Coles boss Leah Weckert warns of frugal shoppers as cost of living bites

Switching from red meat to chicken, cooking in bulk to freeze meals and reducing treats are some of the ways households are stretching their budgets, says Coles boss Leah Weckert.

Coles boss Leah Weckert says shoppers are continuing to alter their behaviour in the face of cost of living pressures, which could worsen if interest rates rise on Melbourne Cup day, as they reduce spending on treats and cook more at home.

Ms Weckert confirmed the growing frugal trend among supermarket shoppers – switching from red meat to chicken, filling baskets with more own brand items and cooking in bulk to freeze for later meals – as also witnessed by Woolworths boss Brad Banducci who testified to a more cautious shopper when he released Woolworths quarterly sales results on Wednesday.

And increasingly shoppers are relying on loyalty programs offered by the retailers such as Flybuys at Coles which Ms Weckert said was being heavily used by consumers to redeem points and then fill their baskets with groceries, using rewards points to help stretch budgets.

As latest inflation figures spiked this week to raise the prospects of further interest rate hikes he wouldn’t be drawn on the impact further interest rate tightening by the Reserve Bank heading into Christmas might have on shopper behaviour. But she said supermarket shoppers were already making purchasing decisions based on saving money and stretching their household budgets.

“They are already changing their behaviour and how they shop for groceries to access more value, and I would expect that will continue now through to Christmas,” Ms Weckert said as Coles reported a 3.6 per cent rise in first quarter sales to $10.25bn.

Its flagship supermarket business booked a 4.7 per cent increase in sales, with customers increasingly eating and entertaining at home to cope with cost of living pressures.

Sales from continuing operations rose 6.7 per cent, ahead of analyst and market expectations.

While the total Coles sales performance for the quarter was slightly ahead of expectations, analysts said Coles supermarket sales were below consensus. Although liquor sales at its stable of chains such as Vintage Choice and Liquorland were ahead of expectations.

Coles CEO Leah Weckert at its Tooronga store. Picture: Nicki Connolly/NCA NewsWire

Meanwhile, Ms Weckert said cooking at home was becoming a growing trend as was looking for cheaper meal ideas, with recent Coles research showing 90 per cent of Coles shoppers telling the retailer in a survey they were making choices and changes to minimise the cost of groceries.

“So some of the things that they are doing, they are reducing spend on treats, they’re cooking more at home, so reducing the amount of spend that they have on restaurants and take away,” she said on Thursday.

“They’re also within the store looking for more affordable options, and we are seeing really strong growth in our own brand products. We are also seeing that customers are trading out of, for example, steaks into mince, or out of red meat into chicken to find cheaper and more affordable options for protein. Some of the other things we are seeing is they’re buying in bulk and then cooking and freezing at home.”

She said Australia had likely been in a period of this more frugal posture for the last 6 to 12 months.

“I think we have been in a period now for probably 6 to 12 months where we have seen customers looking for value and seeking value out and I think that will continue through Christmas.”

Coles had played into this trend by having more than 4,000 food and grocery items on ‘everyday low pricing’, lowering prices for hundreds of other items and also doing more personalised offers to shoppers through various promotions and engagement platforms.

On Wednesday, Woolworths reported first-quarter sales of $17.22bn, up 5.3 per cent, slightly below market forecasts of sales growth of around 5.5 per cent to $17.3bn, as inflation continued to moderate across the supermarket aisle to bring relief to customers.

Woolworths CEO Mr Banducci also said shoppers were looking for value, ways to save money at the checkout in the face of cost of living pressures.

At Coles, food and grocery prices continued to moderate, giving relief to consumers and household budgets. Total supermarkets price inflation declined to 3.1 per cent for the quarter due to deflation in the fresh category.

Inflation excluding tobacco and fresh also continued to moderate but remained elevated at 5.7 per cent, primarily driven by farmgate milk prices and higher commodity prices, including cheese, eggs and oil.

The fresh category (including fresh produce, meat deli and seafood, and bakery) experienced deflation of 2.3 per cent during the period. Fresh produce declined by 14.5 per cent, reflecting the cycling of elevated prices in the first quarter of 2023 when severe flooding and cool weather impacted growing conditions.

Lower red meat livestock prices also contributed to fresh deflation, while bakery inflation remained elevated due to wheat commodity prices.

Releasing its first quarter sales performance on Thursday, Coles said its Flybuys active members increased by 9.9 per cent during the quarter with customers redeeming Flybuys points doubled and, with more personalised offers, the number of its customers participating in Flybuys offers increased by 22 per cent.

Supermarket sales rose 4.7 per cent to $9.19bn for the quarter, liquor sales increased 1.8 per cent to $851m.

Coles also announced the appointment of former Telstra boss Andrew Penn as a non-executive director to its board, effective December 1.

Coles chairman James Graham said that he very much looked forward to Mr Penn joining the board.

“Andy will bring his significant Australian corporate and customer facing experience to the board. As a past chief executive of both Telstra and AXA Asia Pacific, Andy has a strong background in large corporations where the application of technology has assisted the repositioning and strengthening of businesses in competitive markets.

Mr Penn will also assume the role as chairman of the audit and risk committee.

Originally published as Coles boss Leah Weckert warns of frugal shoppers as cost of living bites