Australians are willing to shop around – and Coles is taking note

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Australians are willing to shop around – and Coles is taking note

By Jessica Yun

Coles chief executive Leah Weckert is closely watching a trend of customers willing to travel further to shops where they get a better deal on groceries, with the supermarket giant posting a 6.8 per cent increase in half-yearly revenue but a dip in profits.

While Australians are continuing to shop to a budget and trading down by buying cheaper cuts of meat, switching to private label or bulk-buying, the grocery boss said she was surprised by the increasing number of shoppers who are happy to drive to where they pay less for groceries.

Coles boss Leah Weckert is seeing customers more willing to shop around to get a better price on groceries.

Coles boss Leah Weckert is seeing customers more willing to shop around to get a better price on groceries.Credit: Arsineh Houspian

“Convenience is perhaps not as important as it was previously,” Weckert told reporters on Tuesday morning after giving a trading update for the December half.

“A number of [customers] were willing to hop in the car to go to places where they knew they could get good value on certain items. I do think that is becoming more prevalent in terms of the implications ... for our business.

“It just means that we need to be sharper and sharper, intensify the value proposition that we’re providing, and that’s something we are very focused on,” she said.

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The grocery executive made her comments after Coles said overall price inflation at its supermarkets moderated slightly from 3.1 per cent to 3 per cent in the six months to December 31, with price growth in fresh food moderating from 5.7 per cent in the first quarter to 4 per cent in the second quarter. However, deflation in fresh produce was offset by higher prices for baked goods.

Cost-of-living pressures have led to an uptick in customers for German-based discount chain Aldi as consumers seek better value for money.

Coles’ revenue for the first half of the 2024 financial year improved by 6.8 per cent to $22.2 billion thanks to successful sales for seasonal events such as Christmas, Halloween and Father’s Day, but the supermarket giant posted an 8.4 per cent fall in profit to $589 million, attributed to one-off costs of divesting Coles Express.

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The company’s gross margins stayed largely steady at 26.6 per cent, while operating earnings rose slightly by 0.6 per cent to $1.06 million as stock loss – or theft – offset strong sales growth. Earnings margins declined slightly to 5.1 per cent. Online sales rose 29.2 per cent to $1.8 billion.

The company has declared a fully franked interim dividend of 36 cents, unchanged from last year, to be paid on March 27.

Investors welcomed the news, sending Coles’ share price 6.2 per cent higher in mid-morning trading.

Weckert said theft levels have been improving since October when Coles began implementing skip scan technology, which detects when a customer doesn’t scan an item, across 300 stores.

Coles and its larger rival Woolworths have been facing heightened scrutiny as high inflation pushed up grocery prices. Both companies have reported a marked increase in price rise requests from suppliers and farmers, which Weckert said had declined recently.

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Weckert and Woolworths’ outgoing chief executive, Brad Banducci, have both committed to fronting a Senate inquiry into supermarket prices due to begin in March. Former Labor minister Dr Craig Emerson will lead a review of the food and grocery code of conduct.

The ACCC has been ordered to investigate supermarkets in a year-long inquiry, which will examine the difference between the prices received by producers at the farm gate and paid by consumers at the checkout.

More to come

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