Food prices are crazy: Coles head
AUSTRALIA’S food and grocery prices have to come down further because they are “crazy” compared with the rest of the world, Coles managing director John Durkan says.
“It’s already an overpriced grocery market in my view and I’ve been saying that for nine years,” Mr Durkan said during Wesfarmers’ strategy day yesterday. “I still look at products here that are made overseas and they are crazy prices.”
His comments come in the wake of consumer magazine CHOICE’s latest supermarket price survey that found consumers could save almost $80 a shop by switching from leading brands to a basket of Aldi budget products.
COLES says it won’t allow bigger rival Woolworths to steal a march on it when it comes to offering low grocery prices to shoppers.
After forking out $65 million to cut prices during the six months to December, the supermarket chain says it has dramatically increased that investment this half.
In a briefing yesterday for investors in parent group Wesfarmers, Coles managing director John Durkan said the investment in price cuts “has probably closer to tripled rather than doubled”.
The return of the Down Down advertising campaign, this time featuring singer Casey Donovan, also underlined its commitment to bringing down prices in the face of heated competition, the group said.
Mr Durkan said the $90 billion grocery sector had become far more competitive this year.
Coles would react by investing more capital into store staff, the customer offer and ultimately into cheaper shelf prices, he said.
“We have always maintained that we are going to be competitive,’’ Mr Durkan told analysts.
Coles has faced a resurgent Woolworths in recent years, with its bigger rival in recent months posting faster same-store sales growth than Coles for the first time eight years.
Mr Durkan said household budgets remained under pressure and Coles’ investment in its offering, across prices, staffing and products, was necessary in the current environment.
Wesfarmers shares fell heavily in the wake of that revelation – closing down 2.9 per cent at $40.23 – and after the group confirmed hardware juggernaut Bunnings was losing money in Britain while department store chain Target was continuing to struggle.
Outgoing Wesfarmers chief Richard Goyder said he remained confident the group’s retail arms, which also include Kmart and Officeworks, could repel any new players entering the local market, including US online retail goliath Amazon.