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Coles V Woolworths: Who Wins?

Coles V Woolworths: Who's the Winner?

Australian retail shopping giants Coles and Woolworths have been competing for our shopping dollars for years now, but 2012 sees the advertising and price war take on a new dimension.
The question is Who Wins?

Australian retail shopping giants Coles & Woolworths have been competing for our shopping dollars for years now, but 2012 sees the advertising and price war take on a new dimension. The question is Who Wins?

Adelaide Independent Senator Nick Xenophon doesn’t think consumers win, introducing draft legislation to break up the ‘duopoly’ that Coles and Woolworths have in Australia, saying that:

Their market power is immense, it is unprecedented anywhere else in the world that 70 per cent of the grocery market is controlled by just two chains

And

It is estimated Coles and Woolworths control about 70 per cent of the packaged grocery sales and 50 per cent of fresh produce sales, such as meat, fruit and vegetables. “It’s time that this was on the national agenda, we can’t wait any longer for action.”

Recent Background on Coles.

Coles Group, was officially taken over by Wesfarmers Limited (who already owned Bunnings – Australia’s largest Hardware chain) on 23rd November 2007 for almost A$20 billion.

The Coles division operates 2,231 food, liquor and convenience stores including Coles, BI-Lo Supermarkets, (which is the reason why there are two Coles Supermarkets at Ingle Farm Shopping Centre in South Australia) Liquorland, Vintage Cellars and Coles Express; found at petrol stations. Target, Kmart and Officeworks are other Coles Group businesses now controlled by Wesfarmers in what was the largest successful take-over in Australian corporate history. Coles owns 94 hotels, of which 79 are in Queensland and 83 of the hotels have a total of 2,800 poker machines.

Recent Background on Woolworths.

Woolworths is the largest supermarket/grocery store chain in Australia, owned by Woolworths Limited.

On 22nd August 2008, Woolworths launched a new identity for all its supermarkets, including the Safeway brand in Victoria, to unite them all under the one brand ‘Woolworths’ and in the process replaced the logo it had been using for 21 years to the new green ‘W’ icon with a stylised leaf to suggest fresh and the slogan ‘The Fresh Food People’. These changes were to give a more modern and ‘likable’ image and to create distance from Coles.

In June 2012, Woolworths spent millions on image improvement, trying to gain back lost market share by changing the 25 year old slogan ‘The Fresh Food People’ to ‘Australia’s Fresh Food People’. There was a new jingle; an upbeat rendition of Betty Driver’s “Monday, Tuesday, Wednesday (I Love You)” as well as a new advertising campaign and improvements to existing supermarkets allowing for customers to see “behind the scenes” in the deli and bakery departments; which Coles had already done.

Woolworths is also the largest retail company in Australia, largest food retailer, largest takeaway liquor retailer and largest hotel and poker machine operator in Australia. To put some perspective on this Woolworths are around the 20th largest retailer in the world. Woolworths owns Safeway Liquor, BWS, Dan Murphy’s, Cellarmasters, Big W, Tandy and until its recent announcement to sell (for A$20 million, which is what it bought it for) Dick Smith.

What they have in common.

There is very little difference in what each of these two grocery stores offer you.

  • Both have aggressive price structures and discounts,
  • Both have loyalty cards offering even better buying incentives,
    • Woolworths have the ‘Everyday rewards’ offering 20-40 percent discount on hundreds of store-selected items each week,
    • Coles have the ‘My 5’, offering a further 10 percent on any 5 items you select from a list with a minimum $50 spend,
  • Both offer savings on fuel at their respective outlets,
  • Both have generic or home brand equivalents on most packaged items at a significant discount to branded goods; in fact they both have two.

Did you Know?

One of the price wars has always been on its home brand or plain label products, but did you know that many of these are not Australian equivalents with both supermarket chains going overseas to buy and then sell to you goods that are reducing sales of Australian made products?

Examples I have uncovered are:

Own Brand Comparison with Sliced Peaches.

Home Brand Comparison for Sliced Peaches.

Approximately 50% of all home brand products are made overseas.

Note: You need to be careful when comparing all the products; some are in syrup and some are in juice.

Here is another example with corn.

Own Brand Comparison with Corn Kernels.

Home Brand Comparison for Corn Kernels.

Note: prices shown here were accurate on 17/10/2012 and were purchased at their stores from Westfield TTP Shopping Centre.

Home brand or Private Label Market share.

I’m sure there are goods that you buy that are generic; either from Coles or Woolworths and equally I’m sure that there are labelled brands you buy too.

There seems to be three main reasons for buying a generic brand:

  1. Our attitude towards staples i.e. milk, bread, sugar,
  2. Significant difference in price between the home brand and branded version,
  3. We’re not too worried about the quality.

Some examples bear this out.

Over the past decade, the share of private label sales in supermarkets has risen from 24 to 68 per cent of butter, 18 to 56 per cent of bread, 56 to 67 per cent of sugar and 51 to 55 per cent of fresh milk

Home branded eggs however have fallen from 61 percent to 50 percent in the same period, primarily due to our leaning towards free-range eggs that are not well catered to with the home brands.

Items that have a particularly low generic label penetration are chocolate, soft drinks, cosmetics and sanitary products, where it seems our favourites are bought regardless of the discount price incentive and where we either trust the labelled brands more or can notice a discernible difference in quality.

The dominance of Coles and Woolworths means that they are likely to give preference to their own brands in terms of spacing and design allocations, placing continued pressure on the big named brands to cut their prices and be more flexible to the contracts offered to them to sell their goods in these two chains to begin with.

So Who Wins?

Consumers are winning by getting lower prices in the short-term, but in the longer-run primary producers, manufacturers and consumers are all likely to lose out to the benefit of Coles and Woolworths dominance and we are likely to see more Australian companies and jobs go to overseas companies that can manufacture cheaper.

As expected figures show that low income earners; under $40,000 spend approximately 40 percent on home brand labels while people earning over $75,000 spend just 15 percent on home brand products.

About Nigel Brookson

Website Designer, Philanthropist, Entrepreneur. Environmentalist. Follow me on
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What people have said:

  1. Unfortunately in these current economic times people find they do not have a choice but to buy cheaper generic brands. Due to my daughter, Shianne Durdin being born with a rare retinal condition I have not been able to work for the past couple of years and we have had to tighten our budget.
    I cannot say too much about Woolworths as I worked in one of their hotels and they have supported my daughter in their sponsorship of CanDo4Kids raising $114k to help with technical equipment.

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