Amidst all the supermarket turmoil in Australia recently, ALDI has now joined the battle to compete for customer business by dropping the price of its meats too. Supermarkets such as Coles and Woolworths previously decided to reduce meat prices in efforts to become loss-leaders and to attract more customers into their stores. But now ALDI has joined the race turning the supermarket landscape into an even more fruitful money saving opportunity for us, the customers.
Cut legs of lamb and other fresh meat products in a basket comparison revealed that Woolworths is still sitting behind Coles in the rankings. However, as of Wednesday 22 June ALDI opted to join the battle and slashed its prices too. Expect to find their legs of lamb reduced by 50¢ per kilo, chicken drumsticks by 50¢ per 2kg and whole chickens by 20¢ per kilo - and that’s just the beginning!
This price dropping is providing customers with great opportunities to save money on a range of different meat products. Woolworths recently dropped its meat pricing by roughly 8% which was immediately matched by Coles. Woolworths committed to reducing its roast leg of lamb prices by 28% as part of its $45 million spend on lowering prices in the meat category. Unfortunately, Coles didn’t give Woolworths much chance to spread its wings because it soon followed suit and discounted its meats by 30%.
NSW completed a meat basket comparison on June 22 and ALDI’s basket came to a total of $93.52. Meanwhile, equivalent products from Coles cost $112.55 and $114.94 at Woolworths. This means that if you were to shop at ALDI you could save either $19.03 or $21.42 respectively. Obviously the big supermarkets hit back accusing ALDI of displaying incorrect values on some of it's figures, but only by $3-$4 which isn’t the end of the world because we still get the general point.
To put this issue to bed definitively, last month Credit Suisse produced a report revealing that Woolworths was 23% more expensive than ALDI, whilst Coles was actually 26% more expensive. Their report was based on 110 packaged and fresh items bought from Woolworths during the last week of May and the bill came to $573, whilst at Coles the total bill was $586 and ALDI $465.
Both supermarket giants claim that they are dipping into their profit margins to pay for these price cuts, but since ALDI has joined the battle the price cut supermarket hasn’t mentioned how much it is spending on the cuts. ALDI is known as being the price leader in the Australian market, but as a business, it stated that it does not believe in imposing pricing levels that are not sustainable in the long term or putting extensive pressure on supply chains. As a responsible business, ALDI have said that they try to reduce the negative impact on its supply chain wherever possible when entering price battles such as this.
The National Farmer’s Federation chief executive, Tony Mahar warned the supermarkets that due to increased commodity prices such as energy and transport prices, the suppliers could not be held responsible for absorbing the cuts. Those cuts must come from the profit margins of retailers because draughts and floods had already applied additional pressure on supplier overheads.
As always, when a price battle like this commences, there is really only one true winner and that is the customer. But how low can these prices actually go? This all depends on the margins and losses that Woolworths has to play with, because it is this supermarket in particular that is aiming to change the public’s opinion (an expensive option). In comparison, the UK supermarket industry experienced peak prices during 2012 and since then the battle has been continuing with a true bottom figure on margin percentages yet to be found.
Tesco and Morrisons in the UK dropped from the mid to high 5% profit margin area down to the mid -1’s. This was the same case with Carrefour in France which peaked in 2004 and took eight years to find the bottom. Ultimately if we experience anything like this in Australia, we are in for a whole host of price-competitive deals, shopping bargains and more money saving opportunities than we have ever seen before.