• Australia’s grocery sector is highly competitive and rapidly evolving • ACCC finds rising cost of doing business has driven higher grocery prices • Coles net profit margin of 2.6% has remained stable for the past five years • Coles welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs
Coles acknowledges the release of the ACCC’s final report and is currently reviewing the report and its recommendations in detail.
Over the past 18 months, we have actively participated in the ACCC’s Inquiry as well as eight other inquiries and reviews into the sector.
Coles believes Australia’s grocery sector is highly competitive, is evolving rapidly, and offers consumers greater choice than ever before. Over recent years, Coles has not only been competing with traditional supermarkets like Woolworths and IGA but also now with major multinational players like ALDI, Costco, and Amazon, who have all established significant businesses in Australia and are expanding their market share.
For example, Amazon has substantially grown and has introduced more than 6,000 product lines that overlap with our offering, significantly increasing competition from a new source.
We also fiercely compete with thousands of specialty retailers and independent supermarkets, as well as major retail chains like Bunnings, Chemist Warehouse, and Priceline who are all now selling products found in supermarket aisles.
Even among supermarket players alone, Coles holds less than 30 percent of the market share.
Customers are increasingly cross-shopping and splitting their grocery spend across a range of retailers – both in store and online – which means Coles must compete vigorously for a share of consumers' grocery baskets.
This diverse and evolving competitive landscape in Australia benefits consumers by providing more choice and greater value.
ACCC’s analysis shows the impact of rising costs on grocery prices.
As the ACCC’s analysis shows, grocery price increases during the past five years are significantly impacted by the rising cost of doing business. Coles and its suppliers have faced significant increases in costs like electricity, rent, insurances, wages, transport, and other costs essential for running a supermarket. We do not control these inflationary costs in the economy – but they contribute to higher grocery prices for Australian households.
Page 2 of 2 Coles has worked hard to keep grocery prices low, with grocery inflation of just 1%, excluding tobacco, for the first half of this financial year.
While of no comfort to households and families, the ACCC’s own analysis shows grocery price inflation in Australia has been lower than in countries like Canada, the UK, US and New Zealand.
Our net profit margin has also not changed. Coles Net Profit After Tax – the only true measure of a company’s profits – has remained at around 2.6% as a percentage of sales throughout the last five years, including through COVID-19 and the height of inflation. This means we earn around $2.60 for every $100 a customer spends in our stores – less than 3c in the dollar.
Coles NPAT margins are comparable to global peers including countries like Canada, United States and United Kingdom.
Overall product margins have increased nominally to cover rising costs, but the ACCC’s analysis of these margins excludes the other significant costs like energy, rent, wages which have all increased. Coles Earnings Before Interest and Tax (EBIT) has been broadly flat for five years.
Committed to industry-led solutions and supporting customers.
Coles welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs. We will review all of the recommendations in detail.
We have listened intently and have already made changes such as simplifying our promotional tickets, providing additional information to customers about promotions and are working to make it easier for customers to compare products through clearer unit pricing.
We remain committed to being part of industry-led solutions and we will be working even more closely with our suppliers, including fresh produce producers, to improve transparency and ways of working with them and all industry participants.
We understand the cost-of-living challenges families face and are continuing to invest in value through measures such as price investment, promotions, Flybuys and Own Brand, especially as mortgages, rents, energy, fuel and other expenses continue to add to the household budget.
