Coles ahead of Woolworths in key supermarket battleground categories, UBS report shows

UBS data comparing consumer preferences shows Coles ahead of Woolworths as the go-to supermarket for Australians, particularly when it comes to fresh food and product discounting.

In the battle for supermarket dominance, figures show Coles is the dominant player.

Coles has edged slightly ahead of Woolworths as the preferred supermarket for Australians as it ramps up pressure on its arch rival in the key battlefields of fresh food and discounting.

New shopper data from UBS shows Woolworths and IGA are losing ground to Coles in terms of the number of trips to the supermarket for both dry groceries and fresh food.

Coles has 34 per cent of “next 10” trips for dry groceries compared with 33 per cent for Woolworths and 28 per cent of fresh-food visits against 27 per cent for Woolworths.

The “next 10” refers to the 10 shopping trips that will occur in the immediate future, focusing on dry grocery items like canned goods, packaged snacks, and non-perishable staples.

Woolies chief executive Amanda Bardwell earlier this year targeted $400m in company savings, of which a large portion is expected to be invested in lower prices. The data validates that strategy as Woolworths plays catch-up.

Woolworths and Coles have for decades fought over fresh food supremacy, led by fruit and vegetables which are the first thing a shopper sees when entering a store.

Coles has now deployed a greater level of planning to its discounting, moving from a 10-day promotion planning cycle – known within the industry as “trade planning” – to a much longer and detailed 12-week cycle.

Coles believes that will give greater certainty to suppliers, enable it to better navigate seasonal fluctuations that dominate fresh food and ultimately deliver a better, cheaper choice for shoppers.

UBS retail analyst Shaun Cousins said the sales outlook for supermarkets was supported by population growth and indications that the decline in food price inflation had now ended.

However, Mr Cousins said supermarkets continued to be under pressure due to increased competition from Amazon, Bunnings and Chemist Warehouse in non-food categories.

“This suggests peak market share for supermarkets has been achieved,” Mr Cousins said.

Chemist Warehouse, the pharmacy and retail juggernaut that merged with pharmaceuticals distributor Sigma Healthcare to create an ASX giant, is dominating pharmacy turnover. The average monthly spend by shoppers at its stores is more than 50 per cent higher than at the main competitors.

Australia’s supermarket sector is estimated to have lost as much as $500m in sales from the health, beauty and home products categories to retailers led by Chemist Warehouse, Amazon, Bunnings and Chinese online marketplace Temu.

Woolworths chief executive Amanda Bardwell. Picture: Renee Nowytarger

Coles reported supermarket sales growth of 4.3 per cent for the December half, easily eclipsing the 2.7 per cent sales growth for Woolworths’ supermarkets.

Mr Cousins said supermarkets had faced reputational damage from recent public inquiries, although the findings from the Australian Competition and Consumer Commission probe were not as bad as had been anticipated.

The ACCC’s 441-page report did not recommend divestiture of stores as a way to boost competition, lower prices for customers and ensure fairer outcomes for farmers.

Instead key recommendations, which have received in-principle support from the Albanese government, called for more transparent and uniform rules on pricing, measures to stop landbanking and increased choice in remote areas.

The report said Coles and Woolworths disproportionately dominate the supermarket sector, with Woolworths holding 38 per cent of the market share and Coles holding 29 per cent.

Coles said it “welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs”.

UBS said Coles had achieved superior performance at the store level and was improving its online execution. Coles also had superior promotional activity, did fewer and better promotions which increased support for its gross profit margins.

“Convenience and affordability are the key factors driving customers to stores for dry grocery while quality and value are driving customers to stores for fresh food,” Mr Cousins said.

Aldi ranks number one on price for dry groceries while Woolworths tops consumer preferences in terms of price, quality and range in fresh food.

“The weekly amount spent has increased for both dry grocery and fresh, with consumers spending more on dry groceries than fresh food each week,” Mr Cousins said.

Trips to the supermarket fell during Covid-19 and are yet to return to pre-pandemic levels, meaning online offerings are becoming more important for retailers. Consumers shopped for dry groceries currently 2.35 per week and 1.70 for fresh food.

Woolworth was the preferred online retailer across for both dry groceries and fresh food.

“For dry groceries, customers care most about reliable delivery and low price while for fresh, customers care most about reliable delivery,” said Mr Cousins.

Originally published as Coles ahead of Woolworths in key supermarket battleground categories, UBS report shows