Coles And Woolworths Trading Update

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

The socioeconomic conditions of Australia make it an attractive market to many food and drink businesses targeting strategic growth. For well established brands the opportunity to engage with the two leading retailers Woolworths Group and Coles Group providing access to almost 2/3rds of the country’s grocery market and around 40m customer transactions per week. The diverse population creating demand for a wide range of foods, flavours and cuisines.

This week both retailers have delivered their financial reports which highlight the headwinds and opportunities in the market and provide a valuable insight into the outlook ahead to help you capitalize 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.

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.

Coles Group

Key callouts being:

• At the Group level total sales revenue rose adjusted to growth of 5.7% to $43.6B, with a Food Sales of $39B a 4.3% increase for Supermarkets and profits of $1.1B
• Private label performance including exclusive brands highlights include over 1100 new lines, over 70 new Finest lines (within the premium range), in excess of 100 rebranded value lines and more than 244 new lines also within the liquor business.
• With Private label total value now exceeding $13.5B, finest sales grew by 20.4%
• Online sales experienced significant sales growth of 30%
• Liquor revenue declines as the market continues to be challenging by 0.3%
• Supplier spend exceeded $34.7B

Headwinds or Challenges? 

• The strong performance was attributed in part to realising significant cost savings, improvements in availability, progress in reducing stock loss (theft) and leading with Quality. All of which can be summarised as doing the basics better and, in our view, creating a solid foundation for future growth and maintaining momentum.
• Areas of innovation highlighted include the development of AI with a focus on both customer and team member experiences alongside the commissioning of the two new automated DCs where further improvements in availability have also recently been reported
• Finest and Convenience highlighted as key growth categories within Private label

Woolworths Group

Key callouts being: –

• Australian Food Sales $50.74B up by 7%
• Private Label performance 5.1 % growth, with item growth at 3.0%. Long life categories growing the fastest at >9.4% as consumers look for value, Fresh Private Label sales growing at 4.3% with bakery a callout and the wider growth rate attributed partly to a decline in inflation across meat and fresh produce.
• Online also performs well with 18.41% growth for e-com and the Milkrun with its delivery in under 60 mins also performing strongly
• Key initiatives and investment around analytics aiding improvements in promotional activity and ranging,
• NZ Food Performance $8.166m up 1.3% with key callouts highlighting the toughness of the local market conditions impacting growth.

Headwinds or Challenges?

• The continued focus on new smaller store formats remains a priority
• Challenges are clearly facing the new CEO across the Bricks & Mortar stores to regain momentum

What does it mean? Is it a good time to target the Australian market for UK-based food manufacturers or brand owners?

Yes, in our opinion there remains 2 strategies when looking to engage the 2 largest retailers in the market that should appeal to UK based food and drink businesses targeting the Australian market. The demand for branded innovation to inspire consumers whilst delivering a clear point of difference in a highly competitive retail landscape remains a key trading objective.

Firstly, through a deep understanding of the target category taking proven innovation from other established markets into Australia or products that have a clear USP should appeal to buyers.

Secondly is understanding the strategic growth in Private Label and the opportunity this creates for your business, as buyers target best in class contract manufacturers, proven innovation capabilities, lowest cost operators or suppliers that can deliver on the increasingly demanding Responsibly Sourced agenda.

There is also the hybrid distinguishing combing the launch of your brand alongside Private label supply to drive growth into the total category.

A standout opportunity that is further established in the UK market is the strong growth the UK retailers are reporting in premium products, fuelled by consumers spending more in store whilst eating out less. With Coles clearly accelerating innovation in this area the demand for premium products will continue to be a priority.  The additional movement towards co-branding with premium products to increase the connectivity with consumers has the added benefit supporting longevity of supply

The consistency of messaging regarding Private Label and its strategic importance for consumers creating demand for innovation that can support the ongoing momentum behind Private Label growth. The past 2 years have seen an influx of new international brands offering innovation, choice, and consistent supply – boosting confidence among buyers and consumers – a trend expected to persist when products have an appealing purpose. We believe the emphasis on health and well-being will continue to grow faster than the market as value-conscious customers aim to indulge in those special moments affordably.

In summary the opportunity for innovative or exciting UK Food and Drink businesses targeting growth in the main Australian retailers continues to look attractive. To succeed its essential to take a strategic approach to retailer engagement understanding the competitive landscape, key marketing messages resonating with consumers and have a route to market through a robust supply chain solution

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.