Aldi Advances as Food Inflation Eases; Retailers Face Pricing and Theft Challenges

The latest industry report by Jarden and the Australian Food & Grocery Council suggests a decline in food price inflation. Aldi continues outperforming its competitors and reclaims the market share it lost during the COVID-19 pandemic. It is supported by value-seeking customers, an expanded product range, increased cross-shopping, growth in own-brand sales, and improved supply chains.

The survey, conducted with 57 supermarket suppliers in early October, found rising market volumes and increased in-store promotions. Jarden’s head researcher, Ben Gilbert, indicated that Aldi’s sales have surged in the mid-to-high teens percentage range annually.

While 8.3% of suppliers increased prices over the last year, only half intend to raise them in 2023. However, by 2024, about 74% anticipate further price hikes, albeit at a decelerated pace. Gilbert predicts that grocery inflation will drop from its current 6-8% to 3-4% by 2024.

Pushing price increases has become challenging, with many suppliers finding Coles more resistant than Woolworths. Gilbert mentioned that retailers are exploring strategies to augment gross margins, such as effective promotions and selling higher-margin own-brand products, to offset ongoing cost pressures.

Coles recently reported theft as a significant challenge in its 850 stores. Yet, Jarden’s survey revealed scepticism among a quarter of suppliers, suggesting Coles might have exaggerated the theft problem’s impact.

There’s debate over loyalty programs, as most participants believed these do not offer real benefits. Gilbert posits that if Coles manages its theft issues, its current underperformance could be unjustified. He also anticipates Metcash’s IGA network could see a positive shift due to its competitive pricing and value propositions.

Both Coles and Woolworths are set to release their Q1 sales figures later this month. Gilbert anticipates both will report growth due to a consumer trend towards dining at home.
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