Source : THE AGE NEWS
Woolworths has fired the first shot in a $100 million cost-of-living trolley land-grab. Let the grocery discounting wars begin!
As Woolies is the supermarket perceived to be the most expensive, its chief executive, Amanda Bardwell, had little choice other than to mount a highly visible price-cutting campaign.
Woolworths desperately wants to shed the perception that it is a more expensive place to shop than Coles.
How far this plays out in reducing cost-of-living pain for Australian shoppers depends in large part on what Coles does next.
Bardwell insists that the two big supermarkets will remain “rational”, thus avoiding a price-cutting slugfest. But investors responded to Woolworths’ discounting announcement on Monday by sending the shares of both supermarkets into the red.
Shoppers certainly will be hoping for a battle, which in turn should deliver bigger and broader discounts.
Woolworths is lowering the cost of about 400 items across its network by an average of about 10 per cent – a $15 saving on a $150 shop if these products are in the basket.
Supermarket shoppers are a promiscuous bunch, and have become even less loyal because times are tough.
That may sound like a meaningful difference, but given stores carry about 20,000 products, this price reduction is particularly targeted.
That said, the list of items reads like one precisely aimed at mid- to lower-income families with large smatterings of Woolworths home-brand products in the mix, including chicken schnitzels, yoghurt, bread and rice and bulk-sized bacon, and essentials such as flour and nappies.
Lowering the cost of these 400 products will cost Woolworths about $100 million a year – although the company is undecided on whether to extend the price cuts into 2026. It will also be looking for a bit of help from some suppliers to fund the cuts.
Coles is outperforming Woolworths on sales. Credit: Louie Douvis
Woolworths desperately wants to shed the perception that it is a more expensive place to shop than Coles, which in turn would need to return fire with a “lower for longer” campaign of its own, trimming prices on the kinds of products that are trolley regulars.
Supermarket shoppers are a promiscuous bunch, and have become even less loyal because times are tough. Both supermarkets admit customers are in peak shopping-around mode as they look for best deals.
Bardwell is sticking to the script that introducing these new bargains and keeping them in place for at least the remainder of the year is all about listening to and helping the customer.
But Coles is outperforming Woolworths on sales, and you can see it in how their share prices have performed over the past year. Coles shares have risen almost 38 per cent while Woolworths has ticked up only 6.7 per cent for the period.
Woolworths chief Amanda Bardwell is sticking to the script of helping customers. Credit: Renee Nowytarger
The pressure is on Bardwell to show the market that it can compete harder. And it is no accident that this latest campaign follows enormous political pressure from the federal government, which has accused the supermarkets of price-gouging and Australian Competition and Consumer Commission (ACCC), which has initiated legal action against both supermarkets for misleading customers with faux discounts.
Both supermarket groups have suffered brand damage over the past year and been blamed (not always correctly) for the cost-of-living pain many customers have experienced.
A discounting makeover certainly won’t hurt their reputations.
It represents a big move by Bardwell, who took over as Woolworths boss last year, and follows a previous announcement from her to take a swath of costs out of the business.
So if you are a fan of Maggi noodles, Coca-Cola, Four’N Twenty party sausage rolls (with Woolworths brand tomato sauce), and home-brand chicken schnitzels with microwave rice or frozen berries, your ship has come in.
