Supermarkets in Australia

PROSPECTS

Woolworths and Coles show renewed focus on online sales

While industry surveys indicate strong interest in online grocery shopping among Australians, the number of consumers who actually buy groceries online remains relatively low. This is partly due to uncertainty about the benefits and reliability of online grocery services.

Government approves reform of Food and Grocery Code of Conduct

In March 2019, the Australian government accepted most recommended reforms to the Food and Grocery Code of Conduct put forward following an independent review. This code was introduced in 2015 to promote greater transparency and fairness in price negotiations between suppliers and grocery retailers or wholesalers.

Kaufland’s entry set to increase pressure on supermarkets chains

Having already had to contend with the rapid expansion of discounter Aldi in recent years, supermarkets will face significant new challenges over the forecast period with the arrival of German hypermarkets giant Kaufland to Australia. With much larger stores and much wider assortments than Woolworths or Coles, Kaufland’s entry will intensify pricing pressure on the top two supermarkets chains, particularly in areas like fresh food.

COMPETITIVE LANDSCAPE

Coles partners with Ocado to strengthen its online business

Having previously lagged behind Woolworths in terms of internet sales, Coles now looks to have stolen a march on its rival in this area after striking an exclusive deal with pioneering UK-based online supermarket Ocado. Announced in March 2019, this partnership will see Coles invest up to AUD150 million in the creation of an end-to-end online grocery shopping system by 2023.

Leading chains look beyond pricing to win over consumers

Following several years of price wars, fuelled in part by the disruptive influence of Aldi, over the review period Australian supermarket giants Woolworths and Coles moved to reduce their reliance on pricing as a competitive strategy. After abandoning its poorly received “Cheap Cheap” campaign in late 2015, Woolworths returned to focusing on positioning itself as the best choice for fresh food, while also working to improve its in-store format, private label offer and customer service.

Woolworths employs new data analytics platform to strengthen competitiveness

The decision to move away from a price-driven strategy in favour of a more quality-based approach has already paid dividends for Woolworths, as evidenced by the healthy increase in its supermarkets value share in 2018. Recent developments indicate the chain will continue working to differentiate its offer in areas other than price over the forecast period.

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