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

Published by: Datamonitor

Published: Oct. 29, 2009

Table of Contents

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

Overview

Table 1: Total private label penetration and spend ($ millions) in Europe, Asia Pacific and the US, by country, 2002-2012

Table 2: Australian consumers are divided on their opinions about how famous branded food products, soft drinks and hot drinks compare to private label equivalents

List of Figures

Figure 1: Freshness and quality has more influence on Australians than overall quality of products sold and proximity to home

Figure 2: Woolworths private label range has two distinct price points

Figure 3: Woolworths' expansion of private label lines drives store loyalty

Figure 4: Woolworths intends to expand its private label beer offering

Figure 5: Coles unveiled a three-tiered private label strategy in 2005

Figure 6: Coles has extended its private label offering into ethical offerings and also alcoholic beverages

Figure 7: Aldi has been recognized for its innovative approach to retailing by the Australian Retailers Association

Figure 8: Aldi's private label stock does not have a common brand for all ranges (unlike Coles and Woolworths)

Abstract

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.

Reasons to Purchase

• Gain insight into the methods used by important industry players to give them a competitive edge
• Identify specific areas for operational improvements
• Capitalize on the knowledge of experienced companies when entering a new niche or market

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