New research from dunnhumby, a company that specialises in customer data science, reveals over a third of Aussies (35 per cent) have noticed the price of groceries across the country is increasing, with many feeling their money being stretched during the COVID-19 pandemic.
The dunnhumby Coronavirus: Australia – Attitudes and Behaviour report, which surveyed the shopping attitudes, behaviours and satisfaction of consumers, found 37 per cent of Aussies say that their money isn’t going as far as it used to when grocery shopping. The research also shows significant concerns about the longer-term impact of COVID-19 on the economy and personal finances, with 41 per cent of Aussies saying their own finances are weak and over three quarters of respondents (76 per cent) feeling that the economy is in a bad shape.
“Now more than ever, shoppers want a good deal. Regardless of price increases, it is still the perception of price and value that matters,” says Kylie Gleeson-Long, managing director at dunnhumby Australia. “Retailers must ensure they are using data to inform their strategies on which levers to pull to ensure customers feel better off, whether it’s base prices, promotions, assortment, personalised offers, communications, own label, store or online customer experience.”
The survey shows a rise in number of shopping trips in-store (84 per cent) versus online as behaviour moves towards pre-pandemic levels. Further, over one third (38 per cent) of people are saying that they spend more per trip, which points to bigger basket sizes and the continued trend of eating at home.
Separately, 62 per cent of people say they are making fewer visits a week, and 57 per cent of Aussies are shopping at fewer stores, opting to buy everything from the one retailer. This highlights the importance of retailers being seen as delivering a good ‘value for basket’ amount as well as having the right assortment of products and safe in-store conditions.
“Aussies can be confident in grocery retailers’ abilities to provide everyday essentials while keeping you safe in store when you visit, without the need for ‘stocking up’ or spending more in the process,” Gleeson-Long added.
When asked to rate their confidence in the largest grocery retailers, 46 per cent of Aussies say that Woolworths is doing a good job at managing coronavirus and its related issues. This was followed closely by Coles at 38 per cent and ALDI at 16 per cent.
The Federal Government has begun an evaluation of Australia’s country of origin food labelling system to make sure it’s working for both Aussie consumers and businesses.
Minister for Industry, Science and Technology Karen Andrews said the evaluation would help determine if the new system which came into effect in 2018 was helping Australians as intended.
“Consumers made it known they wanted to understand in a clear and simple way where their food is grown and processed,” Minister Andrews said.
“Our Government responded with comprehensive reforms to the country of origin labelling system and now we’re making sure it’s delivering as intended.
“While this evaluation was planned since the reforms were introduced, it is particularly timely as COVID-19 has seen a ground-swell in support for Australian Made food.
“This is about making sure consumers are being given the tools they need to make an informed choice, without crippling Australian businesses with unreasonable and expensive labelling expectations.”
Minister for Agriculture, Drought and Emergency Management David Littleproud said it would be good to ensure the reforms are delivering the right information to consumers so they can choose to support our agriculture sector and regional Australia.
“When consumers buy Australian goods, they aren’t just supporting those manufacturers, but also our farmers, truck drivers and regional communities more broadly,” Minister Littleproud said.
“We know that so many Aussies are more determined than ever to buy domestically made products like bacon and cheese, and Australian grown products like seafood and flowers. It’s important that it as simple as possible for them to do that, without placing undue burden on business.
“Agriculture and manufacturing is at the heart of many regional communities, so we want to make sure that the country of origin labelling system is delivering its intended objectives.”
The evaluation of country origin labelling for food will consider if the labels are helping consumers make more informed choices, as well as clarifying the origin claims that businesses can make, while avoiding excessive costs for businesses which will be passed onto shoppers.
The consultation will include surveys, consumer focus groups and interviews with industry and government.
A discussion paper and an opportunity to provide views is available at consult.industry.gov.au until 11 September. The evaluation is expected to be completed by mid-2021.
Research by data science specialist dunnhumby in the form of a consumer pulse survey revealed that trust and satisfaction with grocery retailers in Australia has surged following the COVID-19 global pandemic.
The COVID-19: Australia – Attitudes and Behaviour report, which surveyed the shopping attitudes, behaviours and satisfaction of 400 consumers in Australia, showed more than two-thirds (69 per cent) of Aussie shoppers agree that grocery stores are doing a good job managing the pandemic – a significantly higher rate than the average of 54 per cent worldwide. Interestingly, this figure is even higher than the trust in government, with 64 per cent of Aussies agreeing that the government is doing a good job. Globally, the benchmark average of shoppers who think that their government is handling the COVID-19 situation well is only 41 per cent.
Despite 83 per cent of Aussie consumers surveyed saying they are practicing social distancing, the findings show Aussies still prefer to purchase their groceries in store, with only 20 per cent of grocery trips being done online (compared to the global average of 30 per cent). The Australian average is also well below other APAC markets. For instance, in China and Korea, 60 per cent and 52 per cent of grocery shopping is now being done online, respectively.
