively 31 per cent of total sales for the period.
While Coles’ third-quarter sales may have shown a 6.4 per cent drop over the 13.1 per cent increase for the same three months to March 2020, allowing for the Covid-19 factor, the chain has actually achieved a 6.7 per cent increase on a two-year growth basis.
Woolworths’ third-quarter sales were $11.1 billion, representing a 10.6 per cent drop in revenues from the comparable period in 2020, a result again shaped by last year’s Covid spending rush.
In the latest quarter, Woolworths suffered a sharp 15 per cent sales drop in its Metro store network with lower customer activity in city centres but has bolstered its online sales, which had an increase of 90.5 per cent for the three months to March 31st.
Allowing for the Covid factor, Woolworths two-year average comparable sales growth was 4.1 per cent, a lower growth over 2020 and 2021 than Coles, with a 6.7 per cent increase.
The comparative results underscore a more aggressive push by Coles to maintain sales momentum and secure a large slice of market share gains from 2020.
Coles CEO Steven Cain is continuing to drive improvements ahead of its rival’s demerger of the Endeavour Drinks business, allowing Woolworths to focus more intently on its supermarket operations.
Pressure on suppliers
Suppliers have reportedly expressed concerns about the inevitable market share battle ahead for the two major supermarket chains, recognising the battle is certain to see increased pressure on prices and charges and potentially further incursions from home brand products.
It’s been reported that Coles and Woolworths suppliers have been pressed for temporary and permanent price reductions.
In the third quarter of the current financial year, Coles added more than 400 products to its everyday low prices schedule and undertook 130 range changes.
Woolworths is expected to reinvigorate its “prices dropped” and “low prices always” campaigns with extensive price reductions.
The big five
Coles and Woolworths are not just knocking on suppliers’ doors for additional promotional support to fund their market share battle but also to shave gains made during 2020 by Metcash independents Aldi and Costco.
With 570 stores nationally and a market share of 10 per cent, Aldi revenues topped $10.5 billion in 2020, while sales for Costco’s 12 stores for the 12 months to August 2020 passed $2.59 billion.
Metcash reported in March that its supermarket sales for the four months from November 2020 through to February 2021 were up 14.4 per cent, a positive and more than competitive growth rate to both Coles or Woolworths.
All five food retailers are also striving to retain the supermarket category market share taken from retailers in other categories that were forced to close for extended periods in 2020. That is likely to further add to a squeeze on suppliers in the weeks and months ahead.