IGA joins supermarket price wars, slashes prices

The supermarket duopoly of Coles and Woolworths is already facing major disruption from the likes of Aldi and a possible debut by Lidl, and another player has just jumped into the fray.

Metcash-owned grocery chain IGA has launched a new price-matching campaign, and has already moved to drop prices on more than 2000 products.

IGA, which has 1200 stores nationally, claims its Price Match Promise initiative will match hundreds of everyday items such as breakfast cereals, coffee and pasta to the rates offered by the big players.

“Many of our customers said to us that they prefer to shop at their local IGA, and while we have great specials, we could do better on our everyday shelf prices – price is important for Australian grocery shoppers,” Chairman of IGA National Council, Ben Ryan said.

According to reports, some of the biggest discounts include a tub of Streets ice cream, previously sold by IGA for $6.96, now slashed to $4.90, the same price charged by Coles.

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Ryan said the initiative will offer customers a better choice in the market and encourage them to shop with independents.

“Quite simply Price Match enables locals to shop at IGA* without paying more on everyday items,” he said.

The campaign has launched nationally (except NT and ACT) with over 800 stores participating.

IGA’s response comes at a crucial time of change in Australia’s supermarket landscape.

German giants taking over

German discount chain Aldi has been giving Coles and Woolies a run for their money of late and its sales are projected to increase from their current level of $5.3 billion to $9.3 billion by 2019.

This is an estimated $250 million to $350 million of sales from each Woolworths, Coles and Metcash.

UBS analyst Ben Gilbert says Aldi could lift sales by 12 per cent per annum over the next five years and consequently.

 

Aldi is not alone. Reports emerged last week of Lidl – another German grocery chain – planning its foray into Australia.

The Australian newspaper reported that Lidl recently applied for trademark protection in Australia and has contacted local logistics firms to help set up the infrastructure needed to open a chain of supermarkets.

Ratings agency Moody's says the German giant's move into Australia would eat into the billions of dollars in profits reaped by Woolies and Coles, who have dominated the local supermarket sector for decades.

Empire-building supermarkets

Over the last couple of years, Australian supermarkets – particularly Coles and Woolworths – have gone on an overdrive to diversify their businesses beyond retail, to cover a range of products and services.

From personal loans to pokie machines, car insurance to cuppa soup, they are out-competing each other to be present across a variety of consumer touch-points.

Coles has revealed it was considering becoming a member of the Financial Services Council, giving it a seat at the table among the nation’s leading wealth managers.

The supermarket teaming up with GE Capital in a plan to issue personal loans in a joint venture that will see the supermarket issue credit cards and other personal finance products, like small loans, from mid next year.

Throw in their recent venture into insurance and their daily financial products suite is also starting to look like that of a big four bank.

Related: Coles enters the banking game

Analysis by Commonwealth Bank a few years ago showed almost 40 cents in every retail dollar in Australia is spent at Woolworths or Coles (Wesfarmers).

“Both groups have been expanding their market share through a spate of acquisitions, which has given them an enormous concentration in our retail market,” said CBA’s retail analyst Andrew McLennan at the time.

And since then, those acquisitions have continued to grow. Woolworths’ brands now include Thomas Dux grocer, Big W, Masters Home Improvement, Dan Murphy’s, BWS, Cellarmasters, Langton’s, ALH Group and Ezibuy.

ALH Group has a portfolio of over 460 liquor outlets across Australia and 294 licensed venues, including Young and Jacksons in Melbourne and the Kirribilli Hotel and Crows Nest Hotel in Sydney.

These venues are home to an estimated 12,000 pokie machines.

Coles has got flybuys, Liquorland, First Choice Liquor, Vintage Cellars, Bunnings, Officeworks, Target and Kmart under its umbrella.

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