Kylie Gleeson-Long, managing director at dunnhumby Australia, commented, “Australian shoppers are exhibiting less changed shopping behaviour than what we’re seeing in other markets because of how well retailers have identified the need to keep people safe balanced with a good shopping experience. The only exception is that Aussies appear to be spending more on groceries per trip, but this is probably because they are making fewer trips in total.”
Customer satisfaction with in-store experiences remains higher in Australia (23 per cent) than the rest of the world (16 per cent). The majority of survey respondents also agreed with a number of actions implemented by grocers in Australia to help manage the spread of the virus compared to global respondents, including special hours for certain people (90 per cent vs. 81 per cent globally) and limiting the number of quantities purchased (85 per cent vs. 79 per cent globally).
“In light of these findings, it’s important for retailers not to become complacent, even though the extraordinary actions they have taken over the past couple of months have been praised. Customer satisfaction is strong but we know that loyalty among Australians is historically low, with the majority shopping across multiple supermarkets. If anything, the pandemic has highlighted how critical the shopping experience both in-store and online really is,” Gleeson-Long said.
Other findings include:
Australians are most likely to notice quantity limits imposed on certain items at 73 per cent – a rate significantly higher than elsewhere in the world at 44 per cent.
While Australians are more likely to notice out of stocks in stores, they are less likely (50 per) to blame retailers for this and are 56 per cent more likely to blame other customers.
63 per cent of Australian customers say their personal finances are “not so good” or “poor” at this time, reflecting the real need for retailers to leverage their customer data to price and promote items accordingly.
“We can’t know for sure what will happen as restrictions ease, but COVID-19 has certainly helped to reinforce the relationship between customers and their local store experience. Retailers need to prepare for the new normal and ensure the best ongoing customer experience to maintain and secure that loyalty,” Gleeson-Long said.
“In addition, retailers must continue to recognise and protect their dedicated employees, all while providing relevant and personalised communications, ranges and offerings to ensure they are meeting their customers’ changing needs.”
To navigate the world beyond COVID-19, innovation that improves life for all rather than playing by the rules to manage risk is imperative to growth in the food and beverage industry. Speaking at the Australian Institute of Food Science and Technology Convention, Kantar Australia’s head of sensory, Dr. Denise Hamblin says that “brand loyalty has been disrupted and there has never been a more important time to ensure our products are as good as they can be.”
In April, 93 per cent of Australians were unable to find their usual grocery brand or product in store. “This happened across an average of 13 grocery categories, and when it did, 9 out of 10 people chose a different brand. Where a home brand alternative was chosen, 78 per cent were ‘as satisfied’ or ‘more satisfied’.”
As product availability returns to pre-crisis levels, 3 in 10 Aussies continue to buy alternatives.
Thirty per cent of Australians surveyed as part of Kantar’s Covid-19 barometer between May 22-26 plan to continue to buy the new brands they purchased during product shortages, with 27 per cent also continuing to shop at new stores they’ve discovered in the height of the pandemic. Over half are paying more attention to products on sale and on price.
“Ultimately, building value around the products and experiences we curate are vital in this climate. As concern around getting sick has reduced, the worry has increasingly turned towards the future, especially around an economic recession – and this brings more aversion to risk,” said Hamblin.
“For older Australians and those in a ‘conformity’ mindset, this may mean demand for the same brands and products for a lower price; but younger generations and those in a ‘rebellion’ mindset are more likely to try new and different things that provide better value for money.”
The coronavirus pandemic has provided an opportunity for brands to gain new consumers
“As we navigate our way towards a ‘new normal’ this is anticipated to continue, particularly in households with children,” says Hamblin. “In April, over half of Australians reduced their frequency in supermarket visits from an average of 2.5 to 1.7 times a week. At the same time, the propensity to shop online has increased for a third of us, with the purchase of food and beverages increasing the most of all categories.”
“This is a huge mass trial of a service,” said Hamblin. “Clearly unexpected in its widespread nature too as only just over a third of Aussies felt that grocery shopping online yielded an excellent user experience.”
Kantar’s qualitative studies also reveal the biggest pain points for online grocery shopping during the pandemic is the absence of sensorial stimulation as a motivator and for enjoyment. While an added cost at a time when price sensitivities prevail, doubt around product freshness and the inconvenience of imprecise delivery slots take strong reign. Price and provenance are also key to what brands should be thinking about to put the consumer at the heart of what they do.”
“With 57 per cent of Aussies paying more attention to homegrown products, if your product is owned, made or grown in Australia, then it’s a great time to ensure consumers know about it.”
Forty-two per cent of Australians say they will maintain most lockdown behaviours – especially food and wellbeing
As lockdown measures began, Aussies began to cook more frequently and more often from scratch. Fresh ingredients, healthy meals and new recipes were key. As lockdown progressed – and has now eased – Aussies are still increasingly trying to gain consistency with eating habits.
“While the crisis has forced many to do more to look after physical and mental wellbeing, it has also beckoned us to snack more and seek out treats,” said Hamblin. “This creates new opportunities for the food and beverage industry, just in a different environment.”
