Coles smashes free-range egg prices

FIRST it was milk, then it was bread. Now there’s a new front in the supermarket price wars, with Coles smashing the price of a key staple.

EXCLUSIVE

EGGS are set to become the latest battleground in the supermarket price war, with Coles smashing the price of its free-range eggs in a bid to make breakfast cheaper.

It’s the latest morning staple after bread, milk, yoghurt and Weet-Bix to come under the hammer as part of Coles’ ‘Every Day’ discount strategy.

From today, the price of a dozen 600g Coles-brand free-range eggs will be cut to $4.20 across the supermarket’s store network Australia-wide — a reduction or at least 14 per cent.

A dozen 700g eggs will be cut by 8 per cent to $4.60, while a dozen 800g eggs will be reduced by 9 per cent to $5.20.

Woolworths has scrambled to follow suit, implementing a nationwide price reduction on its home brand Select range of free range eggs, to take effect this afternoon.

A dozen 700g pack will be reduced by 8 per cent to $4.59, with a dozen 600g pack (the largest egg size available in Western Australia) reduced by 13 per cent to $4.19.

Coles has removed cage eggs from its home-brand range, but still sells cage eggs from third-party suppliers. Woolworths has committed to phasing out cage eggs from its stores entirely by 2017.

News.com.au understands the price cuts are being funded by internal cost savings from both Coles and Woolworths and will not be passed onto egg suppliers, unlike in some other cases.

Earlier this year, Andrew Reeves, chief executive of Tip Top-maker George Weston Foods, criticised the bread price war, saying it had funded most of the price cut strategy but had seen no increase in volumes or sales.

The “milk wars” of 2011 saw both Coles and Woolworths cut the price of 2L milk to $2. In January, Coles cut the price of eight varieties of Goodman Fielder’s Helga’s bread from $5.39 to $3.50 — a price matched by Woolworths.

In August, Coles cut the price of a 1.4kg pack of Sanitarium Weet-Bix by 30c to $5.00, and in September it cut the price of Yoplait and Yoplait Forme 1kg from $5.89 to $4.00, with Woolworths yet to follow.

More than 2500 products in the past 12 months have come under Coles’ Every Day pricing, which the supermarket commits to maintaining for at least six months.

Coles has not publicly revealed how much it is investing in the low pricing strategy, but Woolworths is pumping around $500 million into its lower grocery prices.

Last month, news.com.au revealed Coles would install extra check-outs at 200 of its stores and reinvest staff hours back into front of store positions as part of a customer service overhaul.

Eggs are the latest front in the supermarket price war.

It comes as the retailer prepares to announce its first quarter retail sales figures on Thursday, with analysts forecasting between a 3.1 per cent and 3.5 per cent rise in the September quarter after growing 3.6 per cent in the June quarter.

Coles reported a positive full-year result in August. Lower food and grocery prices helped push up its underlying earnings in 2014/15, which rose 6.6 per cent to $1.78 billion.

While that was a slowdown from the 9 per cent rise the previous year, comparable food and liquor sales were up 3.9 per cent, compared with 3.7 per cent in 2013/14.

“We are always looking for new ways to lower the cost of shopping for our customers,” said Coles managing director John Durkan.

“We know many of our customers are doing it tough with the rising cost of living, and most of them would buy eggs every week. That’s why we’re maintaining our relentless drive to lower prices and deliver the best value both today and into the future.”

A Woolworths spokesman said the company was “investing heavily to bring great prices to our customers”. “We always offer great prices and our customers can know that if they come to Woolworths they’ll always get great value on staples like our Select free range eggs,” he said.

Peter Ryan, retail analyst with Red Communication Australia, said Coles had been far more effective at using “propaganda pricing” and selling its message than Woolworths.

“It’s based off the Wal-Mart strategy, which is if you can create the perception that the prices on the brands you know and trust are the lowest available and guaranteed, then you don’t need to shop anywhere else,” he said.

“I find it interesting that they are all so fixated on price as the differentiator, and yet we know there’s a lot more leverage for shoppers outside of cheap price,” he said. “To be perfectly honest, between Aldi and Costco they’ve rattled [Coles and Woolworths].”

He said the targeting of “meal occasions” such as breakfast was a good strategy. “The idea is to get the consumers thinking in a certain way. You can offset the discount on a particular item by bundling a meal occasion.”

Mr Ryan earlier said Woolworths had “panicked” in the past by trying to slash prices to compete with Coles. “Coles has very carefully chosen loss-leading products to cut to make ‘price statements’. I’m not sure Woolworths has been as clever,” he said. “You don’t have to be intelligent to be cheap, but you do have to be intelligent to make a profit.”

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