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Australian Retail Grocery Market Case Study: challenging the dominance of Coles and Woolworths

Datamonitor
October 29, 2009
SKU: DFMN2500518

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Countries covered: Australia

Introduction

This case study on the Australian grocery retail market forms part of Datamonitor's case studies series which explores business practices across a variety of disciplines and business sectors. It looks at how the market is increasingly in the spotlight due to recent attempts to liberalize it, the growing strength of private label and the growing challenge posed to the Big Two, Woolworths and Coles.

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DATAMONITOR VIEW
CATALYST
SUMMARY: Analysis; The evolution of the Australian grocery market has been characterized by retail consolidation; Competition Commission findings in 2008 provide optimism for rival retailers; Retail concentration reportedly impacts healthy eating; High rental prices and large geographic spread hinder competition; Freshness and quality of products are the key determinants of where Australians do most of their grocery shopping; Australian consumers consider a store's location to be influential in choosing retailers; Private label penetration in Australia is still behind that of the US and Western Europe; Just a tenth of Australian consumers regard private label products as superior to leading brands; Woolworths and Coles have utilized economies of scale and vertical integration to grow market share; Strong supply chain efficiencies, a tiered private label architecture and growing consumer trust make Woolworths the "best in game"; Woolworths' expansion of private label lines has driven store loyalty; An emphasis on value for money characterizes Woolworths' marketing; Expansion through acquisitions and product development; Wesfarmers is reinventing the Coles shopping experience; Coles is placing a renewed emphasis on private label; A focus on on-shelf availability, providing better value to customers and expansion of house brands characterizes Coles new strategy; Online presence presents opportunities; Greater pressure on suppliers has attracted criticism for Coles; The dominance of the Big Two is coming under increasing threat from Aldi, and more recently Costco; Aldi poses a considerable competitive threat to the Big Two; The 2009 Australian Retail Innovation of the Year award demonstrates Aldi's considerable impact on the Australian retail sector; Growing consumer acceptance demonstrates continued potential for Aldi in Australia; Consumer perceptions have moved away from just cheaper pricing to quality; Costco's low cost model and diverse range of products are well suited to the Australian retail sector; Conclusion
APPENDIX: Case study series; Methodology; Secondary sources; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer

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