The federal government has announced $60 million in additional funding to boost the Recycling Modernisation Fund (RMF) and accelerate the uptake of recycled content in plastic packaging and products. Read more
Jobs Victoria is working with major supermarkets including Coles, Woolworths and Aldi, as well as wholesaler Metcash, to link job seekers with food suppliers and reduce critical workforce shortages. Read more
The Banksia Foundation revealed the dates of its 32nd Banksia Sustainability Awards, which will be held virtually from March 23 to the 24, featuring some of Australia’s sustainability success stories.
ALDI Australia has announced that following a 40 per cent reduction of overall operational emissions from a 2012 baseline, it is now committing to 100 per cent renewable electricity to power its Australian operations by the end of 2021.
The commitment will be possible at the completion of a solar installation program and the procurement of two ten-year Power Purchasing Agreements (PPAs) with wind farms. The wind farms will provide renewable energy to all of ALDI’s New South Wales and Victorian stores. These will generate over 180,000 MWh of electricity and result in over 160,000t carbon emissions avoided each year.
ALDI will use the rooftops of its real estate portfolio to harness more than 15 per cent of its total energy use from the sun. By the end of 2020, over 250 of ALDI Australia’s stores and six Distribution Centres will have solar installations, totalling 102,000 panels of onsite solar energy generation, preventing 41,000 tonnes of carbon emissions entering the atmosphere every year. This will see ALDI have Australia’s largest commercial and industrial solar rollout to date. This is the equivalent of taking 11,700 cars off the road per year or generating enough electricity to power 7,000 average Australian homes.
ALDI is the 64th biggest user of electricity in Australia, powering 555 stores and eight distribution centres around the country. The businesses’ shift to renewable energy sources should provide clear evidence to Australia’s top energy users that renewable alternatives are affordable when factored in to long term planning.
The commitment to renewable energy has driven ALDI’s investment in more efficient systems to reduce both energy usage and carbon emissions. This includes reducing energy consumption by LED lighting and energy efficient chillers, upgrading to natural refrigerants and installing solar power systems, currently on 175 stores and six distribution centres.
ALDI is the first to admit that it still has trucks on the road and an extensive supply chain that relies on fossil fuels.
ALDI Australia’s commitment to becoming 100 per cent renewable is a part of the global commitment to achieve a company-wide target for climate protection endorsed by the Science-Based Target Initiative (SBTi). SBTi took a close look at the retailer’s international targets and validated them based on scientific criteria agreed by CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF).
In a letter to its business partners, ALDI Australia has encouraged them to set their own science-based emissions targets by the end of 2024.
One of the world’s largest retailers, Kaufland, has broken ground to commence construction of its first South Australian supermarket in Prospect, their first outside of Europe. It is one of three stores it will be building in Australia, with more to come.
The multi-million-dollar development, on a 24,000sqm vacant site, will feature a Kaufland supermarket, food hall, outside dining area and support tenancies.
The company has also secured planning approval for another Adelaide store on the former Le Cornu site on Anzac Highway at Forestville and has another development application currently being assessed.
Premier Steven Marshall said it was an exciting day for the state to have a company of Kaufland’s international standing build one of its first two Australian stores in Adelaide.
“Not only will this project create an estimated 150 construction jobs and up to another 100 retail jobs upon completion, it will offer South Australian consumers more choice,” said the Premier.
“Developments like this from major international companies show the confidence in the South Australian economy, reinforcing that we are heading in the right direction.
“Kaufland’s expansion into South Australia presents significant opportunities for the state’s food producers, as the company has publicly stated its desire to stock local products on its shelves which is fantastic news.
“We look forward to working with the company as they look to expand into further sites across Adelaide and the state.”
Minister for Trade, Tourism and Investment David Ridgway said construction of Kaufland’s Prospect store and the subsequent projects in Forestville and across Adelaide will provide a number of important contract opportunities for local construction companies.
“The company has already employed a local property development and construction management team in preparation for Kaufland’s expansion, which is a further indication of Kaufland’s strong commitment to South Australia and the local economy,’’ Mr Ridgway said.
“To have a global brand like Kaufland invest in property is a great reflection of South Australia’s global standing, and I’m confident this partnership will generate further trade advantages in the future particularly with Europe where Kaufland has almost 1,300 stores across the continent”.
