Woolies and Coles merge into one
It's a fight, but is it a fake fight? While the two biggest supermarket chains are pushing the message that they are in a fierce battle, driving prices down to compete, behind the theatre of their marketing campaigns the supermarket profits keep growing and most shoppers do not feel like winners at the checkout.
Whether it is the big red hand or the red boxing glove, grating jingles sung out of tune or shopping like master chefs, supermarket advertising has gone into overdrive in recent months. Marketing experts say there is no doubt Coles and Woolworths have boosted their marketing budgets, but the true aim of the aggressive ads may be more about convincing all shoppers they are getting bargains and less about genuine competition between the two big players.
Phil McDonald, the managing director of George Patterson Y&R Sydney, says there is strong evidence that most shoppers can see no real difference between Coles and Woolworths. According to George Patterson's annual brand asset study, the two chains have strengthened their brands in the past year, but have also moved to almost the same position in terms of brand strength and stature in the mind of consumers.
''They're not differentiated from each other,'' Mr McDonald said. ''Consumers see the two brands as offering very much the same things. They've almost become one brand.''
Coles and Woolworths have pursued a ferocious game of catch-up in their marketing. While Woolworths was the fresh food people for nearly a decade, once Coles began to make an impact with its lower prices message, Woolies jumped on that bandwagon, too.
Professor Susan Dann, deputy head of the Australian Catholic University's school of business, said the strategy employed by the two big players in recent months has been to copy each other, as well as upping their rival's claims.
''The biggest problem for them is it's apples and apples wherever you buy them, so they have to offer a reason for you to buy your apples from them. If one side gets ahead with a particular point, the other side tries to match it and say we've got something else as well.''
Todd Sampson, chief executive of Leo Burnett Sydney, recently described the so-called supermarket wars as ''a friendly''. And a recent YouTube spoof that showed Coles and Woolies working together to crush competition from independents, such as IGA, was quickly pulled off the air.
Both of the big players seem to be using a classic loss-leading strategy, luring customers in the door with products discounted as far as below cost, hoping that while they are inside they will buy some of the higher margin items.
But while the cost of basic items, such as milk and bread, have been cut, the supermarkets are clearly making up the money elsewhere.
Wesfarmers recently reported 5.3 per cent growth in food and liquor sales to $6.18 billion for the final quarter of 2010-11, taking full-year sales for the Coles business to $25.02 billion. Woolworths reported comparable sales growth of 4 per cent for the fourth quarter and 3 per cent for the 2010-11 financial year. Woolworths remains the leading supermarket chain with total annual sales of $36.2 billion.
Professor Dann said that while the big players are putting pressure on suppliers to cut costs, the strategy can only be taken so far before it leads to fewer distributors and less competition between those left. Both companies are clearly making up for lower profits on the basics with higher margins on other items.
She said the only shoppers gaining from the apparent price war are those who buy only the staples and avoid more discretionary items with higher profit margins.
The loss-leading strategy seems set to stick around. ''Consumers won't easily accept those prices going back up,'' Professor Dann said.
Longer term, the new strategy for Coles and Woolies may centre on their home brand goods, promoting them as a way of boosting customer loyalty, she said. It seems the only true winners in the supermarket wars are the supermarkets themselves.
bendigoadvertiser.com.au 16 Aug 2011
Another price fixing and collusion fraud that the duopoly are involved in without any legal action against any of them.
Another example of how the corporate giants are above the law.
Another event that will cause the rise of the price of fuel could be the event of Hurricane Irene in the United State's east coast.
