Melody Teh

News

Thu, 16 Jul, 2015

Woolworths trails Coles on grocery prices

Woolworths trails Coles on grocery prices

Woolworths is still trailing behind Coles on price, despite their launch of a $500 million price slashing strategy in May. New data shows that Woolworths' grocery prices were flat for the June quarter while for the same period groceries at Coles became cheaper.

The cost of a selection of typical groceries was analysed by Macquarie Securities and they found that the cost at Woolworths has fallen 1.9 per cent since March. For the same groceries in Coles, there was a 3.1 per cent drop in price. The majority of the price cuts were due to a seasonal drop in fruit and vegetable prices.

The report from Macquarie suggests that taking fruit and vegetable pricing out of the statistics would show that the prices at Woolworths were "broadly flat" across the quarter. It also noted that Woolworths needs to work fast to revive its business.

"Woolworths is rapidly losing share as their strategy takes time to implement," the report said.

"In our view, it is too soon for investors to be confident that the new management team will take the appropriate action… given the early stage of the executive search process and time required to potentially develop a new strategy."

The report estimates that over the past 12 months Woolworths has lost 1.5 per cent of market share while the broader market has grown by around 7 per cent.

For Woolworths these statistics come at the same time as the shock resignation of chief executive Grant O'Brien in June, a falling share price, and a second profit downgrade in four months.

While Woolworths declined to comment on the report they said they were committed to "delivering the lowest prices for its customers".

"We have invested more than $160 million in reducing prices," a spokesman said.

"For example, customers can now enjoy the same prices in-store and online, so they can take advantage of the same low prices with the convenience of home delivery or click and collect."

Despite increasing their specials from 16 per cent of items to 20 over the quarter, Woolworths haven’t seen the expected increase in sales.

Another area of concern according to the Macquarie report is that Woolworths' margins may be feeling the pinch due to their meat strategy. Despite the recent hike in beef prices, Woolworths have not passed on the costs to customers whereas Coles has increased meat prices by 0.7 per cent. The report said that as Coles had made reductions in other areas such as eggs and confectionery any negative impact had been offset.

Image credit: TK Kurikawa / Shutterstock.com

Related links:

Do you agree with this restaurant’s decision to ban children under 7?

This mob of emus had the most incredible reaction to a cat toy

In photos: breathtaking shots of the world’s most remote caves 

Our Partners