Woolies offers Christmas sweetener

WOOLWORTHS has warned customers should expect price increases — but has launched a massive discount on two Christmas favourites.

Woolworths is cutting its Christmas chocolate prices. Picture: Ian Waldie/Bloomberg

WOOLWORTHS has warned customers to expect price increases in products exposed to global export markets such as milk formula and vitamins, but has vowed to “take a position” to keep prices low in strategic categories such as fresh meat.

Steve Donohue, director of buying and merchandise at Woolworths, told news.com.au the supermarket’s net price reduction over the past few months equated to hundreds of millions of dollars in savings for customers.

“Our annualised reductions are running in excess of $400 million, and we’re adding about 100 lines a month to the program that’s now in the 3000 mark,” he said.

From today, Woolworths is halving the price of two of its most popular Christmas chocolate lines, Roses 620g and Celebrations 750g tins, which are now selling for $12.50. The retailer says the price cuts will be permanent, unlike rival Coles which is running a similar price drop on promotion.

Woolworths estimates the ranges will sell around 800,000 units this season.

“We’re really pleased to be able to offer customers a consistent price on two of the most popular gifting chocolate products from now through to Christmas and beyond,” Mr Donohue said.

“Between now and Christmas, a lot of schoolteachers get these gifts, you see them on coffee tables, they’re given as staff presents. Aussies love Celebrations and Roses, and they’re good value at these prices.”

Mr Donohue said the overall savings in a basket of groceries more than offset “a few lines going up” in price. “Certainly there is a lot of pressure on food products that are exposed to export markets,” he said.

“Everyone’s familiar with the pressure that’s been going on in beef prices, and we’ve been proud to be able to take a position on our mince, which we think is the best price and quality in the market. Lamb legs at $10 have absolutely gone berserk and customers love them.

“We’ve taken a position in categories we know are important to customers.”

Mr Donohue said global demand meant some suppliers simply wanted more for their product or they sold offshore. Whether Woolworths decides to make up the difference or pass on the cost to customer “is intrinsically linked to our ability to be more efficient”, he said.

“Our job is to drive efficiencies in our side and work with suppliers to put downward pressure on prices. But sometimes the scale of the price increase is such that is has to unfortunately be passed onto customers.”

Earlier this month, Credit Suisse noted Woolworths had resisted raising prices in meat, while Coles had discounted its packaged goods to make up the difference. Deutsche Bank noted meat was a key driver of larger basket size.

Credit Suisse said Coles’ prices fell 2 per cent in the quarter compared with 2.4 per cent in the previous quarter, largely due to higher meat prices. Woolworths prices fell 2.9 per cent in the same period.

The investment bank forecasts like-for-like sales growth for the first quarter of the 2017 financial year of 0.3 per cent at Woolworths and 3.8 per cent at Coles. Coles is due to announce its first-quarter sales next Wednesday, October 26, while Woolworths reports two days later.

Analysts predict food price deflation will continue in the near term as Coles and Woolworths fight to keep market share from Aldi.

Earlier this year, UBS warned Woolworths’ slower-than-expected turnaround was heightening the risk of a damaging price war that would benefit shoppers but hit supermarket profit margins.

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