Kaufland Australia’s Managing Director, Julia Kern said they are committed to investing in South Australia for the long term, and today’s celebration at Prospect is a tremendous and exciting milestone for Kaufland Australia.
The Prospect store will initially operate as a testing facility to train staff, practise processes and trial proposed concepts.
Construction of the Prospect store is due to be completed in late 2020.
ALDI has been considered the most-trusted brand in the latest Roy Morgan Net Trust Score survey, following on its success in the previous, mid-year, survey.
Data collected in October shows that Aldi continues to be Australia’s most trusted brand, with Bunnings, Qantas and the ABC are also holding their position in the top-10.
But, in the past three months there has been a big shake-up in Australia’s top-10 most-trusted brands.
Between Roy Morgan’s July and October surveys there were big moves in the rankings.
Car insurance group NRMA fell from 5th to 7th place, Bendigo Bank slid from 7th to 9th place, and Samsung, Myer, RACQ and IGA fell out of the top-10.
Kmart, ING, Toyota and Target all saw their Net Trust Scores improve enough to secure a place in the October top-10.
A brand’s Net Trust Score is generated by asking respondents, unprompted, to name brands they trust and brands they distrust.
Subtracting a brand’s distrust score from its trust score reveals its Net Trust Score.
Respondents for the Net Trust Score surveys are drawn from the 600,000-strong Roy Morgan consumer panel.
At a sector-wide levels, Net Trust Scores were lowest in banking, media and mining and petroleum, and highest in retail, consumer products and supermarkets.
Roy Morgan CEO Michele Levine said trust is vital to the success of any business, but the key message of the Roy Morgan Net Trust Score survey is that growing distrust can be a disaster, leading to customer churn, loss of market share and in some cases a long slide into oblivion.
“Understanding what drives trust with customers – and just as importantly with potential customers – is essential to brands wishing to improve their Net Trust Score.
“Trust is not just a ‘marketing’ or ‘comms’ issue – it goes to the heart of corporate culture and governance for every company,” said Levine.
“Whether it’s Facebook, the big banks or our major utilities, directors and their management teams need to think about the social drivers of trust and distrust – ethics, believability, integrity and transparency.
“The Roy Morgan NTS Report is a major step in helping achieve that level of awareness at all levels,” she said.
Prices between Coles’ and Woolworths’ private label brands and those at discounter Aldi have gone down by as much as 70 per cent in the past two years. According to the AFR, this reflects the major chain’s $1.6 billion investment into reducing prices.
At the moment, many private labels are under 10 percent pricier at Coles or Woolworths than one in Aldi. This is in comparison of the price gap of 23 per cent when Choice conducted a similar survey two years ago. This is reported as part of the larger strategy of neutralising competition from Aldi by trimming the prices of private label brands to appeal to bargain-hungry shoppers. Coles and Woolworths have also re-engineered their private label ranges to better compete with Aldi, improving packaging and product formulations to overcome consumer perceptions that their own-brand groceries were inferior to those at Aldi.
In addition, the price gap on leading national brands has also fallen, from 99.5 per cent at Coles in 2015 to 66 per cent in 2017, and from 101.6 per cent at Woolworths to 64.6 per cent, according to AFR.
Even though Aldi still remains the cheapest option, the price differential has narrowed significantly across the board as the major chains attempt to claw back market share from the discounter, which is now estimated to account for about 10 per cent of food and grocery sales on the eastern seaboard.
Citigroup analyst Bryan Raymond said Coles and Woolworths were attempting to minimise the loss of customers to Aldi by demonstrating better value with a mix of national and improved private label brands.
“In some respects it’s about slowing (Aldi’s) growth,” Mr Raymond said.
“Aldi has made material market share gains and Woolworths and Coles need to be careful they don’t lose shoppers because they don’t have a good value offer – they’ve made good progress on that over the last two years.”
“Aldi is still growing but the loss of customers from Woolworths and Coles has moderated and some of that is rightly attributable to their private label positioning,” he said.
According to Coles managing director, John Durkan , Coles was prepared to cut prices ahead of cost savings to ensure the supermarket chain stayed cheaper than Woolworths, which has invested about $1 billion into prices over the last 18 months.
“We’re going to carry on investing in lower prices to make sure we do what we said we’d do, which is to be the cheapest supermarket,” Mr Durkan said.