Return-to-work trends also provide opportunities for the food industry to innovate
Only 57 per cent of Aussies have a return-to-work timeframe in mind given concerns about hygiene and social distancing, as well as the commute and public transport. For the food industry, this may mean less reliance on office-provided snacks and ‘on-the-go’ solutions but opens the opportunity for supporting workers to prepare their own lunches.
“Safety is paramount, and this extends into buying products to protect ourselves – especially important to households with children. We’re seeing an increased propensity towards vitamins and supplements. This also indicates a real opportunity for food and beverage innovators to develop functional and fortified products,” said Hamblin.
“Considering the consumer’s need for more considered, purposeful activities and connections as we emerge out of isolation; along with a renewed focus on health, a desire for local, an eye for value and new confidence, shopping online will stand any brand in good stead. Brands should also pay heed to what Aussies increasingly want from them at this time – to guide the change, use their knowledge and inform. The new normal presents opportunity for brands innovating to leadership.”
Coles and Foodbank have begun a new campaign to enable poor local families to be assisted by shoppers in South Australia.
Customers will have the opportunity to buy food donation cards with values of $5, $10 or $20 at Coles supermarkets, which will fund much needed food items for Foodbank’s warehouses and food hubs.
Providing more than four million meals annually through a large network of charity partners as well as school breakfast clubs in South Australia, Foodbank is the s largest food relief organisation in the country.
According to Foodbank SA Chief Executive Officer Greg Pattinson, more than 3,000 children miss out on Foodbank’s services every month.
“It’s not just traditionally vulnerable people they’ll be helping, but low income families doing it tough, single parents and the elderly, often within your own neighbourhood,” Pattinson said.
Coles has worked nationally with Foodbank for the past 14 years, donating food and groceries each year that have been used to provide a total of 20 million meals.
Coles State General Manager Neil Lake said Coles was proud to work with Foodbank in South Australia.
“Coles has been donating food and grocery items to Foodbank for more than a decade, to help families and individuals in need to put a meal on the table,” Lake said.
“Customers and team members are telling us that they want a simpler way to make a difference in the community, and give people the products they require to prepare healthy meals. The food donation card campaign will provide this and will make a major difference to the people in our community who need it most.”
The donation cards will be displayed on stands inside Coles stores and then scanned at the checkout and added to a customer’s grocery bill.
Pressure is mounting for Coles to move eggs into refrigerated aisles in a move to protect consumers from salmonella, a practice currently rolling out at Woolworths.
Woolworths has pledged to keep eggs in refrigerated cabinets as it continues a nation-wide revamp of its stores.
In order to prevent the spread of the harmful salmonella bacteria, fresh eggs are now being chilled in new cabinets installed at dozens of Woolworths outlets in the past year.
Coles has come under some criticism across social media platforms as it would not disclose if any of its stores would keep eggs refrigerated in response to cases where egg-related incidents lead to hundreds of hospital admissions each year.
According to infectious diseases expert at Australian National University medical school, Professor Peter Collignon, eggs must be treated just like raw meat and kept in a refrigerator at all times.
“I’m always surprised by the lack of anxiety about this. We ought to make the product safer, and we do that by refrigerating it, even at the supermarket,” Collignon said.
Collignon stressed that poor practices at farms, where "dirty eggs" are graded and used when they shouldn't be, combined with poor food-handling practices, particularly in catering or at restaurants, have been the main culprits behind large outbreaks of the food-borne illness.
The salmonella bacteria is spread by birds, usually through faeces, with food safety laws requiring eggs to be washed, inspected for cracks, graded and then kept at cool temperatures at farms and during transport.
But there is no legal requirement to keep eggs in a cool environment at the retail level, and there is no scientific consensus about the need to do so.
The Australian Competition and Consumer Commission (ACCC) has instituted proceedings in the Federal Court against Woolworths Limited, alleging the supermarket giant engaged in unconscionable conduct in dealings with a large number of its supermarket suppliers, in contravention of the Australian Consumer Law.
The ACCC alleges that in December 2014, Woolworths developed a strategy, approved by senior management, to urgently reduce Woolworths’ expected significant half-year gross profit shortfall by 31 December 2014.
It is alleged that one of the ways Woolworths sought to reduce its expected profit shortfall was to design a scheme, referred to as “Mind the Gap”. It is alleged that under the scheme, Woolworths systematically sought to obtain payments from a group of 821 “Tier B” suppliers to its supermarket business.
The ACCC alleges that, in accordance with the Mind the Gap scheme, Woolworths’ category managers and buyers contacted a large number of the Tier B suppliers and asked for Mind the Gap payments from those suppliers for amounts which included payments that ranged from $4,291 to $1.4 million, to “support” Woolworths. Not agreeing to a payment would be seen as not “supporting” Woolworths.
The ACCC also alleges that these requests were made in circumstances where Woolworths was in a substantially stronger bargaining position than the suppliers, did not have a pre-existing contractual entitlement to seek the payments, and either knew it did not have or was indifferent to whether it had a legitimate basis for requesting a Mind the Gap payment from every targeted Tier B supplier.
