Costco and Aldi are booking a combined $17.5bn in annual sales
Foreign retail giants Costco and Aldi have taken a huge chunk of annual sales from Australian supermarkets, forcing Coles and Woolworths to slash prices on everyday items.
US warehouse giant Costco and German discount titan Aldi are siphoning off more than $17.5bn in annual sales from Australian-owned retailers, new corporate filings reveal, triggering an aggressive fightback from local heavyweights Coles and Woolworths.
A counterstrike from the homegrown supermarket leaders is being fought across key basket items such as chicken, pork chops, sausages, lamb loin, beef mince, milk, soda water and frozen pizza, which has resulted in the price gap between the supermarkets majors and Aldi shrinking to its lowest level in almost three years.
Together Woolworths and Coles, which are both ramping up their private label offerings, have reduced the price difference with Aldi on key supermarket items by almost 30 per cent since mid 2023, latest industry research has shown. While Woolworths and Coles have long warned about the incursions of multinational cashed-up online players such as Amazon and eBay as they penetrated into groceries and home products, a major threat too is now coming from traditional bricks-and-mortar rivals like Costco and Aldi.
Combined, the power of Costco and Aldi reaped more than $17.5bn in sales in Australia in fiscal 2024, latest federal government and corporate documents show. To put that in context within the Australian retail landscape, in 2024 Coles had annual sales of $39bn and hardware giant Bunnings reported sales of $19bn. Aldi in its own right is now one of the biggest retailers in Australia, with its sales eclipsing that of JB Hi-Fi and Harvey Norman.
Latest corporate tax data compiled and published by the Australian Taxation Office as part of its corporate tax transparency report has revealed for the first time the Australian revenues harvested by Costco, the warehouse-style chain that has 15 stores spread across the nation.
It shows Costco reaped sales of $5.15bn in fiscal 2024 (tax payable $31.93m) with its membership and bulk-buy model proving popular with shoppers since it opened its first doors in Melbourne in 2009.
Recently Costco’s true sales performance in Australia has been hidden from view as Costco’s local operations were merged with Costco Taiwan, with the accounts lodged with the Australian Securities and Investments Commission not separating the performance of the two arms.
Costco – which sells annual memberships for its stores for between $65 and $130 – has raked in cumulative sales of more than $30bn since 2009, most of which has been pinched from the local chains that it competes against.
An even bigger threat has come from Aldi, the German private label specialist with tiny stores in comparison to Woolworths and Coles — not to mention the giant Costco warehouse stores. Latest ATO data shows that Aldi, a highly secretive global retailer that now operates 602 stores in Australia, had sales of $12.5bn in fiscal 2024 (tax paid $178.63m).
In 2015 the supermarket wars between Woolworths and Coles deviated into a tax battle, after Richard Goyder, the then chief executive of Wesfarmers – which owned Coles at the time – demanded to know if German discounter Aldi was paying its fair share in Australia.
Mr Goyder argued at a business lunch in Melbourne in June 2015 that Aldi should have its local financial accounts inspected to ensure it is competing fairly.
“I think someone should go and have a look (at) how much taxes Aldi pays in this country,” Mr Goyder told the lunch. “I suspect they (Aldi) are very profitable.”
Highlighting its secretive nature, in 2024 at the ACCC supermarkets inquiry, Aldi senior executive Jordan Lack asked that responses to questions about Aldi’s recent profitability should be taken into a private hearing and not broadcast as part of the public hearings.
The battle between Woolworths, Coles and Aldi has been especially fierce with Aldi emerging as the third biggest player in the $120bn supermarket sector, and the traditional supermarkets recently fighting back by pouring investment into lower prices, particularly private labels, which is where Aldi dominates.
According to JPMorgan, Woolworths’ and Coles’ price premiums to Aldi had stabilised in September, with Woolworths at 8.4 per cent and Coles at 8.2 per cent. However, both supermarkets remain marginally below their historical average price premiums to Aldi at 8.9 per cent for Woolworths and 8.8 per cent for Coles.
Over the last few years Woolworths and Coles have invested heavily in more competitive prices and this has helped narrow the gap from a recent peak in mid-2023 when Woolworths’ price premium to Aldi was as high 11.7 per cent and Coles’ prices were at an average 11 per cent premium to Aldi.
For Woolworths’ battle with Aldi the key battleground has been protein items (pork, chicken), lactose-free full cream milk, cola, soda water, and cornflakes, as well as specials such as pork loin chops and lamb loins.
Coles managed to narrow its price premium against Aldi by 60 basis points in September driven by a mix of specials (mostly multi-buy specials) across sausages, beef mince and beef brisket, as well as promotions across chicken, salmon, frozen pizza and olive oil.
“Both Coles’ and Woolworths’ price premium to Aldi remains modestly below historical averages highlighting both retailers’ continued focus on value, but there is no indication of a ‘price war’ to restore value perception and sales momentum,” JPMorgan analyst Bryan Raymond said.
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