“We’re going to do it in a measured way [and] eventually our cost savings will pay for our investment in our business.”
Aldi will start selling its own brand products, sourced from Australian suppliers, online in China this month.
Reuters reports that the German discount supermarket chain will sell a selection of wine, snack and breakfast products through the online platform Tmall Global.
“For decades ALDI’s own brands have enjoyed the reputation of providing excellent value for money,” said Christoph Schwaiger, CEO of the retailer’s arm in China. “We are convinced that Chinese customers are also very interested in the quality and the reasonable prices we can offer them.”
An Aldi spokeswoman told Fairfax the “majority of these products will be sourced from Aldi’s existing Australian suppliers.” However, she did not say how many suppliers would be involved.
Entrepreneur Dick Smith has said Woolworths’ decisions to end its supply deal with SPC Ardmona was the fault of tough competition from Aldi, which could eventually run Woolworths and/or Coles out of business.
Woolworths has said it is reviewing the prices and volumes – as it does every year – for the coming season. It has not guaranteed it will continue its five-year, $70 million contract with SPC for tinned fruit, which began in 2014, and has dumped SPC as a supplier of tinned tomatoes.
Dick Smith has weighed in, telling AAP that this was the result of intense price competition from German supermarket chain Aldi, as well as the result of “extreme capitalism”.
“It’s clear that Woolworths and Coles will have to either replicate Aldi, that is, move to around 90 per cent home brand products and reduce their product selection from over 20,000 to just a few thousand, while sacking most of their Aussie employees, or they will be sent into bankruptcy,” Smith told AAP.
“There is absolutely no doubt in my mind that Aldi, with its incredibly low overheads – they hardly employ any Australian staff – and its private ownership in Germany – they don’t have the high costs of public listing – will mean they will eventually send one or both of our Aussie shareholder owned food retailers out of business.”
The tinned fruit deal was announced in 2014, at a time when the survival of the Shepparton operations of SPC Ardmona – and hundreds of jobs in the Goulburn Valley – were unclear.
Shoppers at Aldi are paying on average 14 per cent less than those at Coles and 12 per cent than those at Woolworths for the same goods, according to a study.
The study by Fairfax Media found that, of 125 branded products available from an Aldi store in one suburb, 36 were also available in neighbouring Coles and Woolworths stores.
The products included in the comparison included Coke, Tim Tams and Weet-Bix.
Paul Foley, an ex-Aldi executive explained how Aldi can offer cheaper prices on these goods.
“The brands they stock are generally those where either the quality available from private-label suppliers is inferior and not comparable, like [laundry detergent] OMO, or the marketing behind that brand is so huge that the consumer demands it, like the cola from Coke,” he said.
“However the deal between the supplier and Aldi is; first Aldi will take a larger pack size, often a pack size that is exclusive to Aldi so some economy is represented here and that Aldi does not embarrass other bigger retail customers (Woolies and Coles) of the brand with its selling price.
“Inevitably this means the discount per kilogram or litre on these branded items is nowhere near the discount Aldi offers on private label items.
However, according a Coles spokesman, the survey did not represent normal consumer behaviour or an average shopping basket.
He told the SMH that promotional specials can make products at Coles much cheaper than competitors.
Supermarket chain Aldi has recalled hot dog rolls sold from its stores in NSW and the ACT after metal shavings were found in some of them.
The affected products are the 450g ‘Bakers Life Hot Dog Rolls – 6 Packs’, sold in plastic bags with a clip, and carrying the best before date of July 14.
“Consumers should not eat this product as metal shavings may cause injury if consumed,” the NSW Food Authority said in a statement.
“Consumers should return the product to the place of purchase for a full refund.
“Any consumers concerned about their health should seek medical advice.”
An Aldi spokeswoman told the SMH the company is conducting a close investigation with the supplier of the product and is collaborating with the food safety regulating authorities.
For more information contact ALDI on 1800 709 993.
Woolworths is ditching its Select private label range. It intends to launch a new brand for a more focused range of products that promises more bang for the buck. The move comes after Woolworths decided in March to axe its Homebrand label as part of its strategy to compete with Aldi.
The move makes sense, but will likely do little to restore consumer trust and sales growth.
Management guru Michael Porter has long argued that products need a clear positioning in consumers’ minds as either special and expensive or convenient and cheap. Woolworths Select was neither, stuck somewhere in the middle. This positioning was confusing for customers.