The ACCC alleges that Woolworths sought approximately $60.2 million in Mind the Gap payments from the Tier B suppliers, expecting that while many suppliers would refuse to make a payment, some suppliers would agree. It is alleged that Woolworths ultimately captured approximately $18.1 million from these suppliers.
“The ACCC alleges that Woolworths’ conduct in requesting the Mind the Gap payments was unconscionable in all the circumstances,” ACCC Chairman Rod Sims said.
“A common concern raised by suppliers relates to arbitrary claims for payments outside of trading terms by major supermarket retailers. It is difficult for suppliers to plan and budget for the operation of their businesses if they are subject to such ad hoc requests.”
“The alleged conduct by Woolworths came to the ACCC’s attention around the time when there was considerable publicity about the impending resolution of the ACCC’s Federal Court proceedings against Coles Supermarkets for engaging in unconscionable conduct against its suppliers,” Sims said.
The ACCC is seeking injunctions, including an order requiring the full refund of the amounts paid by suppliers under the Mind the Gap scheme, a pecuniary penalty, a declaration, and costs.
These proceedings follow broader investigations by the ACCC into allegations that supermarket suppliers were being treated inappropriately by the major supermarket chains.
IGA Romeo’s Food Hall at the MLC Centre will today open its doors to customers, providing a shopping option in the heart of Sydney’s business district.
The 1000 sqm boutique supermarket is located beneath the MLC Centre’s ‘new look’ food court and will operate seven days a week from 6am to 10pm, for the convenience of shoppers.
With an approximate fit out cost of over $2 million, The Romeo Group has tailored its newest supermarket to inner city consumers, providing quality and fresh produce, all at great value to the customer.
Joseph Romeo, store owner of IGA’s Romeo’s Food Hall, said he expected to attract city workers, commuters and local residents and looked forward to bringing his 30 years of supermarket experience to Sydney.
“It is important that our new store meets the needs of busy commuters and whether looking for quality take home meals, fresh produce or staple grocery lines, they will find it all at one convenient location.”
“IGA Romeo’s Food Hall will include premium features such as a bakery that produces fresh bread, a cheese bar with a resident connoisseur and a premium meat and fish section. We are confident the most discerning of foodies will find everything they need at our supermarket,” Mr. Romeo said.
Metcash Chief Executive Ian Morrice said IGA Romeo’s Food Hall at the MLC Centre epitomises the value independent retailers can deliver through a tailored offering.
“The Romeo Group has achieved great success in the South Australian and New South Wales markets and with their industry knowledge, competitive prices and unique offering we expect them to replicate this in Sydney’s CBD.”
The massive fragmentation of consumers’ beliefs about health is contributing to the break-up of traditional food and beverage markets and opening the doors of opportunity for start-ups and small brands, says Julian Mellentin, director of New Nutrition Business and author of 10 Key Trends in Food, Nutrition and Health 2016. “Big food companies are being forced to rethink their business models,” he says.
The great fragmentation explains how high volume opportunities are scarce and becoming scarcer. In some markets they may already be history, said Mellentin.
Just as the person who listens to Bach’s Goldberg Variations at home also listens to Aerosmith or Black Sabbath while driving to work, people’s ideas about food and health have become a menu of choices from which they select and change as new information becomes available. We’re all food explorers now, looking for novelty and variety.
This is producing a proliferation of niches that smaller companies and new brands – often premium – are perfectly placed to serve.
In the future, smart companies will only rarely launch mass-market brands aiming to rapidly get high volume. Instead they will build portfolios of small brands, finely targeted at an ever-more fragmented consumer market. A few of these will become big brands, some will be big niche, most will remain niche.
The report gives the example of US giant General Mills as one of the few larger and more visionary companies already embracing the change. It has set up a new business unit – called 301 Inc. – to invest in entrepreneurs and early stage food companies.
“The rapidly evolving consumer landscape is dramatically changing the game in the food industry,” said John Haugen, general manager of 301 Inc. “Tremendous opportunity exists…to partner with and foster emerging food brands.”
Foodland Supermarkets will build 22 new stores across South Australia and develop a major new warehouse/distribution centre as part of a five year $200 million expansion program.
Speaking before the Foodland 2020 conference to be held this Friday, Foodland’s Chief Executive Officer, Con Sciacca, said the new stores would create an additional 2600 jobs in the retail sector and further consolidate Foodland’s position in the South Australian market.
Up to 25 per cent of Foodland’s existing 118 stores will also undergo refurbishment, generating an additional 200 jobs as the group gears up to increase its offering to all South Australians.
“New store locations have been identified and construction has already commenced on a number of sites, including McLaren Vale, Salisbury East and Mawson Lakes,” Sciacca said.
“New outlets will also be opening in country areas as part of our state-wide commitment.
“This will generate more jobs for South Australians in the retail sector and provide additional opportunities for local food producers and growers.
