Supermarket the hero for Coles as sales jump 3.4pc, liquor falls amid customer push for value

Adrian Lowe
The Nightly
4 Min Read
Coles expects moderating inflation across supermarket categories will be good news for customers.
Coles expects moderating inflation across supermarket categories will be good news for customers. Credit: Asanka Ratnayake/Getty Images

Coles boss Leah Weckert is doubling down on the need to be “sharp” on good value for customers who are increasingly testing major retailers against each other on price.

As Coles’ supermarkets division reported another strong quarterly showing, Ms Weckert said cross-shopping, or customers splitting their time and money across different retailers, was “alive and well in Australia”.

In addition, she said, Coles had experienced enormous growth in customers starting their shopping online and then heading in-store.

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“Australians shop on average at between two to three supermarket brands per month,” Ms Weckert on Tuesday said, citing a “fairly large” new survey Coles had completed.

“There’s definitely a lot of cross-shopping that’s occurring to help people to meet their budget and then on top of that, they’ll shop at two to three other retailers as well who also sell grocery products — so that could be a small independent, it could be Amazon, Bunnings and the like.”

The raft of research customers were conducting to determine where they should buy their products meant “we are having to be very sharp in terms of the value that we provide to the customer, particularly on key value items ... to make sure that we continue to be competitive”, Ms Weckert said.

Coles’ house labels enjoyed a stellar quarter, with sales up 8.8 per cent, and up 22 per cent for its premium “Coles Finest” label. A new “Coles Simply” value group, such as 90¢ 500g pasta, had had a strong reception.

“We really are seeing customers go at both ends of the spectrum to look for value, potentially for different purposes,” Ms Weckert said.

“We believe some of it is as customers are cutting down on eating out at restaurants and are moving to buy food to try and replicate that experience at home, the products they are going for ... are in the best tier. It’s a new customer and a customer that is coming from all levels of affluence to own brand at the moment.”

She later told analysts Coles was monitoring its competitive position relative to Aldi, as well as other retailers in health and home categories.

“We know at the moment that there are a lot of customers trying out Aldi for the first time, and as such, being in a strong position on products that they would compare across the retailers is really important,” Ms Weckert said.

“I think customers definitely have an expectation that as we see commodity prices shift back versus where they were over a couple of years that that those types of shifts will be passed through to the retail price.”

Coles’ eCommerce sales growth in the third quarter of the financial year rose 34.9 per cent in supermarkets. Ms Weckert said there had been good growth in home delivery and click and collect.

That fed into overall supermarkets sales growth of 5 per cent to $9 billion, amid expectations that moderating inflation across grocery lines will continue into the last few months of the financial year

Ms Weckert said the company was committed to providing the “best value possible”.

Further campaigns on reducing shelf prices and add-ons such as KitchenAid ovenware would help to attract customers, particularly those cooking at home during cooler months, she said.

Overall inflation in supermarkets fell to 2.2 per cent in the 12 weeks from January 1 to March 24., compared to 3 per cent in the prior quarter. Excluding tobacco and fresh produce, it fell to 2.9 per cent from 4 per cent — a key metric given packaged grocery inflation and supplier price hike requests had, Coles said, driven much of the inflation shoppers had experienced.

Customers could see great value now in apples, avocado and lamb, she said.

Ms Weckert also attributed its positive sales momentum to Australia Day and Valentine’s Day offers in-store, as well as its Pokemon Builders collectables campaign for children.

Overall, Coles reported sales growth of 3.4 per cent in the quarter — with liquor sales revenue at its Liquorland, Vintage Cellars and First Choice Liquor chains collectively down 1.9 per cent to $789 million. Coles’ liquor division sales have gone backwards for two consecutive quarters now.

Ms Weckert said lower discretionary spending was largely pushing sales lower, but Coles was “doing a pretty good job” at holding market share. She said customers trading down and challenging sales was a market-wide phenomenon.

For Coles, this trading down included customers switching champagne for prosecco or Australian sparkling, and in red and white wine, moving to lower-priced labels. Shoppers were moving back into beer because of its traditionally lower cost per serve, while spirits were experiencing sales and transaction decline — particularly on international brands that had pushed through cost increases last year.

Coles also reported a positive response to expanding the number of products in its house label Coles Simply, while 6.8 per cent growth in active FlyBuys members was reported as the company looks to simplify redemption of points.

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