The gulf between Australia’s two largest supermarket chains continues to widen as Coles’ sales growth surpasses its larger rival, Woolworths, for the seventh consecutive quarter. Coles reported a total sales growth of 3.9% for the first quarter of the new financial year, outpacing Woolworths’ 2.7% figure revealed yesterday, indicating a gain in market share.
Coles’ Chief Executive Leah Weckert expressed satisfaction with the supermarket’s performance, highlighting increased grocery sales and customer acquisition. “The volume rate for us is really strong right now. One of the things driving that is really good growth in transactions,” Weckert stated on Thursday morning. “That is new customers coming into Coles and actually our existing customers visiting us more often as well, so we’re really excited about that.”
Coles’ Strategic Gains
Sales from Coles’ supermarket business rose 4.6% on a like-for-like basis to $9.96 billion. Revenue from own-brand products saw a 5.3% increase, driven by the Coles Finest range, which boosted sales by 15% over the 13-week period. Meanwhile, Woolworths is grappling with shareholder concerns over reputation damage and loss of public trust amid price-gouging claims.
Woolworths’ Chairman Scott Perkins faced hours of questioning at the company’s annual general meeting. Addressing the issues, Perkins admitted, “[Price trust is] clearly an area where Woolworths took its eye off the ball. We took our eye off the ball in a period of quite dramatic change.” The company has been under scrutiny due to multiple government inquiries into supermarket pricing, the departure of long-serving CEO Brad Banducci, and a worker strike that impacted sales by $240 million.
Challenges and Opportunities for Woolworths
Despite lowering prices on 750 products, Woolworths disappointed investors with muted sales growth. Chief Executive Amanda Bardwell acknowledged the company’s underperformance, stating, “I will begin by acknowledging that the group’s overall sales performance during the first quarter remains below our aspiration. We know there are things that we need to get consistently right.“
Woolworths has ceded market share to competitors like Aldi and Coles following a series of strategic missteps. According to JPMorgan lead consumer analyst Bryan Raymond, “The execution advantage which Woolworths has enjoyed over Coles has been eroded and is a key driver of year-on-year sales momentum, which is firmly in Coles’ favour over [the next six months].“
Non-Food Categories and Market Dynamics
While Coles’ non-food categories are performing well, Woolworths has identified weaknesses in its pet and baby categories, struggling with restocking issues and losing pet food sales to competitors like Amazon and Costco. Coles, however, saw a decline in liquor sales by 1.1% and a significant slump in tobacco sales by 57%, attributed to the growing illegal market of vapes and cigarettes.
As the crucial Christmas trading period approaches, early indications suggest that customers might prioritize convenience over bargain hunting. “Customers are starting to indicate that convenience is more important to them,” Weckert noted. “But I think it’s very early days for that, and it probably will take some time for behavior to revert back.”
Outlook for the Holiday Season
The upcoming Christmas season is expected to be a battleground for grocery retailers. Aldi aims to capture more market share, having gained customers during peak cost-of-living pressures. However, its growth has slowed as economic conditions stabilize and Coles and Woolworths aggressively lower prices on everyday items.
Woolworths’ Amanda Bardwell remains “cautiously optimistic” about the Christmas trading period, emphasizing the need for improvement in own-brand offerings, price tiering, and produce quality. She also highlighted the necessity to address underperformance in the company’s New Zealand and Big W businesses. “We are determined to get back to our best this Christmas and give customers every reason to do their entire shop with us, whether that be in store or online,” Bardwell stated.
The competitive landscape of Australia’s supermarket industry is set to intensify as major players strategize to win over consumers during the holiday season. The outcomes of these efforts will likely shape market dynamics in the months to come.