But will fixing this problem make a difference, and perhaps even keep growing Teutonic supermarket force Aldi at bay?
Unlikely. After all, similar efforts are only baby steps towards what truly distinguishes growing companies: the ability to make consumers’ lives simpler. Think of Uber, Netflix, Amazon, but also Aldi. That’s the common denominator.
And yet, research shows that most companies keep confusing the gobbledegook out of us. A lot has been written about how consumers get more than they want, and how more product choice often makes us less happy.
But consumer confusion extends to other tactics too, like pricing and discounting. Shoppers increasingly ask questions such as: why are some products almost always on special (while others never are)? Do half-price offers mean that we usually pay twice as much as we should?
At best, discounts have become meaningless. While discounts were used successfully in the past to move excess merchandise, they have become ubiquitous and permanent, providing little incentive to respond. It’s a bit like the guy in the audience of a stadium that stands up to see more: it’s an effective tactic so long as not everyone else is standing up too.
Another major concern that emerges is product claims and packaging; for example, most consumers do not know the difference between “Product of Australia” and “Made in Australia”.
Also, products claiming to be “natural”, “real”, or “healthy” are usually hiding behind meaningless terms, undefined in labelling law and merely meant to persuade rather than inform people. The result is ever more confusion.
So what should brands do to simplify the consumer experience? Ironically, the answer to this question is not simple. It takes an awful lot of work to make things less confusing. An app that you visit once in a while and find easy to navigate may be the result of years of painstaking work, with many difficult decisions made behind the scenes about what should go where, and just as importantly, what to leave out.
Companies should start making every aspect of their product offerings simpler. Consumers do not appreciate clutter; they appreciate everything being transparent, clean and easy.
Marketers should understand that consumers rarely inherently care about brands. In some countries, only about 5% of brands would truly be missed. Whether consumers order an Uber ride, or buy a carton of milk, they often want to invest the least amount of effort and time in making the right decision.
Overloading consumers’ already saturated brains with all kinds of marketing tactics, including dynamic pricing and even heavy discounts can backfire or fall flat. This was clear when consumers showed a lack of interest in even 90% discounted product at Dick Smith’s closing down sale.
Instead, every decision brands make should be guided by a desire to help customers feel confident about their choices. Fortunately, we can learn from a handful of companies that have long understood the principle of simplicity in driving customer satisfaction.
No discounts, no confusing ads, no loyalty cards, no bullshit.
Aldi is the most profitable retailer in Australia and it should grow by about 15 per cent a year for the next three years, according to a new report.
According to AAP, the report by UBS analysts found that the German supermarket chain is growing four to five times as fast as the overall Australian grocery market and that it could grow to $14.8 billion by 2019 if the company focuses on fresh food on customer service.
In addition, by 2019-20 Aldi is expected to grow its share of the national grocery market from 7 per cent to at least 10 per cent and take a significant share of business from industry heavyweights, Coles and Woolworths.
Indeed, according to the report, Aldi could claim $450 million in sales per year from Woolworths over the next three years. It added that Coles is handling the challenge better than Woolworths.
UBS analyst Ben Gilbert pointed to the experience of Aldi overseas as having similarities to what is happening here.
“In the UK the tipping point came when the discounters (Aldi and Lidl) lifted their share of main shops to more than 10 per cent,” he told Fairfax Media.
“We think Aldi’s share of main shops is 8 per cent nationally, 10 per cent on the east coast and 15 per cent in their catchment.”
Woolworths’ plan to rebrand its private label ranges in an attempt to meet changing shopper demands and combat the growth of Aldi will simply play into the hands of this German discounter.
This new strategy, a replication of what Coles did in November 2015, will see their existing “Homebrand” and “Woolworths Essential” product ranges combined under the “Essentials” brand name. However, in focusing on price and private label ranges, supermarkets are in a race to the bottom where there are no points of difference in products except for price.
The risks with the private label strategy
The fastest, although not the smartest, way to compete with a competitor like Aldi is to replicate; and that’s exactly what Woolworths and Coles have been doing for the past five years. With both major supermarkets driving a message of “price” and increasing their private label ranges, more shoppers also started frequenting Aldi.
