1. Comment
June 5, 2019

Australia’s ‘Big 2’ supermarkets pledge to reverse nation’s dependence on promotions

Coles and Woolworths have said they want to focus more on consistent and fairer pricing and less on deep discounting.

By GlobalData

Coles and Woolworths, who dominate Australia’s grocery sector, both announced their intentions to review their promotional strategies at the recent annual summit of the Australian Food & Grocery Council.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

Australia’s grocery promotions culture

Coles general manager for grocery, Anna Croft, said the retailer had an “over-reliance” on price promotions, despite launching its “Everyday Low Prices” campaign five years ago. Similarly, Woolworths’ director of buying for packaged groceries, Peter McNamara, asserted that deep discounting was ultimately “eroding price trust.” Both supermarkets indicate an intention to focus more on consistent and fairer pricing.

This new approach will certainly prove more sustainable from a supply chain perspective, especially as suppliers often need to subsidise heavy discounting. Moreover, relentless promotional activity from both supermarkets has made shoppers simultaneously reliant on and desensitised to deep discounts. Establishing more consistent pricing with intermittent price promotions will ensure that such promotions will achieve greater impact.

However, Coles and Woolworths must also recognise the sacrifices associated with such a strategy, as the appeal of price promotions should not be underestimated. Indeed, according to GlobalData’s 2018 Q3 consumer survey, 52% of Australians say that frequent promotions and price discounts are influential in deciding where to do their grocery shopping. A deeply discounted item in Woolworths, for example, can persuade an otherwise Coles loyalist to shop in Woolworths. By withdrawing such discounts, the retailers lose valuable opportunities to encourage supermarket-switching. Moreover, there is a certain excitement associated with unanticipated promotions; they can encourage trial of a new product or improve overall shopper satisfaction.

Arguably the biggest risk for these retailers, however, is that by pushing a ‘consistently low prices’ narrative, they reposition themselves precariously close to Aldi , which is renowned for its dependably low prices. If the possibility of heavy discounts is essentially removed from Coles and Woolworths, their prices will almost never match those of deep discounters, such as Aldi .

It is therefore crucial for the ‘Big 2’ to ensure they continue to emphasise other key points of differentiation associated with freshness, product choice and convenience, which are even more influential to Australians than price promotions. This will ultimately convince shoppers that while they may not be the lowest in price, they offer the best value.

Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.