Woolies now cheaper than Coles on a basket of goods: Credit Suisse

WOOLWORTHS is finally cheaper than Coles. While the big two are still more expensive than Aldi, the price cuts are starting to show.

WOOLWORTHS is finally cheaper than Coles.

While the big two are still more expensive than Aldi, hundreds of millions of dollars invested in lowering prices has closed the gap, according to a report by Credit Suisse.

And on a basket of groceries, Woolworths is now cheaper than Coles for the first time in more than a year, the Australian Financial Review reports.

Credit Suisse’s basket of 110 packaged and fresh items was $573 last week at Woolies, compared with $586 at Coles and $465 at Aldi.

Woolworths basket was 23 per cent more expensive than Aldi, down from 32 per cent a month ago, while Coles was 26 per cent more expensive than Aldi, down from 30 per cent.

Six months ago, Woolworths was 6 per cent more expensive than Coles and 38 per cent more expensive than Aldi.

Credit Suisse analyst Grant Saligari told the AFR Woolworths’ promotional basket was now the closest it had been to Aldi for more than a year.

“It’s an important milestone for Woolworths,” Mr Saligari said. “They’ve recognised that pricing needs to improve ... and it does appear to be becoming more price competitive to Coles on different metrics.”

But he said on average, Coles’ shelf prices were still slightly cheaper than Woolworths.

Last month, Woolworths said it would pump another $150 million into lowering grocery prices, having already invested more than $400 million since the second half of FY15.

It came as the country’s biggest supermarket announced its fourth consecutive quarter of negative sales growth, with food and liquor sales declining by 0.9 per cent.

Yesterday, a report from investment bank UBS said German discounter Aldi — now the most profitable supermarket in the country — was nearing “tipping point”.

UBS analyst Ben Gilbert predicted Woolworths would lose around $476 million a year in sales over the next three years as Aldi improves its fresh food offering and claims a higher share of “main shops”.

“Aldi is nearing a tipping point, but needs to get fresh right.” Mr Gilbert wrote. “The tipping point in the UK proved to be when the discounters (Aldi and Lidl) lifted share of main shops over 10 per cent.

“Aldi is now at 8 per cent in Australia. The key to lifting this will be fresh perception, which remains the number one category for improvement.”

Woolworths has been the “universal giver of sales over the past 12 months”.

“Consistent with market knowledge, Woolworths has lost its way and this has been reflected in it losing share of main shops, shopper frequency and weekly spend,” Mr Gilbert wrote.