Internationally, grocery discounters like Lidl and Aldi continue to steal market share from the major full-line supermarkets, while supermarkets continue to discount heavily. The practice of deep discounting and private label expansion limits the differentiation between the grocery players and accordingly reduces shopper loyalty. As such, with no supermarket providing a point of difference, more and more customers simply shop around for the lowest price.
The problem with “no-name” products
Franklins No Frills was Australia’s first low-cost grocer, with a narrow range of very low priced, generic, “no-name” grocery products. This concept of “no-name” products was new to Australian shoppers at the time and Franklin’s market position initially worked in its favour.
However, Aldi’s entry into the Australian market in 2001 changed the way we looked at private label products. While Woolworths “Homebrand” and Coles “Smart Buys” prices were generally as cheap, if not cheaper than similar entry-level private label products at Aldi, consumers considered the quality of these basic “no-name” products to be substandard to higher tiered private label products.
These lower perceptions are related to packaging. In a low involvement, routine shopping task, supermarket shoppers will often employ simple logic (often brand or price) to determine quality and aid selection.
Woolworths “Homebrand” and Coles “Smart Buys” were designed in plain packaging with no pictures to infer low price. However, shoppers also related low price and plain packaging to mean low quality.
In contrast, Aldi’s private label ranges mimic nationally branded products. As such, shoppers perceive Aldi’s private label ranges to look similar to the nationally branded alternative and correlate quality. The lower price then creates a positive value experience for the shopper.
Woolworths’ new strategy equally is about improving perceptions of brand, through new packaging, while maintaining, or even lowering price.
The rise and rise of supermarket private labels
Where once private label grocery products were considered a “cheap and nasty” alternative for the branded product, supermarket quality assurance teams have changed this mind set. Today’s supermarket private label products, offer quality on par with national branded alternatives, with some, so closely resembling the market leader, one would be forgiven for grabbing the wrong box.
Australian consumers appear to be warming to the supermarkets’ private label products. Research last year indicated that the number of Australians who tend to buy private label groceries over big name brands rose from 44% to 65% in the space of just six months. In comparable markets, like the UK, the proportion of private label sales is almost at parity with national branded products and across Europe, countries like Switzerland and Spain have already reached more than 50%.
The strategy of increasing the proportion of private label products will meet the needs of shoppers who seek value over brand, but also provides sufficient margin to allow supermarkets to slash prices further.
How will private label impact supermarkets in the future?
When it comes to choice in the supermarket, some is certainly better than none, but more is not necessarily better than less. Australian shoppers can expect less choice in the supermarket of tomorrow and this may not be a bad thing.
For many years, Australian supermarkets promoted vast ranges of brands and products, believing that broader, deeper ranges would satisfy shoppers. However, recent research suggests that, psychologically, this assumption was wrong. In fact, shoppers faced with excessive choice found it difficult to choose and were less likely to purchase.
Aldi has demonstrated the power of “less”. Selling only 1700 products, the supermarket’s small ranges may deliver less choice, but saves shoppers time, this creates less confusion and satisfies most.
Globally, where German discounters like Aldi or Lidl have entered the market, incumbent supermarkets have slashed range. Recently, Tesco cut 20,000 product lines from their 90,000 range, similarly Coles in 2012 reduced its range by some 7,000 products.
While this strategy responds to customers who are looking to make their grocery shopping more efficient, it also reduces supply chain costs for supermarkets.
Gary Mortimer is Senior Lecturer, QUT Business School, Queensland University of Technology.
It’s reporting season, and over the past few weeks some of Australia’s biggest companies have been releasing information on how they’re travelling. These reports reflect key themes of how things are going in key sectors of the economy. Over coming days we’re going to report on the results a handful of major companies in key sectors, transport, construction, retail, mining, insurance and banking. Today we look at the retail sector.
Dominant retail giants Wesfarmers – owner of Coles supermarkets – and Woolworths hold a 70% of market share of Australia’s fresh food grocery market, but have had contrasting fortunes over the past few years. Half-year results for Wesfarmers and Woolworths for 2016 show very different outlooks.
Meanwhile, the major retail players are continuing to feel the disruptive impact of smaller players such as Aldi and highly competitive market conditions; both will have employ new strategies away from the tried and true defensiveness that has worked in the past.
Wesfarmers reported a net profit after tax of $1.4 billion, up 1.2% since the same time last year, while Woolworths reported a net loss of $973 million after a profit of $1.3 billion. Over the last few years Coles has seen stronger sales growth and comparatively better market share.