“It’s about building on our already strong Foodland brand, a South Australian icon and one of the State’s most trusted names.
Foodland is recognised by Roy Morgan as having the most satisfied customers in Australia between January and August 2015 and was also ranked second as the most valued supermarket brand in Australia for 2014 by Canstar.
Sciacca said the new stores would range in size from around 4000 square metres to around 1000 square metres.
“Many of these will match or exceed the standards already set by existing stores at Golden Grove, Norwood, Mitcham, North Adelaide, Frewville and Woodcroft which have all won the IGA International Retailer of the Year award in recent years as the best supermarkets globally for the International Grocers Alliance network,” he said.
“Foodland differentiates itself in the market by its strong commitment to South Australian and Australian producers, meaning our stores frequently stock brands the other major supermarkets do not.
“All our supermarket owners are South Australian so profits also remain in this state, while we have an unmatched commitment to service and the local community which means quicker, better service for our customers.”
Foodland presently has about 32 per cent of the supermarket retail share in South Australia, the highest state market share for independent supermarkets in Australia.
The new warehouse/distribution centre will be built in conjunction with Metcash and will help facilitate Foodland’s ongoing growth.
Foodland will also be launching a major new advertising and marketing plan in coming weeks.
Over 40 per cent of retailers are set to increase technology budgets in the next twelve months in a move to meet changes in consumer behaviour for online and mobile retail sales, according to the inaugural CommBank Retail Insights report.
Consumers are remaining highly selective and loyal to their brand, with more than 90 per cent of online shoppers transacting with just three or fewer brands each quarter.
Online retailing not only boost sales with strong websites and great products, it also offers a broader product range that can be easily found with effective search engine optimisation.
For Food & Liquor retailers, the shift towards online sales has been relatively slow in comparison to other industries. 41 per cent of businesses surveyed in the report had no online presence with multichannel retailers while 28 per cent only had between 1-10 per cent overall sales from online orders.
Multichannel retailers have experienced higher growth than their online-only competitors, indicating that customers could be inclined to search online for physical retailers that they are already familiar with.
Most Australian online retailers remain focused on the domestic market, with only 21 per cent generating sales offshore. Food and Beverage retailers aim to capture a greater share of offshore customers by investing in initiatives to localise offers included discounted food delivery and advertising produce on local websites.
Collectively, Australia’s supermarket and grocery stores and fuel retailing industries will generate an estimated $ AUD125.1 billion in 2015-16. Business information analysts at IBISWorld forecast that this figure will reach $AUD134.5 billion by 2020-21.
The traditional supermarket giants Coles and Woolworths currently account for more than 70 per cent of the supermarkets and grocery stores industry in Australia, and over 40 per cent of the fuel retailing industry.
Competitor Costco’s continued expansion has seen the bulk-buying retailer grow its share of supermarket revenue. According to IBISWorld industry analyst Brooke Tonkin, “the company already claims 1.2 per cent of this $ AUD88.1 billion dollar industry, with only seven stores.” Costco’s ongoing diversification into the fuel retailing industry is expected to increase competition, with the company’s low-price strategy attracting motorists, as customers have little brand loyalty in terms of fuel.
“The trading landscape for supermarkets and fuel retailing has changed considerably over the past three decades, with new entrants increasing competition, and changing consumer preferences creating new challenges and opportunities,” said industry analyst Brooke Tonkin.
Supermarkets and grocery stores once operated alongside specialist food retailers, but now compete fiercely with specialist retailers on price and product range in a bid to attract shoppers. Industry retailers like Coles have recognised the importance of price competition by implementing substantial price cuts across their stores. Consumers have become increasingly price-conscious, and want to be assured that they are purchasing value-for-money goods.
Sales volumes generally remain relatively static for supermarkets, as shoppers tend to buy similar goods from week to week. As a result, price cuts have a significant effect on profit margins. To combat price competition and maintain profit margins, Woolworths has been forced to reduce costs.
“While supermarkets continue to compete on the basis of price, other factors such as convenience, product variety and quality have emerged as driving forces in securing customer loyalty. This helps explain the growth of Costco, which has steadily gained market share over the past five years,” Ms Tonkin added.
The Costco model
Convenience has become a major factor in attracting customers, with major supermarket players attempting to broaden their ranges to include basic necessities as well as specialist gourmet products. Meanwhile, Costco is attempting to increase its market share through the opening of new stores, and the sale of a diverse range of products in bulk. The expansion of new stores has been a major driver of ALDI’s growth, and similar success is expected for Costco, as the number of stores is a key competitive factor.
Costco offers a much wider range of products than the current supermarket duopoly at its seven Australian stores, including clothing, televisions and other appliances. Costco’s bulk-buying power allows it to offer very low prices. The wholesaler is able to offer such large discounts on its products and remain profitable due to its annual membership fee of $AUD60.
The majority of the company’s profitability comes from this fixed source of revenue, allowing it to pursue aggressive price competition. Costco’s earnings before interest and tax have only shown positive results once in Australia since 2009, indicating that the company is primarily focused on gaining market share in Australia. The membership fee also helps foster customer loyalty.
