Did you see this SMH article? Obviously did not survey AFFers though!
Apparently an Aldi opening "within one kilometre" will reduce the prices at Coles by 5 per cent, and ours will be not 100 metres away.
If we do shop there, where everything is a home or private label brand, it'll be a whopping 23 per cent to 27 per cent cheaper than Woolies' or Coles' equivalents,
Choice's secret shoppers found.
And that's only cheap versus cheap. Compared with the big brand names bought at Coles or Woolies, Aldi's offerings would almost halve your grocery bill.
Even without an Aldi in sight,
Choice's undercover shoppers saved 35 per cent by switching to the Coles and Woolies (Select/Macro) brands.
Move to Canberra and a typical supermarket shop of "28 leading brand products and three fresh food items" would cost $163.60 compared with Melbourne's $166.96 or Sydney's $167.40. But even I say that's getting desperate.
But is Coles or Woolies cheaper?
At Coles, prices are "down down" and at Woolies' "cheap cheap", perhaps in deference to Tony Abbott who also likes to repeat himself. More recently the "cheap cheap" have been joined by red spot specials at Woolies.
If you ignore specials and buy name brands only,
Choice says the difference is just $1.80 on a $175 basket of goods, in Coles' favour. Buy home brands only – which would limit your shopping somewhat – and it was $5.16, again in Coles' favour.
But who'd ignore specials, anyway?
These change every Wednesday, so UBS has been canny enough to lean on the Australian Food & Grocery Council to ask supermarket suppliers which one they think is cheapest. They should know since they watch the shelf prices of competitors all the time.
As it turns out, they back
Choice's secret shoppers: Coles has a slight edge. It seems Woolworths has more of them, but Coles has bigger discounts.
Woolies has about one-fifth of its products on special, with what Macquarie Research analysts Bryan Raymond and Elijah Mayr call an "average depth of promotion" of 30 per cent.
At Coles, about 15 per cent of stock is on special but discounted by a heftier 40 per cent on average.
The competition
IGA, never the cheapest in surveys, is taking a different tack. Its "price match" strategy is to take "hundreds" of the lowest Coles or Woolies "everyday" – but not "special" – prices each week and match them.
That way, it claims "you'll never pay more at your local IGA". Guess you won't pay less, either. Although Aldi, no surprise, beats them all, the suppliers think it's more like 15 to 20 per cent cheaper. Most of them also expect, or maybe hope, Aldi compatriot and look-alike Lidl will open in Australia. Lidl has reportedly been in talks with the Victorian state government in advance of setting up shop over here.
That'd be a dream come true for shoppers and the worst nightmare for Wesfarmers and Woolworths shareholders.
"Aldi would likely respond by dropping prices to drive price perceptions in the lead up to a Lidl entry. All retailers would lose out of this," UBS warns.
A price war in Britain between Aldi and Lidl bought the supermarket behemoths Tesco and Sainsbury's to their knees.
In any case, UBS tips that the chains will move to fewer but deeper discounts.
Meanwhile Woolies and Coles are pushing their own brands to the hilt, at the expense of what little is left of manufacturing. They're a win-win for the stores because they're cheaper – impresses shoppers – yet more profitable because of the higher margin – good for the share price.
But how can home brands be cheaper yet more profitable?
UBS can explain with this example: Say the brand name is $10 on the shelf and the home brand $7.50. The cost of promotion is a lot for the supplier but negligible for the supermarket, since you're already shopping there and all it needs to do is pick an eye-level shelf and stick a price tag on it. Also, through their sheer market power and promise of mass sales, the supermarkets can drive down the manufacturer's profit margin. So the $10 brand has a gross margin of 28 per cent but for the supermarket brand it's 39 per cent.
No wonder 82 per cent of the biggest suppliers in the UBS/Grocery Council survey said they were "losing range to private label" products. Their own brands are being elbowed out. Shoppers are complaining too. Familiar brands are suddenly disappearing from the shelves. In
Choice's words "copycat packaging" is squeezing shelf space and is "aisle-way robbery" though you'd have to hand it to IGA that there's no mistaking its no-frills Black & Gold brand. "We understand both retailers have plans to reduce range, with Coles being the most aggressive with plans to cut some categories by 30 per cent over three years," says the UBS report.
There's not much reward for loyalty at Woolies or Coles either.
Spending $100 a week on groceries will take Fly Buys members 100 weeks to earn $50, or 109 weeks with Woolworths Everyday Rewards, according to
finder.com.au.
Spend $250 a week and it's the other way around, but you'll still have a big wait.
It'll take 35 weeks shopping at Woolies and 40 weeks at Coles for a $50 voucher.
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