People before profits key to Coles & Woolworths regaining trust

Coles and Woolworths have hit record lows for brand distrust, but can these supermarket giants regain consumer trust and reinvigorate their once-loved brands?

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Coles and Woolworths need to abandon price-focused positioning and invest in their brands if they wish to regain consumer trust in the wake of an ACCC investigation.

The two supermarket brands have plummeted in consumer trust rankings following the announcement of the consumer watchdog’s legal action for allegedly breaching Australian Consumer Law and misleading consumers through discount pricing claims on products. The legal action was viewed by consumers as confirmation of the allegations which had been circling for months and threatened to deliver the final blow for the brands, which have dropped to record lows in consumer trust metrics.

While Woolworths and Coles were the two most trusted brands from April 2019 to November 2023, they have recently plummeted to the bottom of the trust ladder, with Coles now the fourth-most distrusted brand and Woolworths the fifth-most distrusted, according to Roy Morgan research.

This sentiment is supported by research captured last week, and shared exclusively with The Growth Agenda, which revealed consumers believe Coles and Woolworths are prioritising profit over customer welfare with 39.6 per cent of people saying the ACCC action had changed their view of the supermarkets, and 26.7 per cent planning to change their shopping behaviour to avoid supporting the companies they perceive to be exploiting them.

However, the research by Juno in partnership with FutureBrand Australia revealed that despite the majority of consumers holding negative opinions of the supermarket brands, 56 per cent said they would not change where they shopped, citing convenience, product availability and a lack of alternative grocery options.

But, consumers expressed a strong desire for more transparent and fair pricing from the two supermarkets to help rebuild trust in the brands.

Richard Curtis is the chief executive of FutureBrand Australia

FutureBrand Australia chief executive Rich Curtis believes shifting the brand positionings away from the current focus on price would be a significant positive step towards both strengthening the brands and rebuilding consumer sentiment and trust.

“Part of the challenge for Coles and Woolworths relates to how those brands have positioned themselves on price alone,” Mr Curtis said.

“If you only position on price, it’s like a stool with only one leg, it is a very precarious position. We can see it has been quite easy to knock them off balance with this alleged issue. It’s a positioning weakness from a strategic point of view.

“It reinforces the reality that most brands aren’t knocked off by their competitors or competitive threats, they do it to themselves. Aldi and IGA didn’t do this. Coles and Woolworths did it to themselves. So the question then becomes: Can they save them from themselves?”

Mr Curtis argues that if the brands can start to demonstrate their values and purpose, beyond pricing positionings, there are significant opportunities to rebuild trust with consumers.

“We know that strong brands are created with purpose, but ultimately they’re defined by the experience. It’s never been more important for businesses and brands to do what they say or risk falling into that ‘say-do’ gap, which is exactly where Coles and Woolies are now, because it would appear as though they haven’t done what they said they were doing. 

“Our FutureBrand index has shown that corporate reputation and trust have increased in importance over the past 12 to 18 months to be perceived as the second-biggest threat to success. It shows us that a brand’s narrative and its future, rests as much in the hands of everyday people as it does those inside the boardrooms and the marketing team.

“However, this means there’s an opportunity to flip that in their favour. And Coles and Woolworths would want to consider the role of the consumers in these allegations and how they might engage more positively or more meaningfully. They can’t change the past but they can take this as an opportunity to reset for the future together with their customers.”

Quantum Market Research managing director Richard Frost believes the supermarkets dominance also provides significant opportunities for the brands’ recovery if they can lean into their positions as the nation’s biggest brands. “Coles and Woolworths need to take a step back and look at the bigger picture, the context and the role they should play in Australian society. They need to start aligning themselves with the values of Australians. Trickery like ‘prices are down’, when they are not in fact actually down, will never play well for these brands.

Richard Frost is the managing director of Quantum Market Research.

“Change will mean a shift in focus to not just be about profit, but profit and people. The supermarkets need to become more than a supermarket because, culturally, these brands are so important.

“Reigniting brand trust can be done. Kmart is a prime example of a company whose trajectory has been on the up because they haven’t over-promised, and they haven’t under-delivered. They proved they can provide quality at the right price point and, in doing so, demonstrated that change is possible.

“This week’s event is the supermarkets royal commission. Coles and Woolworths need to treat this time as a ‘line in the sand’, and go on a journey of being an important part of Australians’ lives just like the banks had to. They will have to take account and look for more effective ways to positively engage Australians.”

Despite the brand lows, industry experts believe the Coles-Woolies duopoly is not likely to weaken its hold on the market.

“I don’t believe the supermarket duopoly will change in the near future. Aldi is a strong brand but it does not have the same gravity and reach as Coles and Woolworths, so hopefully the two major brands understand the integral role they play in society and how deeply Australians depend on them,” Mr Frost said.

This is supported by the research findings, which suggest customers will not change their shopping behaviours.

“Coles and Woolworths are going to have to weather this storm and it is going to be challenging. The hope is they use this as an opportunity to rebuild, to take account, rise to the challenge and work towards being a brand that serves for the betterment of Australians.”