By contrast, Woolworth’s strategy problems with its home improvement business, Masters, has been widely ventilated. The company attributed $1.8 billion loss to the costs related to its exit from Masters.
Woolworths' underlying profit was $925 million, still down 33% on prior year. Woolworths would hope that its exit from the ultimately costly Masters endeavour will serve as a boost to investor confidence.
Woolworths has also struggled with branding and has seen advertising agency changes over the last few years the most recent being the dropping of Leo Burnett and a return to M&C Saatachi.
Perhaps more revealing to the outlook of the industry are some of the underlying similarities in strategy. Both Woolworths and Wesfarmers emphasised price deflation, cost reduction and further price cutting, as key strategies.
The companies expect highly competitive market conditions and consumers to remain price sensitive, and will largely focus on improving supply chain productivity, through cost reduction. Woolworths is reducing its spending on activities such as marketing, property acquisition and rent as part of $500 million in cost savings during the 2016 financial year (July 2015 to July 2016).
In an industry where profit margins are already low, such intense competition would carry significant risk. If sales don’t meet expectations, the retailers have little room to lower prices when margins are low. As a consequence, covering fixed costs like maintenance and rent of stores becomes increasingly difficult and the likelihood of making a loss is higher.
To some extent these price wars reflect the two retail giants directly competing against each other, but another factor is the disruption caused by new entrant Aldi. The supermarket chain has gained 11% of the market since it came onto the scene in 2002, using its streamlined, low cost supply chain to undercut Woolworths and Wesfarmers on price.
Aldi is a unique player in this space. In the past Coles and Woolworths could exercise their market share and size to squeeze out small producers; but Aldi is a different beast, a global company with a presence in both Europe and the USA.
Aldi may not even be the biggest problem facing the locals, if reports that European retailers such as German retailer LIDL are sizing up the Australian market prove true. LIDL is the fourth biggest retailer in the world, with $128 billion in annual sales. Whatever hold true for Aldi is doubly true for LIDL. Other hypotheticals floated around Danish discounter Netto and UK grovery giant, Tesco.
The traditional defensive strategy against competitors employed by the Aussie giants relies on economies of scale, being larger than your rival and being able leverage this efficiency to deliver a cheaper end product or more controversially to loss lead and force your opponent out of business maintain your market share and eventually maximise your profit.
Woolworths and Coles are falling back on their old ways to try and beat Aldi, the companies' corporate strategy for the most part is focused on a doubling down on the traditional squeeze out all newcomers approach. However Aldi brings global resources to the table that Woolworths and Coles don’t have access to.
In the retail sector Aldi will continue to steal market share from Wesfarmers and Woolworths more so if the companies continue with old strategies and don’t think of a way to innovate the retail space.
Shumi Akhtar is a Senior Lecturer at University of Sydney.
Farida Akhtar is a Lecturer at Curtin Business School, Curtin University.
Product Name: Milfina Summer Delight Ice Cream, 6pk/540m
Product Manufacturer: ALDI Australia
Launch date: January 2016
Ingredients: CARAMEL FLAVOURED ICE CREAM [CREAM, MILK, LIQUID SUGAR, WATER, MILK SOLIDS NON FAT, GLUCOSE SYRUP (FROM MAIZE), NATURAL FLAVOURS, EMULSIFIER (471), VEGETABLE GUMS (412, 410, 407, 401), NATURAL COLOURS (160a, 160b)], BISCUIT CRUMB (17%) [WHEAT FLOUR, SUGAR, VEGETABLE OIL, GLUCOSE SYRUP (FROM WHEAT), MALT EXTRACT (BARLEY, RICE), SALT, MINERAL SALT (500), NATURAL FLAVOUR], COMPOUND CHOCOLATE (12%) [VEGETABLE OIL, SUGAR, NATURAL COLOURS (150a, 162, 153), COCOA POWDER (3%), MILK SOLIDS, EMULSIFIER (SOY LECITHIN), NATURAL FLAVOUR]
Shelf Life :12 months
Packaging: Individually wrapped ice cream sticks inside a full colour cardboard box
Country of origin: Made in New Zealand
Brand Website: https://www.aldi.com.au
Describe the product: Sure to be a hit with the entire family, these caramel and vanilla flavoured ice creams have been dipped in chocolate and wrapped in sweet biscuit pieces. With no preservatives, artificial flavours or colours, they are a perfectly cool treat to have on hand during the summer season
Contact Email: ALDI@creation.io
Collectively, Australia’s supermarket and grocery stores and fuel retailing industries will generate an estimated $ AUD125.1 billion in 2015-16. Business information analysts at IBISWorld forecast that this figure will reach $AUD134.5 billion by 2020-21.
