How Coles and Woolworths are fighting Aldi

YOU may not even have noticed but the price of your groceries could have changed, it all depends on what kind of shopper you are.

COLES and Woolworths have slashed the prices of their private label groceries to counter the growing threat from Aldi.

But it seems Coles is also trying to make up the shortfall by increasing the cost of its more expensive national brand products, according to Deutsche Bank’s latest supermarket inflation survey.

The survey showed the price of private label (homebrand) groceries at Coles and Woolworths dropped by 6.1 per cent in the June quarter, which is the sharpest fall in more than 18 months.

Coles and Woolworths were widely expected to drop their prices to compete more effectively with Aldi, whose private label products are about 30 per cent cheaper.

While the price war has been great for shoppers looking for a bargain, others who shop at Coles and are loyal to certain brands or don’t shop around as much, have seen the cost of their groceries increase.

The survey found that prices for a basket of national brand groceries at Coles rose by 5.1 per cent, in contrast to Woolworths, who cut its prices by 2.6 per cent.

Overall prices for branded groceries rose by 1.3 per cent in the June quarter compared with 2.8 per cent in the prior quarter, which meant that supermarket prices were generally flat.

“Notably, Coles did not appear to match Woolworths’ discounting,” Deutsche Bank analysts Michael Simotas and Daniel Wan wrote.

“The aggressive price investments from Woolworths on branded products make some sense to us given these are the products where Woolworths became too expensive.”

Meanwhile, Coca-Cola slashed its prices in the June quarter following the introduction of Coke Life. Coca-Cola prices declined 11 per cent versus the same period last year, with aggressive discounting across both the new and existing products.

“We expect [Coca-Cola] Amatil saw strong volumes during the promotional period, offset by the sharp decrease in prices,” the authors wrote.

“Notably, there was demonstrable reduction in promotion at from Amatil in the last few weeks of the quarter which was followed by some of the deepest promotions we have even seen (Coke 2L PET

“This may suggest the group hit its volume targets but could also be indicative of an attempt to boost margins.”

The supermarket inflation survey is based on seven baskets — three each from Coles and Woolworths and one from IGA — each containing around 100 products spanning 29 product segments.