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Coles shoppers are choosing sparkling wine, prosecco and rosé over champagne, swap craft beer for mainstream brands, and pick up premixed drinks over spirits as it increases its budget-friendly options ahead of Christmas amid rising cost-of-living pressures.
Australia’s second-largest supermarket chain saw group revenue increase 3.6 per cent to $10.3 billion between June and September, boosted by 9.4 per cent growth in private-label brands.
Coles is preparing for Australians to celebrate Christmas at home.
Chief executive Leah Weckert said the cost-of-living crunch was front of mind for customers, and Coles was making it a priority to deliver more affordable products, with a customer survey signalling 20 per cent more Australians are looking to cook, eat and celebrate at home this year than last year.
“We’re very proactively doing things like reducing the cost of ham versus last year and finding really great value options, so customers can balance their budget. That’s a huge focus area for us at the moment,” she said on Thursday morning.
Going into Christmas, shoppers are expected to continue “trading down”, she said, with economic experts flagging the possibility of two more rate hikes before the new year and putting further pressure on household budgets.
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“Customers are trading out of, for example, steaks into mince, or out of red meat into chickens, to find cheaper and more affordable alternative for protein. Some of the other things we’re seeing is that they’re buying in bulk and then cooking in bulk and freezing at home,” Weckert said.
In-store Liquorland sales revenue growth was reasonably steady at 1.8 per cent, but it was a different story online, where people are increasingly buying food and drinks: ecommerce liquor sales soared 32.2 per cent, accompanied by a 24.6 per cent growth in online grocery shopping.
Coles’ quarterly figures appear to have undershot expectations, with investors sending the share price down 0.5 per cent in late morning trading. UBS analyst Shaun Cousins assessed supermarket’s like-for-like sales growth as “slightly below market,” while E&P Capital retail analyst Phillip Kimber said Coles’ results has missed expectations.
MST Marquee senior research analyst Craig Woolford said Coles’ sales growth “slowed more markedly” than revenues at its larger competitor Woolworths.
“We expect small downgrades to earnings given the weaker trends are likely to continue,” he wrote in a note.
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Like Woolworths, Coles saw fresh fruit and vegetable prices soften, declining 14.5 per cent compared to the same period last year during which colder weather and La Niña flooding severely impacted growing conditions.
However, overall food inflation – excluding tobacco and fresh produce – rose to 5.7 per cent as prices for dairy products like cheese, eggs and oil remain elevated, affected by high farmgate milk prices. The prices of bakery items have also been impacted by higher wheat commodity prices.
Coles is also contending with rising theft, and is implementing stock loss technology such as cameras that can determine if items have skipped the scanner and ‘smart gates’ that lock the wheels of trolleys if someone tries to leave without paying at 250 of its most affected stores by the end of the year.
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