Store location is also important, and Coles and Woolworths have attempted to broaden their reach by expanding fuel station grocery offerings into mini supermarkets. “Costco’s expansion into fuel retailing is in line with this trend, as the wholesaler plans to become a convenient one-stop-shop where customers can buy all their groceries and fill up on petrol in the one location,” Ms Tonkin explained.
The fuel retailing industry faces a high level of competition, as price and location largely determine where motorists buy petrol. “Most consumers see petrol as an undifferentiated product and therefore purchase on price – there is effectively no brand loyalty,” Ms Tonkin said.
The Costco fuel retailing strategy offers customers convenience and consistently lower prices, in line with the company’s grocery strategy. Costco’s establishment of a Moorabbin store with fuel pumps is a first in Victoria.
The first Australian Costco fuel station was established in Liverpool, NSW, in November 2013. The introduction of a fuel station at the Brisbane North Lakes store in May 2014 prompted a flurry of price cutting in the surrounding area, as other fuel retailers scrambled to compete with Costco’s low prices.
However, Costco’s fuel prices remained lower than other retailers in the city, with customers saving up to 15 cents per litre. In the months following its opening, competition from Costco has continued to force down prices among other petrol stations in the area.
The way forward
As ALDI and Costco continue to expand in the supermarkets and grocery stores industry, the well-established major players are expected to look for new ways to remain competitive and boost market share. Woolworths announced in September 2015 that it would invest $AUD65 million in store improvements and increasing staff hours. Meanwhile, Coles has already begun upgrading some of its larger stores to a new market-style format.
“These strategies are designed to keep shoppers instore for longer by presenting stores as foodie destinations, and attract greater sales through premium offerings such as ready-made meals and delicatessen products,” said Ms Tonkin.
These new stores also offer patisserie goods, artisanal breads and even sushi bars. However, major competitor ALDI is also transitioning its stores to a market-fresh approach, with more fresh food, branded groceries, and ready-to-go and organic food. This is expected to further increase supermarket competition.
The Australian Competition and Consumer Commission’s chairman has criticised major supermarket chains over their implementation of the voluntary grocery industry code of conduct.
The Australian reports that chairman Rod Sims has said Woolworths and Aldi had continue to pressure suppliers, ahead of the Australian Food and Grocery Council’s Industry Leaders Forum today.
“It is unfortunate that the major retailers haven’t got off to a great start in implementing the code,” The Australian reports Sims as saying.
The code was launched in July, and aimed to bring in a truce between suppliers and retailers.
“The ACCC had concerns that some retailers, particularly Aldi and Woolworths, were presenting new supply agreements in a way that might give the impression that suppliers are not able to negotiate the terms of the agreement,” Sims said.
“We have also had concerns about the low level of detail provided in some supply agreements about the circumstances in which retailers can require certain payments. We have written to these retailers expressing our concerns.
Fairfax reports that the ACCC will not be pushing for a mandatory code of conduct, though said early-stage feedback suggested the major chains had not negotiated in good faith.
"They won't stop trying to screw down on price," an unnamed industry representative told The Sydney Morning Herald.
"But at the same time some of the practices of the past don't seem to be there."
ALDI Australia is commencing recruitment for almost 400 new positions across Western Australia, as it prepares for statewide expansion in 2016.
From today, ALDI has opened applications for Store Managers and Assistant Store Managers. Other roles including Trainee Store Manager and Store Assistant positions will open from December 12.
“As one of the country’s fastest growing retailers, ALDI is looking for dynamic, enthusiastic and ambitious people to help bring the ALDI difference to Western Australia,” said Viktor Jakupec, ALDI Managing Director – Western Australia.
“ALDI employees are highly motivated and dedicated to delivering the best shopping experience to our customers. In return, they are provided with rewarding careers, development opportunities and industry-leading employment benefits.”
As part of its commitment to staff, ALDI offers paid maternity leave (18 weeks at half pay), five weeks annual leave for full-time employees and salaries that are well above industry standards.
New employees will undergo extensive training to learn the ALDI way of doing business. West Australian Store Managers and Assistant Store Managers will also receive in-store training at one of ALDI’s existing stores on the eastern seaboard.
“Our commitment to the personal development of ALDI employees starts from day one,” Jakupec said. “ALDI’s training program sets our employees up for career success. We’ve enjoyed seeing our staff grow alongside our business and independent employee surveys have consistently shown high levels of job satisfaction.”
As ALDI’s West Australian expansion continues to progress, confirmed locations of interest include Nedlands, Lakelands, Belmont, Australind, Mandurah, Cannington, Camillo, South Lake, Haynes, Halls Head, Wattle Grove, Lakeside Joondalup, Midland, Rockingham, Ellenbrook, Southern River, Busselton, Kwinana, Maddington, Mundaring, Secret Harbour and Waikiki.
The Australian Competition and Consumer Commission is investigating reports about the approach supermarket retailers are taking to implement the Food and Grocery Code of Conduct (Code).
