Grocery sales growth slows as Woolworths, Coles cut prices

Date
    August 5, 2015 


The battle for market share between the major grocery chains and independent retailers has led to the weakest supermarket sales growth in almost two years.

While overall retail sales growth exceeded market forecasts in June, delivering a long-awaited shot in the arm to traders, food sales growth was weaker than expected due to intensifying price competition between Woolworths, Coles and independent retailers.

Supermarket and grocery store sales rose just 2.9 per cent - the weakest rate of growth since September 2013 and well below the six month trend - as Woolworths, Coles and independents supplied by Metcash cut prices to regain market share lost to Aldi.   


"Woolworths invested in price and Coles is doing a bit of the same and people are shopping more at Aldi – that's my sense of it," says Morgan Stanley's Tom Kierath.   

Overall food and liquor sales grew by 2.7 per cent, compared with growth of  3.4 per cent in May and the 12-month average of 4.8 per cent.

"It's hard to read too much into it  but you're starting to see signs that supermarkets are going a bit harder on price," said Morgan Stanley analyst Tom Kierath​.
Pressure on margins


Woolworths lost market share in June despite cutting grocery prices.

Food price inflation is estimated to have slowed to 1.3 per cent in the June quarter, compared with 2.5 per cent in the fourth quarter 2014, increasing the pressure on supermarket margins.

The June Australian Bureau of Statistics figures show that cutting grocery prices is a zero sum game – consumers do not necessarily buy more packaged food and groceries when prices fall and growth in volumes barely offsets lower prices.

"The deterioration in food sales suggests market growth has been affected by the price investments made by Woolworths and Coles, and volume uplift has been insufficient to offset this,"  said Deutsche Bank analyst Michael Simotas.

Analysts believe Woolworths continued to lose market share in food and groceries in June even after the retailer stepped up discounting for branded and private label groceries and trimmed online prices to lure customers back to stores.

Cutting profit guidance in mid-June, for the second time in four months, Woolworths said Australian food and liquor sales had fallen 0.7 per cent on a same-store basis in the quarter to date. Analysts said there was unlikely to have been a change in momentum in the last two weeks of the month.

Coles "held up OK," according to Deutsche Bank, and sales at independent retailers improved slightly as a price-matching program at IGA stores gained momentum.
Aldi the drawcard



While promotional discounts are deeper than they were last year, analysts say pricing remains rational and there are no signs of an all-out price war.

Woolworths announced plans in May to slash costs by more than $500 million and pour the savings into lowering grocery prices and improving service in supermarkets to "neutralise" Coles, which has been outperforming its larger rival for 23 consecutive quarters, and to "contain" Aldi.

​Analysts and investors are hoping to see Woolworths supermarkets return to same-store sales growth over the next few quarters. However, UBS analyst Ben Gilbert believes it could take two years for Woolworths to return to a defendable, like-for-like sales growth trajectory.

Read more: http://www.smh.com.au/business/grocery-sales-growth-slows-as-woolworths-coles-cut-prices-20150804-gir5by.html#ixzz3huPRtojt

Please open more Aldi supermarkets.   

Buying groceries from Coles or Woolworths is no more buying Australian than buying iron ore from Rio or BHP is.

In terms of ultimate beneficial ownership, Coles (Wesfarmers) & Woolworths are as much owned by US, Canadian, UK, German, Asian &etc shareholders as they are by Australians.

Very_Vinnie wrote on Aug 5^th, 2015 at 4:01pm:


Rubbish. It's those retailer scumbags such as harvey norman who chased cheaper products overseas whilst local manufacturers went to the wall !! They are the reason that so many aussie manufacturers no longer exist. They are greedy and want their 10,000% markups. They sell goods for $100 which they pay some local supplier $20 but then they go overseas and buy it for $10 simply because they are f.cken greedy and don't want to pay the local supplier an extra $10. Same with farm produce which is why farmers are having to close down and sell off their land to foreign investors.

And how much of what coles sells is not some foreign slop put into a can and sent here via New Zealand etc ?

And I note that dick smith always bags Aldis but not Woolies which he sold out to for his 30 pieces of silver.

Aldi have gone on record stating that at least 80% of its products are sourced from Australia.

I haven't heard any such undertakings by Coles or Woolworths.