The traditional supermarket giants Coles and Woolworths currently account for more than 70 per cent of the supermarkets and grocery stores industry in Australia, and over 40 per cent of the fuel retailing industry.
Competitor Costco’s continued expansion has seen the bulk-buying retailer grow its share of supermarket revenue. According to IBISWorld industry analyst Brooke Tonkin, “the company already claims 1.2 per cent of this $ AUD88.1 billion dollar industry, with only seven stores.” Costco’s ongoing diversification into the fuel retailing industry is expected to increase competition, with the company’s low-price strategy attracting motorists, as customers have little brand loyalty in terms of fuel.
“The trading landscape for supermarkets and fuel retailing has changed considerably over the past three decades, with new entrants increasing competition, and changing consumer preferences creating new challenges and opportunities,” said industry analyst Brooke Tonkin.
Supermarkets and grocery stores once operated alongside specialist food retailers, but now compete fiercely with specialist retailers on price and product range in a bid to attract shoppers. Industry retailers like Coles have recognised the importance of price competition by implementing substantial price cuts across their stores. Consumers have become increasingly price-conscious, and want to be assured that they are purchasing value-for-money goods.
Sales volumes generally remain relatively static for supermarkets, as shoppers tend to buy similar goods from week to week. As a result, price cuts have a significant effect on profit margins. To combat price competition and maintain profit margins, Woolworths has been forced to reduce costs.
“While supermarkets continue to compete on the basis of price, other factors such as convenience, product variety and quality have emerged as driving forces in securing customer loyalty. This helps explain the growth of Costco, which has steadily gained market share over the past five years,” Ms Tonkin added.
The Costco model
Convenience has become a major factor in attracting customers, with major supermarket players attempting to broaden their ranges to include basic necessities as well as specialist gourmet products. Meanwhile, Costco is attempting to increase its market share through the opening of new stores, and the sale of a diverse range of products in bulk. The expansion of new stores has been a major driver of ALDI’s growth, and similar success is expected for Costco, as the number of stores is a key competitive factor.
Costco offers a much wider range of products than the current supermarket duopoly at its seven Australian stores, including clothing, televisions and other appliances. Costco’s bulk-buying power allows it to offer very low prices. The wholesaler is able to offer such large discounts on its products and remain profitable due to its annual membership fee of $AUD60.
The majority of the company’s profitability comes from this fixed source of revenue, allowing it to pursue aggressive price competition. Costco’s earnings before interest and tax have only shown positive results once in Australia since 2009, indicating that the company is primarily focused on gaining market share in Australia. The membership fee also helps foster customer loyalty.
Store location is also important, and Coles and Woolworths have attempted to broaden their reach by expanding fuel station grocery offerings into mini supermarkets. “Costco’s expansion into fuel retailing is in line with this trend, as the wholesaler plans to become a convenient one-stop-shop where customers can buy all their groceries and fill up on petrol in the one location,” Ms Tonkin explained.
The fuel retailing industry faces a high level of competition, as price and location largely determine where motorists buy petrol. “Most consumers see petrol as an undifferentiated product and therefore purchase on price – there is effectively no brand loyalty,” Ms Tonkin said.
The Costco fuel retailing strategy offers customers convenience and consistently lower prices, in line with the company’s grocery strategy. Costco’s establishment of a Moorabbin store with fuel pumps is a first in Victoria.
The first Australian Costco fuel station was established in Liverpool, NSW, in November 2013. The introduction of a fuel station at the Brisbane North Lakes store in May 2014 prompted a flurry of price cutting in the surrounding area, as other fuel retailers scrambled to compete with Costco’s low prices.
However, Costco’s fuel prices remained lower than other retailers in the city, with customers saving up to 15 cents per litre. In the months following its opening, competition from Costco has continued to force down prices among other petrol stations in the area.
