Finance Consumer Coles is slinging everything from smashed avo to giant packs of pasta, but consumers could lose out

Coles is slinging everything from smashed avo to giant packs of pasta, but consumers could lose out

Coles rival
Coles is up-sizing food products and offering more fresh convenience foods as it tries to undercut its rivals. Photo: Getty Images
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From fresh breakfasts to bulk goods, Coles is scrambling to cover all bases as competition from overseas rivals threatens to undercut the business model of Australia’s supermarket duopoly.

On Monday, Coles revealed a focus on selling “convenience” products such as smashed avocado, tomato, fetta and toast in smaller, metropolitan locations in a bid to capture time-poor, inner-city shoppers with deep pockets.

On Wednesday, the nation’s second-largest supermarket chain announced that it would be selling supersized versions of around 25 “family favourites” including one kilogram bottles of mayonnaise, five kilogram bags of pasta and two kilogram bags of breadcrumbs.

The bulk range is designed to “make life easier for time-poor and budget-conscious customers, saving them up to 65 per cent on select products”, Coles said.

Coles takes on Costco and 7-Eleven

Coles has pit itself against rivals on both ends of the grocery spectrum, from omnipresent convenience store 7-Eleven to bulk goods supremo Costco, Deakin University retail and marketing lecturer Michael Callaghan said.

The chain’s limited-time-only discounted bulk offerings are a “very clever” move, as it allows Coles to save on expensive warehousing costs, one of the biggest drawbacks for retailers stocking bulk items, he said.

A standard 500 gram pack of pasta next to Coles' supersized "big value pack".
A standard pack of pasta is dwarfed by Coles’ “big value pack”. Photo: Coles

“They’re taking a page out of Aldi’s book and doing this as a limited, one-time offer like Aldi do with their best buys,” Dr Callaghan said.

The move allows Coles to tackle Costco head-on by “delivering the same sort of better pricing on bulk goods”, while saving on warehouse storage costs by only stocking items on shelves for a limited time.

The dual strategy of convenience and bulk offerings shows that Coles is  “trying to cover all bases” because “they’re concerned about losing relevance to marketplace”, Dr Callaghan said.

“This is a test market at both ends.”

Australia’s supermarket duopoly threatened

New entrants to Australia’s grocery market including Aldi and Amazon have threatened the stranglehold Coles and Woolworths have long had over the market.

A recent IBISWorld report showed Australia’s $103 billion grocery sector is dominated by Woolworths, with 37.5 per cent market share, and Coles with 29.6 per cent.

German-owned Aldi commands 9.9 per cent of the market, with the low-cost supermarket’s “rapid expansion” over the past five years already causing significant shifts in the industry.

There is “no doubt that Australian consumers are warming to international entrants such as Aldi,” University of Tasmania marketing and retail researcher Louise Grimmer said.

Customer dissatisfaction with the two major supermarkets shows that “competition is coming from all sides – the large international chains as well as the smaller, local independent grocery stores”, Dr Grimmer said.

Downside for customers

Coles’ dual strategy comes with multiple downsides for customers, Dr Callaghan said.

Stocking bulk goods on a “rolling basis” means that Coles is attempting to “change consumer behaviour” by shifting shoppers into a mode where they buy bigger, long-lasting goods less frequently, he said.

The downside for consumers is that the supermarket is saving money on warehousing by “having consumers do the warehousing for them”.

“These bulk products are fine while they are sealed, but I’m not sure many of us want to eat the same packet of pasta for months,” Dr Callaghan said.

The growing problem of food waste is then also “conveniently” shifted onto consumers, he said.

Coles is targeting two different types of customers: Urban professional “convenience” shoppers, and suburban “buy-in-bulk” family shoppers, Dr Callaghan said.

“It clearly means they want to hold onto both ends of the consumer market and there’s going to be tension in stores themselves about how they manage to do that.”

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