ACCC Chairman Rod Sims said, “The aim of the Code is to redress the imbalance in bargaining power that can exist between suppliers and large grocery retailers by prohibiting certain types of unfair conduct”.
“The Code imposes a duty to deal with suppliers in good faith and we are concerned by reports we have received from suppliers that suggest that some retailers have not got off to a good start when it comes to implementing the Code,” Mr Sims said.
“The ACCC has concerns as to the manner in which some retailers, in particular Woolworths and Aldi, are presenting new Grocery Supply Agreements (GSAs), which might give the impression that the supplier is not able to negotiate the terms of the GSA.”
“The ACCC is also concerned about the low level of detail provided in some GSAs about the circumstances in which certain payments may arise.”
The Code sets out a number of prohibitions on, for example, requiring a payment for wastage that occurs at the premises of the retailer. While it is possible for retailers and suppliers to opt out of such prohibitions, this can only occur if the opt outs are agreed, if the agreement sets out the circumstances in which the opt out applies and if the payment is reasonable in the circumstances.
“One of the purposes of the Code is to provide certainty to suppliers, who are often in a much weaker bargaining position when dealing with retailers. In order to provide that certainty, the ACCC expects retailers to set out the circumstances in which they will seek payments from suppliers,” Mr Sims said.
The Code requires that retailers offer code-compliant GSAs. Suppliers should not feel compelled to sign these agreements and should seek advice before signing them. In particular, the Code will confer protections on suppliers 12 months after a retailer has signed up to the Code, regardless of whether a supplier has accepted a code-compliant GSA.
The ACCC said it has written to retailers about the manner in which they purport to be giving effect to the Code. The retailers have responded providing their new GSAs and the correspondence they have sent to suppliers offering the new GSAs.
The said ACCC said it will continue to monitor compliance with the code.
Fast food giant McDonald’s has been under a cloud in recent years as its US customers turn to alternatives. In this “Fast food reinvented” series we explore what the food sector is doing to keep customers hooked and sales rising.
Australia’s two main supermarket chains Coles and Woolworths' representation of “fresh” and “local” food reflects heightened interest among consumers about these values. But they also contribute to concerns about food production and the supply chain.
Both have employed celebrity chefs with a reputation for caring about such matters. When he joined forces with Woolworths, UK chef Jamie Oliver explained:
part of what I’m doing with Woolies is looking at standards, and ethics, of where our sort of food comes from.
But when pressed on the demands Woolworths had made for farmers to surrender some of their profits to pay for his campaign, Oliver said he was just an employee.
The problem is that his claims and the supermarket’s promotion suggest that standards and ethics – as well as the growers asked to fund messages about themselves – are well regarded by the public. This is due, in part, to the strategies of producers and small retailers that the two supermarkets have appropriated to win the custom of consumers who care where their food comes from.
Consider the case of Macro foods: the chain, rebadged as Thomas Dux, an urban store format, was a shift from the freestanding supermarkets established in the 1960s. When it was bought out by Woolworths in 2009, Macro founder Pierce Cody saw the sale of the chain as evidence of the work they put in:
to take organic to a large-format, mainstream model rather than little folksy corner stores.
The chain was used to test the market for Woolworths' privately labelled gourmet goods. And Coles has its own organic label.
The proliferation of privately labelled goods (which are made by one company for offer under another company’s label) has diminished the product range offered by supermarkets. Coles’ product range, for instance, dropped by 11% between 2010 and 2012.
Private-label items, produced in conjunction with specific suppliers, compete directly with other products in the range, dominating shelf space and usually offering a lower price. And this is only one part of the pincer movement reducing the number of suppliers.
Australia’s largest dairy company, Devondale Murray-Goulburn, may grow from the exclusive deal it has struck with Coles to provide milk, for instance, but in the process it reduces the number of milk suppliers in the market.
A fairer go for farmers
Supermarkets use the romantic image of the small family farm to play up their close relationship with farmers and suppliers. But it’s also employed in arguments for reforming the sector, because of the commercial disadvantage small family farms have in the domestic food system.
The Agricultural Competitiveness White Paper released earlier this year, for instance, recommends a new commissioner dedicated to agriculture and a more “farm savvy” Australian Competition and Consumer Commission (ACCC) to encourage fair trading.
The aim is to strengthen competition in agricultural supply chains, which will engage the ACCC more directly with supermarkets. And the first priority is to help farmers achieve a better return for their produce. But this is only one sign that Woolworths and Coles face a political environment that is increasingly hostile to their sourcing policies (as well as growing consumer scrutiny).
The code of conduct for grocery wholesalers and retailers (Food and Grocery Code), for instance, discloses the existence of practices by grocery retailers and wholesalers in their dealings with suppliers, which motivated its development. It mentions “preventing a supplier from fulfilling obligations” by placing their products behind other competitors’ products on shelves such that consumers cannot see them, and “payment for wastage” that occurs at the retailer’s premises.
