Is the era of Coles’ dominance over Woolies over?

DOWN, down, over and out? Coles has been the dominant supermarket for nearly a decade, but that’s all about to change.

ANALYSIS

WHEN they write the history of Australia, the period 2010 to 2017 will be known as “the Epoch of ‘Down Down’”.

The Coles jingle has proved perhaps the most successful jingle ever to blare from our televisions. Not as patriotic or as fun as the “C’mon Aussie, C’mon” jingle, sure, but it cut through and cut through hard.

I dare you not to have it in your head right now.

But the era could be over.

The jingle, based on a song by British hard rockers Status Quo, transported Coles to the top of the supermarket hierarchy in Australia. After a long period last decade of being smashed by Woolworths, Coles climbed back on top, and every repetition of the “Down Down” jingle forced its boot harder on to the neck of its big green rival.

Coles’ relatively strong performance lifted the share price of its owners Wesfarmers while Woolworths suffered, as the next graph shows. (The very different performance of its two hardware stores, Masters and Bunnings, is also a factor in this graph!)

I won’t deny it, I’ve worried about Woolies. Letting Coles walk all over you at the exact moment that Aldi was stealing market share left and right looked like it might be the last move you make before you fade to irrelevance. They looked lost.

Woolies tried a “Cheap Cheap” jingle, but it was a poor knock-off of “Down Down” and it never flew. It didn’t help that the Woolworths group was also involved in an ill-fated hardware experiment called Masters at the same time, distracting everyone and soaking up lots of perfectly good money. Eventually, finally, Woolies realised it had all gone pear-shaped, and replaced the CEO with a new one. His name is Brad Banducci.

Brad didn’t particularly care for the ‘Cheap Cheap’ campaign.

Brad made some simple changes. He changed Homebrand to Essentials, closed a bunch of supermarkets that weren’t going well and started renovating the rest. Would it work? Would we get a great plot twist in the next episode of the long-running Coles v Woolies show?

Well the first three months of the new financial year are now behind us and behold: Woolworths has worked its way back into a winning position and it is holding it comfortably. It put out its sales results for the first three months of the latest financial year and they’re pretty good. Woolworths Food and Liquor sales are now clearly growing faster than Coles and the trend is solid.

THE QUESTION IS WHY?

Some answers might be found in the “Down Down” jingle itself. Aussie consumers believe that Coles is cheaper than Woolies. Brad reckons the two supermarkets are actually pretty even on price but admits reality doesn’t matter — you have to deal with consumer perception.

“However you break it down we feel we are now competitive with Coles. But we can’t move away from perception. How the customer sees it is how we want to see it,” he said.

The fact Woolies can grow faster than Coles despite this perceived deficiency in price could hint cheapness isn’t everything. We could be tired of swapping range for price. We could — finally — be Aldi-ed out.

Australian consumers might be discovering just what Woolies has — a single-minded price obsession can be unhelpful.

“Everything is about balance. Every time we are out of balance we just don’t get to where we need to get to,” Mr Banducci said.

“We are realistic about our ability to close the gap on [price perception] given our broader agenda on range, freshness and community.”

If these Woolworths results are emblematic of a new approach by the Aussie shopper, then the “Down Down” era is over in more ways than one.