Competition for the $82 billion grocery market in Australia, is no longer a two horse race dominated by Woolworths and Coles. Aldi's rapid growth in Australia has seen their customer base increase four-fold during the past eight years, from an average of 1 million customers per month to 4.2 million per month. Their low cost pricing and expansion of supermarket stores (now standing at around 340 across Australia) is making them an increasingly popular destination amongst Australian grocery shoppers.
Here are the five main reasons why I believe that Aldi is playing a key role in changing the supermarket landscape in Australia, particularly on the price-competitiveness of this sector.
- - - - - - - - - - - - - -
1. Aldi's Low Cost Private Label Products:
Almost all of Aldi's products are private-label (e.g Aldi Baked Beans) whereas Woolworths and Coles traditionally sell the produce of third-party suppliers (e.g. Heinz beans). This makes it very difficult to compete with Aldi's prices as it's highly unlikely that Coles and Woolworths will be able to charge less for a can of Heinz beans than Aldi can charge for it's own cans of beans.
2. Government Intervention Putting Pressure on Coles' and Woolworths' Pricing:
Coles and Woolsworths do appear to be broadening their range of private label products (often produced from cheaper international sources) in order to remain price-competitive, although this has resulted in a backlash from local suppliers who have called on the Government to take action. Along side this, intervention by the competition watchdog, the ACCC, in the Australian grocery market is also on the increase as they pursue investigations into alleged bullying of suppliers by supermarkets.
This will be putting huge amounts of pressure on both Coles' and Woolworths' ability to maintain competitive pricing without continually cutting into supplier's margins. All the while Aldi, who have already knocked Metcash’s IGA supermarket network into 4th place in terms of market share, will be able to use this to their advantage and continue undercutting grocery prices on a broader range of products.
3. Suppliers Prefer Dealing With Aldi:
The Nielsen Retail Barometer 2013, a full copy of which is closely guarded by retailers and suppliers, is an annual report which bases its findings on interviews with shoppers, retailers and suppliers. A particularly revealing finding in the report arose from the question which asked suppliers who they would nominate as retailer of the year. Their responses were as follows: 64% chose Aldi, 21% chose Coles while Woolworths limped in with just 7% of the votes. Also, when it came to suppliers rating their relationship with retailers, the proportion of votes was very similar again with Aldi standing out as the clear favourite. What this ultimately implies is that the supermarket with the best relationships amongst its suppliers is far more likely to be able to negotiate the best deals.
4. Aldi Opening Doors For Other International Supermarket Chains:
Aldi's popularity to date amongst Australians has undoubtedly been noticed by other supermarket giants from abroad, probably also considering entering the Australian market. It's said that British grocery retailers Tesco and Asda Stores have frequently sent over teams to Australia to scope out the grocery market in recent years. Thus, Aldi's success could likely be paving the way for more international supermarket chains to make their move down under. This would only increase competitiveness helping lower prices even further for Australian consumers.
5. Aldi's Everyday Low Prices vs Weekly Specials:
Aldi has a budget product range called "Everyday Essentials" featuring a wide selection of common, everyday groceries. The company also has a national pricing policy meaning prices are fixed across all of their stores nationwide. This contrasts the traditional approach by supermarkets of having weekly specials and discounts on a selection of items, which tend to vary from state to state (and often from store to store as well). Customers therefore get to enjoy much more transparency and consistency with Aldi's pricing as they are no longer forced to contend solely with the fluctuating product costs of other supermarket chains.
- - - - - - - - - - - - - -
Aldi's Smart Shopping Tool:
Is you're wondering how much shopping at Aldi can save you, I suggest you do yourself and favour and run some price checks at Aldi using their helpful online Smart Shopping Tool. This allow you to compare prices on their grocery items which you regularly buy from elsewhere. If you're somebody who's not overly-loyal to particular brands, then I suspect you'll be surprised at the competitiveness of Aldi's prices across a very wide range of products - not to mention their quality.
Aldi Price Comparisons:
To give you an idea of some of the great value products offered by Aldi, here's a quick list of comparisons with Coles and Woolworths products:
- Aldi toast bread is $0.99 per 700g (or 15c per 100g) - Coles own brand is $2.30 (or 33c per 100g); Woolworths own brand $2.70 (or 39c per 100g).
- Aldi free range eggs are a dozen for $3.99 (or 57c per 100g) - Coles own brand is $4.70 (or 67c per 100g); Woolworths is the same.
- Aldi tomato sauce 2L for $3.69 (or 18c per 100ml) - Coles is $4.33 (or 22c per 100ml); Woolworths is $4.29 (or 21c per 100ml).
- Aldi olive oil 1L for $5.49 (or 55c per 100 ml) - Coles is $7 (or 70c per 100ml); Woolworths is $10.20 (or $1 per 100 ml) which is their cheapest option available.
- Aldi long grain rice 2kg for $2.99 (or 15c per 100g) - Coles is $4.30 (or 22c per 100g - although they have a "smart buy" offer currently costing 18c 100g); Woolworths has a 1kg pack only for $1.50 (also 15c per 100g).