Coles and Woolworths Half Yearly Trading Update & Analysis

Planning your growth strategy into Australian Retail through a deeper understanding of the leading retailers financial reporting and market

The latest round of financial reporting in the Australian grocery sector saw the 2 major grocery retailers in Australia, Coles Group and Woolworths, announce their ½ year trading update. The much-anticipated update covering the Christmas performance alongside the wider business performance. In a highly dynamic market this update provides an essential insight for UK Food and Drink businesses targeting Australia for strategic growth.

With Coles Group clearly having momentum in the market at present we have taken a deeper dive into their strategy and the market outlook.

The updates providing valuable insights into both the headwinds and opportunities in the market and the outlook ahead to help you capitalise on the opportunity for your business either as a branded supplier or a Private Label contract manufacturer.  Crucially these two retailers have combined turnovers exceeding $90bn.

Woolworths reported first, top line details included: –

• Food Business Sales growth of 2.7%
• E-com growth 20%, driven by same day, direct to boot and milk run
• B2B (including PFD which grew at 6.05) 5.5%
• 1^st 7 weeks in H2 3.3% growth
• Supply chain disruption (DC strike) pre-Xmas having a significant impact on sales

Focus areas for the remainder of the year including:

• Focus on fundamentals, value, range and availability
• Simplification through restructuring of the Support Centre targeting $400m savings
• Embedding new structure and leadership team
• Portfolio shape review

Coles top line details included: –

• Food Business growth of 3.7%
• E-com growth 22.6%
• Exclusive to Coles brands performing well with over 5% growth, Coles Finest 10.2% growth and over 500 new lines
• Liquor growth of 2.0%
• 1^st 7 week in H2 3.4% sales growth

Focus areas for the remainder of the year including: –

• Continued investment in value
• Seasonal growth through key event execution
• Focus on fresh food quality availability
• Tailored ranges through the range reduction process

A deeper dive into Coles Strategy and the outlook

• Coles current strategy continues to deliver growth driven partly by the success of the Private Label strategy, building on the quality focus and now innovating into the premium category, ultimately giving customers more affordable choice from the value offer to the across store premium range. Additionally, the investing in the Automated Distribution Centre’s (ADC) are supporting the growth in on-line for home delivers and demonstrating the enhanced power of the supply chain to meet the extra demand on volume into Christmas further elevated by the strike impacting Woolworths. This will give confidence internally and to suppliers, which is critical in the current retail landscape.
• The highlights from the trading update are the momentum that Coles have built up over the last 12 months, especially with Australian consumers continuing to find things tough. The value rebrand has made the range easier for customers to find, ultimately helping them save money which will be important through the remainder of the year. On-line growth continues demonstrate momentum which is positive when we look at some of the online casualties this year and the changing dynamics in the market such as Costco deal with DoorDash.
• ADC – Bringing massive projects on-line such as the new DCs is a complex task and had the ability to severely impact performance, this looks to have been well managed and the additional volume reaching stores to support Christmas trading highlighting the strengthen capacity, whilst also showing the strength of the supply base to meet the demand. Pressure testing the system in this way sets a solid foundation to build on as the business demands. Whilst it’s been recognised that Woolworths were significantly ahead with supply chain capabilities what we know now is the gap has at least narrowed a great deal.

• With Private Label playing a key part of the growth strategy, it’s important to recognise that on global scale if penetration is mid 30s there is still plenty of opportunity to increase, and each % increase represents a considerable value. Cole’s portfolio of brands is today estimated to be a $14b business. In the short to medium term this growth lever should continue to deliver across the value offer and the Finest brand.
• Momentum is essential to build supplier trust as the supply community looks to itself unlock more value. This gives the confidence to invest and enhance sourcing capability. The growth in Private Label becomes a growth opportunity for the supply base, especially where suppliers produce brands and Private Label products.

In our latest blog post, we’ll delve into what this means for both the market landscape and explore the strategies you need to thrive in this exciting new territory. Understanding the high growth categories. Brand strategies and changing customer dynamics enables you to better understand the growth opportunities for your business.

 This report offers valuable insights on how the investment market has reacted compared to expectations. It also delves into the impact of consumer habits on driving growth and changing purchasing patterns, which in turn shape the retail landscape. Additionally, it highlights the key challenges that will require strategic attention in the current financial year.

For UK manufacturers seeking growth in markets like Australia, it’s essential to grasp trading updates and financial reporting. This understanding allows tailored offers to align with the market’s current narrative.

Prof. Consulting Group.

Are you looking to break into the Australian food industry? Look no further than Prof. Consulting Group! With our team of industry-leading experts and extensive range of services, we’ll help you take your business to the next level.

For more information or to discuss how Prof. Consulting Group can support your business, Contact Us Today.