Woolworths revamps ads in price war with Coles

Woolworths will overhaul the way food and grocery suppliers advertise in its stores in its price war with Coles.

Woolworths advertising revamp

Woolworths will overhaul the way food and grocery suppliers advertise in its stores, from shelf and fridge stickers to staging cash-prize competitions, as it strives to convince shoppers it is closing the price gap with Coles.

New insights flowing from the largest ever study of customer shopping experiences by Woolworths will now shape the supermarket giant’s new mer­chan­dising principles and alter the in-store advertising and promotions paid for by suppliers.

But Woolworths pledged to suppliers in a recent presentation that the costs to them would be much lower than historic rates following the ditching of the retailer’s external media agency, with the cost of production and installation of displays and point of sale material not passed on. However, suppliers wishing to run promotions outside their category will be charged a 10 per cent premium and need the approval of a key supermarket executive.

Woolworths will tempt suppliers to spend up on promotions by promising that it will partner with Woolworths’ 50 per cent owned data analytics firm Quantium to provide advanced reporting on all premium in-store advertising packages.

Woolworths has also relaxed some of the rules relating to the prize a supplier must offer if they want a promotion to include a prize, with the former $100,000 prize pool requirement now removed.

Meanwhile, Woolworths’ new in-house media agency, Woolworths Media Hub, has begun holding presentations with key suppliers over the last month to alert them to changes to the creation, cost, presentation and analysis of in-store marketing.

Led by new Media Hub boss Natalie Race and Woolworths general manager Rod Evenden, suppliers have been invited to engage in more and better-targeted advertising, promotions and marketing packages to entice shoppers as they stroll up and down the aisles.

The new strategy from Woolworths will be crucial in eroding the damaging perception among shoppers that it is more expensive than Coles, which has caused its sales growth to fall further behind its arch rival this year, as well as revitalise the look of its stores to be more attractive to consumers, especially in terms of value. “We have recently undertaken our largest study on the customer shopping experience in our stores,’’ Mr Evenden told suppliers in a letter last month.

“The insights from this research reaffirm some vital merchandising principles that can enhance our customers’ shopping experience.

“Our customers are telling us they are looking for inspiration when in store, they also want clearer communication when a new item or new range is available and to make it easy for them to identify great value.

“Most importantly our customers have asked us to make the shopping trip easier, less cluttered, with fewer and simpler messages.’’

As part of this radical shift in its promotion of branded food and groceries, Woolworths in June ended a 10-year relationship with media agency Torch Media, asking all suppliers to buy directly from the supermarket all in-store advertising, ranging from displays at the end of aisles to ads on shelves, trolleys, at the check out and via in-store radio.

Led by Ms Race, Media Hub is now the central point of contact for all suppliers to advertise within Woolworths’ network of 950 stores, its online platforms and printed catalogues and magazines.

In a presentation last month Ms Race told suppliers the new Media Hub would align media opportunities to category and brand strategies, ensure less clutter and more effective communications and be run by a dedicated and experienced Woolworths team focused on delivering sustainable and profitable sales for their brands.

She said under the Torch contract there were too may contact points for suppliers, which created confusion while at the same time generating numerous competing messages to customers.

A key attraction being dangled in front of food and grocery suppliers also seems to be a closer relationship with Quantium, a leading data analytics firm that uses the flood of information from supermarket checkouts to advise brand owners and retailers on customer shopping behaviour.

A Media Hub presentation pack given to suppliers says Quantium will provide reporting on all key in-store marketing packages such as ‘‘major activations’’, as used by Disney recently in its ‘‘domino stars’’ campaign, and investments of more than $150,000 in the Woolworths Fresh magazine.

The continued shake-up of the advertising and promotions relationship between Woolworths and its suppliers is part of the new and wider strategy developed by outgoing chief executive Grant O’Brien and his new head of supermarkets, Brad Banducci, to improve sales and shrinking group profitability from its flagship business.

In June Woolworths invited 900 suppliers to a gathering in Sydney where it promised to improve its relationship with them as part of the sweeping overhaul at the nation’s largest supermarket group, while also pledging to put the customer at the heart of all it does to drive sales volumes. It is also making a stronger pitch for supplier advertising dollars, with Ms Race reminding suppliers Woolworths was one of Australia’s most valuable media partners with its 17.9 million shoppers per week, 300,000 active online shoppers, as well as via its publications, with 3.58 million readers of Fresh magazine and a growing social media reach.