Shoppers hunting affordable treats as cost-of-living pressures bite, says Ritchies boss

The boss of supermarket chain Ritchies says shoppers are hunting for discounts with price cuts of as much as 50 per cent needed to entice them to grab a product from the shelf.

Shoppers facing cost-of-living pressures including higher mortgage or rental bills are increasingly favouring heavily discounted groceries and promotional items, with snacking in particular trading strongly as consumers look for affordable treats, according to supermarkets boss Fred Harrison.

People were looking for “some form of discount” when walking the aisles, Mr Harrison said, with it becoming increasingly difficult to entice shoppers to take a product from the shelf that did not come with a steep discount, sometimes as much as 50 per cent.

Some categories were in strong growth however, led by energy drinks such as V and Red Bull, while households were also stocking up on ice cream to give themselves an affordable treat during tougher economic times.

Following a grocery suppliers and half-yearly sales update, the boss of Ritchies – one of Australia’s largest independent supermarket chains – said he believed these trends applied across the $100bn supermarket sector.

“Value is becoming increasingly important. People are looking for some form of discount and it’s very difficult to get people to buy a product that’s just a normal standard shelf price – everyone is looking for some form of discount,” Mr Harrison said. “I don’t think this is unique to us, it is across the sector.

“Those discounts can be greater than 50 per cent, through to 5 or 10 per cent, but we are definitely finding products that have a (sale) ticket on them are selling more than say 12 months ago.”

With 75 stores, the Ritchies network is becoming a growing force within the independent supermarket industry. Ritchies sales have risen 64 per cent from $848m in 2013 to $1.388bn in 2022.

In his recent presentation to food and grocery suppliers, Mr Harrison said value ranges were selling strongly. Top performing categories for the first half of the year were snacking, beverages and frozen products.

Coles and Woolworths will release their trading updates in the coming weeks, giving further insight into the strength of the Australian consumer.

Ritchies snacking sales grew by 2.5 per cent for the first half, with beverage sales up 7.3 per cent and frozen products recording growth of 2.4 per cent.

“There is definitely a push on for frozen food,” he said. “It is relatively cheaper than the fresh equivalent, it is convenient and you don’t have to use it all within a short period of time.

“Ice cream is a huge growth category. I think when people are doing it a bit tougher they like a pick-me-up or cheer-up treat. Ice cream fits that bill, and that can be ice cream on a stick or a tub.

“Beverages are in major growth, I think there’s a lot more sugar-free options coming on the market in beverages instead of just being carbonated soft drinks. We are finding enormous growth in energy drinks too; V, Red Bull, that whole energy drink range is exploding.”

Further insight into the strength of the Australian consumer will be revealed when major supermarkets Woolworths and Coles reveal their latest trading performance. Coles will release its quarterly sales update on April 28 and Woolworths will issue its quarterly sales results on May 2.

At the twin supermarket giants’ half-year results the retailers said they were witnessing a shift to value groceries by shoppers, led by a lift in sales for traditionally cheaper private label groceries as well as other value-based categories like frozen and canned goods.

Coles chief executive Steven Cain said at the interim results in February that there had been a 12 per cent spike in sales of cheaper private label groceries in the second quarter, describing the uplift in home brand groceries as a “big number” and one of the biggest on record for Coles.

A recent consumer survey by investment bank UBS found that consumers were still upbeat, although optimism was softer

“First quarter results remain upbeat overall, showing that Australian consumers still expect spending growth to remain quite strong over the next 12 months. However the survey indicates a turning point, with this quarter‘s results showing the largest moderation in years,” said UBS strategist Richard Schellbach.

There was also the emergence of a “two-speed” consumption pattern as pressures on household budgets impacted some shoppers, UBS found.

“Cost of living pressures are forcing consumers to spend more on essentials: with food, fuel, rent, utility and healthcare costs impacting most – which disproportionately hurts lower-income earners,” Mr Schellbach said.

By contrast, the tight economy shines favourably on higher income groups due to the wage gains they are experiencing and ownership of assets.”