While the code fails to address the inequality of market power in the supply chain, it does reflect the challenging environment in which Australian farmers and suppliers now operate.
Marketing by supermarket giants highlights public interest in food production, supply and retailing. When Woolworths brought back its “Fresh Food People” campaign last year, the advertising featured a range of products from farm to store complete with “fresh food stories” of individual farmers.
But the UBS Supermarket Supplier Survey tells a different story; Woolworths' rating on quality of fresh food produce lags behind Coles.
Besides selling the brand of Woolworths, the marketing also appropriates the ideal of farming and relationships with suppliers to sell products. The company considered a “local” retail brand in 2013, in addition to its other labels such as Macro and Woolworths Select.
This suggests Woolworths still believes it can increase or maintain its market share with buzzwords despite how incongruous these sound coming from a supermarket giant. But while local might be more important to consumers than fresh, supermarkets are falling behind the innovations of local food producers to create a fairer food system.
Coming out on top
Supermarkets have tried to tailor their products to include organic, natural and local foods to meet consumer demand. But while Coles and Woolworths control 80% of the grocery market, they have 45.5% of the market in fruit and vegetables and 47.2% of meat.
The imbalance in market power favours the duopoly. But eaters are still choosing to buy their fresh food at local fruit and vegetable shops, butchers and farmers' markets. There, they can engage directly with the people who grow their food and not just see representations of them.
A survey undertaken last year on behalf of the Australian Farmers’ Markets Association, for instance, found that 14% of respondents typically buy their vegetables at a farmers’ market.
Supermarkets have stopped merely copying each other: from liquor to petrol to hardware. It’s clear from sales, from how they advertise and from consumer concern about food security and food sovereignty that what they really need to worry about is the combined agency of farmers and the power of consumers. Put together, the story isn’t so gloomy for the food sector.
As Wesfarmers and Woolworths continue to battle for leadership across different retail categories in Australia, Julia Illera from Euromonitor International assesses how successful they’ve been in their attempts to gain market share – as well as the hearts and minds of Australian consumers.
“Although competition has been almost head-to-head in most of retail categories in recent years, including grocery retailing (supermarket, forecourt retailing, food/drink/tobacco specialist) and mass merchandisers (discount department stores), Wesfarmers has managed to step ahead in the competition thanks to its position in mass merchandisers and home improvement and gardening stores with its Kmart, Target and Bunnings brands,” said Ms Illera.
“Furthermore,” she noted, “Wesfarmers also has a strong presence in stationers/office supply stores with the Officeworks brand, a category in which Woolworths Ltd does not have a presence”
“Despite Woolworths’ poor FY15 results, out of these two competitors Woolworths seems to have a better strategy for the long term, with its online channel better prioritised and experiencing stronger growth. For FY14, the group reported a 50% increase in its online sales, exceeding $AUD1.2 billion. In FY15, it reported a 15.6% increase in online sales to $AUD1.42 billion.”
“Up until now the battle has been limited to the physical world, but it seems we will soon see the fight move increasingly online,” Illera concluded.
Reader’s Digest has once again completed its annual Trusted Brands competition, recognising and rewarding manufacturers that have earned the public’s nod of approval.
Through an independent survey conducted on a sample of 2,412 Australian adults by market research company Catalyst Marketing & Research, Reader’s Digest has recognised the most trusted brands in 46 categories of products and services across a wide range of industries.
“Many purchases are made with the heart and, even in this digital age, it’s the brands which continue to offer quality and substance that hold our trust,” said Sue Carney, Australian Reader’s Digest Editor-in-Chief.
Dettol claimed the number one spot with other top 10 finalists including Dulux, Colgate, Band-aid, Dyson, Twinings and Lipton.
Rotary clothes line manufacturer Hills Hoist was again voted the country’s most iconic brand, followed by Arnott’s and SPC which both earned Highly Commended titles.
Australia’s most trusted food and beverage manufacturers include:
• Beer – James Boag (Winner), Heineken, Corona and Crown Lager (Highly Commended)
• Bread – Bakers Delight (Winner), Helga’s and Burgen (Highly Commended)
• Breakfast Foods – Weet-Bix (Winner), Uncle Tobys and Kellogg’s (Highly Commended)
• Confectionery – Lindt (Winner), Cadbury and Darrel Lea (Highly Commended)
• Frozen Foods – Birds Eye (Winner), McCain and Ingham (Highly Commended)
• Ice Cream – Peters (Winner), Streets and Bulla (Highly Commended)
• Milk – Dairy Farmers (Winner), Devondale and Pauls (Highly Commended)
• Pies – Four’n Twenty (Winner), Mrs Macs and Sargents (Highly Commended)
• Sugar substitutes – equal (Winner), Splenda and natvia (Highly Commended)
• Tea – Twinings (Winner), Lipton and Dilmah (Highly Commended)
• Yoghurt – Yoplait (Winner), Dairy Farmers and Jalna (Highly Commended)
For the full list of winners, head to www.homeoftrustedbrands.com.au