Beyond Coles and Woolies, the fight for cheap essentials heats up
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The battle for budget groceries is heating up as competitors to supermarket giants Coles and Woolworths, including Costco and Aldi, say their value offers are resonating with cash-strapped shoppers.
A flurry of competition on essential items comes as a UBS investment bank survey of suppliers last week suggested food inflation would moderate significantly but was expected to sit at about 4.8 per cent over the next year.
As prices remain high, retailers are trying a range of offers to get shoppers through the door. Credit: iStock
This inflation rate is expected to “prompt consumers to trade down to smaller pack sizes, private label and/or to Aldi”, UBS said in a note to clients, making Aldi the most likely business to grow market share over the next six months.
The German discount supermarket has been upbeat about its position in the face of the cost of living crisis. The company said last month that many shoppers had been coming to its stores for the first time recently, and it was gradually increasing the size of its shops.
“[Shoppers] might come in for meat, and it might take them a month, or two months, but they start exploring different parts of the range,” Aldi’s director of customer interactions, Adrian Christie, said.
Aldi is not the only grocery challenger looking to capture value-conscious consumers. The managing director of Costco in Australia, Patrick Noone, said the membership and online warehouse was still in expansion mode in Australia, and that food and fuel had been the company’s most popular categories in recent times as shoppers demanded more value on essentials.
“Costco offers a wide range of quality, brand-name items at the best possible prices,” he said. “A lot of these items are everyday essentials that provide the savings members are looking for. We also add a layer of competition to the grocery market and extend the choice of the consumer.”
IGA operator Metcash is also working on ways to deliver for value-conscious consumers, and has been trialling a new store format called Supa Valu, with two sites so far in NSW and one in Victoria.
“The format is designed to offer these shoppers amazing value on their weekly shop through our bulk buying, locking more prices down for longer, along with extra low prices on weekly specials for key items such as meat and produce,” said Metcash Food chief executive Grant Ramage.
“As you would expect with the rise in interest rates and other cost of living pressures, we have seen an increase in foot traffic to our Supa Valu stores in recent months.”
Coles and Woolworths have been acknowledging for months now that customers have been switching to private label and “trading down” to more budget options.
Retail giants have been responding to this trend by rolling out price-lock and bulk-buy promotions.
Coles launched a range of 80 bulk-buy essential products last week, while discount department store Kmart dropped the prices of 1000 everyday items.
Coles and Woolworths hold the largest share of Australia’s grocery market, commanding more than 60 per cent between them, but much smaller retailers say they can provide a competitive alternative for shoppers.
Deep discounter NQR has returned to expansion mode as its approach of buying unloved grocery stocks resonates.
At the other end of the spectrum, retail juggernaut Amazon also wants to provide an alternative way for consumers to buy non-perishable groceries.
Amazon Australia confirmed that health and personal care, grocery items and beauty products were some of the best performing categories at its Prime Day sales event last week.
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