The way forward
As ALDI and Costco continue to expand in the supermarkets and grocery stores industry, the well-established major players are expected to look for new ways to remain competitive and boost market share. Woolworths announced in September 2015 that it would invest $AUD65 million in store improvements and increasing staff hours. Meanwhile, Coles has already begun upgrading some of its larger stores to a new market-style format.
“These strategies are designed to keep shoppers instore for longer by presenting stores as foodie destinations, and attract greater sales through premium offerings such as ready-made meals and delicatessen products,” said Ms Tonkin.
These new stores also offer patisserie goods, artisanal breads and even sushi bars. However, major competitor ALDI is also transitioning its stores to a market-fresh approach, with more fresh food, branded groceries, and ready-to-go and organic food. This is expected to further increase supermarket competition.
ALDI Australia is commencing recruitment for almost 400 new positions across Western Australia, as it prepares for statewide expansion in 2016.
From today, ALDI has opened applications for Store Managers and Assistant Store Managers. Other roles including Trainee Store Manager and Store Assistant positions will open from December 12.
“As one of the country’s fastest growing retailers, ALDI is looking for dynamic, enthusiastic and ambitious people to help bring the ALDI difference to Western Australia,” said Viktor Jakupec, ALDI Managing Director – Western Australia.
“ALDI employees are highly motivated and dedicated to delivering the best shopping experience to our customers. In return, they are provided with rewarding careers, development opportunities and industry-leading employment benefits.”
As part of its commitment to staff, ALDI offers paid maternity leave (18 weeks at half pay), five weeks annual leave for full-time employees and salaries that are well above industry standards.
New employees will undergo extensive training to learn the ALDI way of doing business. West Australian Store Managers and Assistant Store Managers will also receive in-store training at one of ALDI’s existing stores on the eastern seaboard.
“Our commitment to the personal development of ALDI employees starts from day one,” Jakupec said. “ALDI’s training program sets our employees up for career success. We’ve enjoyed seeing our staff grow alongside our business and independent employee surveys have consistently shown high levels of job satisfaction.”
As ALDI’s West Australian expansion continues to progress, confirmed locations of interest include Nedlands, Lakelands, Belmont, Australind, Mandurah, Cannington, Camillo, South Lake, Haynes, Halls Head, Wattle Grove, Lakeside Joondalup, Midland, Rockingham, Ellenbrook, Southern River, Busselton, Kwinana, Maddington, Mundaring, Secret Harbour and Waikiki.
The Australian Competition and Consumer Commission is investigating reports about the approach supermarket retailers are taking to implement the Food and Grocery Code of Conduct (Code).
ACCC Chairman Rod Sims said, “The aim of the Code is to redress the imbalance in bargaining power that can exist between suppliers and large grocery retailers by prohibiting certain types of unfair conduct”.
“The Code imposes a duty to deal with suppliers in good faith and we are concerned by reports we have received from suppliers that suggest that some retailers have not got off to a good start when it comes to implementing the Code,” Mr Sims said.
“The ACCC has concerns as to the manner in which some retailers, in particular Woolworths and Aldi, are presenting new Grocery Supply Agreements (GSAs), which might give the impression that the supplier is not able to negotiate the terms of the GSA.”
“The ACCC is also concerned about the low level of detail provided in some GSAs about the circumstances in which certain payments may arise.”
The Code sets out a number of prohibitions on, for example, requiring a payment for wastage that occurs at the premises of the retailer. While it is possible for retailers and suppliers to opt out of such prohibitions, this can only occur if the opt outs are agreed, if the agreement sets out the circumstances in which the opt out applies and if the payment is reasonable in the circumstances.
“One of the purposes of the Code is to provide certainty to suppliers, who are often in a much weaker bargaining position when dealing with retailers. In order to provide that certainty, the ACCC expects retailers to set out the circumstances in which they will seek payments from suppliers,” Mr Sims said.
The Code requires that retailers offer code-compliant GSAs. Suppliers should not feel compelled to sign these agreements and should seek advice before signing them. In particular, the Code will confer protections on suppliers 12 months after a retailer has signed up to the Code, regardless of whether a supplier has accepted a code-compliant GSA.
The ACCC said it has written to retailers about the manner in which they purport to be giving effect to the Code. The retailers have responded providing their new GSAs and the correspondence they have sent to suppliers offering the new GSAs.
The said ACCC said it will continue to monitor compliance with the code.