The divide between Coles and Woolworths are growing – so what does this mean for shoppers?
Australia’s cosy supermarket duopoly is suddenly in an uncomfortable position. The big two, Coles and Woolworths, who are used to ruling over the lives of Australian shoppers — and local suppliers — find themselves in very different circumstances.
Coles is soaring, booking strong profits and keeping customers happy. Woolworths is struggling, slashing its dividend, watching shoplifters run riot, and experiencing slumping profits.
In the last two days the big two reported their results to the market and the contrast could not have been more stark.
Woolworths had its worst single day in the markets in years, falling a shocking 13.3 per cent.
That’s a huge move in such a large company.
Coles stock, by contrast, was rewarded with its second-best day ever, seeing the stock rise 8.5 per cent.
As you can see, this is rare.
The two companies usually mirror each other. (That’s what a dupoly is, right, a cosy situation where they all float along together.)
But now we have a chasm emerging.
Coles stock price has surged ahead of Woolworths. · Jason Murphy
Note that Coles Group includes Coles supermarkets and Liquorland, whereas Woolworths Group is a bit broader. The group includes the supermarket and Dan Murphy’s, but also Big W and Petstock. The big moving parts in both companies, however, are the supermarkets.
This could be the end of an era.
A bit like the collapse of the Soviet Union, or the inability of NSW to beat Queensland in Rugby League in the decade after 2006.
A rivalry in balance is now out of balance. The Yin has lost its Yang.
So how will Australians fare?
Are we about to get whacked by a single supermarket holding a triumphant monopoly position?
Or will a brutal round of competition break out as Woolworths scorches the earth to catch up to its rival?
Coles is making huge investments in new automated delivery centres to make big progress on home delivery.
That was an area where it really lagged Woolies, and now it is catching up with a vengeance.
If they can combine happy customers with great delivery they might be able to make the gap with Woolies even bigger.
Here’s what Woolies have promised:
A smaller range of products, to make shopping simpler.
Fewer specials and instead more consistent low prices which they call “Lower Shelf Price”.
Some new fancier Home Brand products.
And, um…. No, that’s most of it.
“This is about a long term strategy for us,” said chief executive Amanda Bardwell in a call with analysts on Wednesday.
“We want to see a better balance in terms of Everyday Low Pricing … and our specials program.
“We’ve shared today also that we’ve seen some really pleasing early signs of customers recognising increased value for money at Woolworths.”
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Does that sound like fiddling round the edges to you?
No wonder the market plummeted.
Now, Woolworths remains the bigger supermarket.
It has 1301 outlets in two countries, Coles has 860 and is just in Australia.
The Fresh Food People aren’t about to disappear.
But what they need is a battle plan to win back our hearts and minds.
Back in about 2010, Coles launched the Down, Down campaign, and it was one of the most powerful brand investments ever.
The lesson of the Coles ‘Down, Down’ campaign will be extremely relevant as Woolies tries to figure out how to win back customer loyalty. · Coles
Coles – which was owned by Wesfarmers back then – went from being dominated by Woolworths to leading, for almost a decade.
While later Woolies got ahead by investing in better home delivery and a great website, the lesson of the Down Down campaign will be extremely relevant as Woolies tries to figure out how to win back customer loyalty. If there’s one strategy that can tap into Australians souls, its massive discounts.
Aldi is making money, thanks very much.
The German discounter has settled into a comfortable niche recently and is sending profits back to Mulheim in Germany.
Aldi Australia boasts the most satisfied customers, and it is coasting.
Forget growth, let’s profit.
Aldi has a recent press release boasting about opening its 600th store.
“Our customers have embraced our business model and have developed a love for our quality products,” said Jordan Lack, Chief Commercial Officer at ALDI Australia.
But .. they had 595 stores a year ago.
Their era of hyper growth — at one point they were opening 8 stores a year — appears ro have concluded.
Instead they seem to be relying on more people coming to each store.
And reports suggest they are going to shadow Coles and Woolies even more closely, adding more branded goods to each store.
A grocery aisle full of products in a Woolworths store in Brisbane. (AAP Image/Darren England) · AAPIMAGE
It’s not a listed company so you can’t get full details on Aldi’s performance and they are generally quite secretive.
Aldi is owned by the Albrecht family of Germany, and it is tough to find out what they are up to.
Our most recent data is from the 2022-23 financial year where they seemed to declare $350 million in income (i.e. profit not revenue) and pay $100 million in tax on that.
What has happened since we will find out only much later.
But basically the era where Aldi added a huge jolt of competition and differentiation to our supermarket scene appears to be over.
BRACE YOURSELVES
Could be time to get a Costco membership.
If Woolies doesn’t take the fight up to Coles, we could be in for a tough ride at the shops.