Coles cuts ‘ too lit­tle’

Townsville Bulletin - - NEWS - PETRINA BERRY

CUTS to the price of bread at Coles are not deep enough to con­vince shop­pers that the su­per­mar­ket chain is cheaper than Wool­worths, Deutsche Bank an­a­lysts say.

Hav­ing al­ready fought bat­tles over milk and meat, Wes­farm­ers- owned Coles has cut the price of more than 30 va­ri­eties of loaves and rolls.

The price cuts range from 5 per cent to 35 per cent, but Deutsche Bank an­a­lysts Michael Si­mo­tas and Daniel Wan say the prices have not dropped far Wool­worths.

In some cases, Coles’ new prices are slightly lower than their ri­vals’, and slightly higher in oth­ers, they said.

“While this is the high­est pro­file price in­vest­ment ac­tiv­ity we have seen from Coles for some time, in our view, it does not con­sti­tute strong price lead­er­ship and will likely not be enough to re­gain the value per­cep­tion ad­van­tage Coles has lost to Wool­worths,” the an­a­lysts said in re­search notes re­leased yes­ter­day. “Over­all, we be­lieve Wool- be­low those of worths has con­tin­ued to gain mo­men­tum rel­a­tive to Coles.”

They said Wool­worths was en­joy­ing the ben­e­fits of stronger sup­plier sup­port and im­prov­ing cus­tomer per­cep­tion, which has seen it win over cus­tomers and re­gain some lost mar­ket share.

“Con­versely, we be­lieve Coles’ cus­tomer per­cep­tion has de­te­ri­o­rated, is not ex­e­cut­ing as well as it used to and no longer has the ben­e­fit of op­er­at­ing lever­age to rein­vest in price re­duc­tions,” they added.

Wool­worths has in­vested more than $ 1 bil­lion in more than 12 months in low­er­ing food prices, which has led to a re­cov­ery in quar­terly like- for­like sales, while Coles’ com­pa­ra­ble sales’ growth has slowed.

Coles managing di­rec­tor John Durkan told in­vestors in June that he wanted “Coles to be fa­mous for its fresh bread”.

There are plans to con­vert an ad­di­tional 180 stores to in­clude full bak­eries as Coles works to­wards of­fer­ing fresh­baked bread in ev­ery store.

Wool­worths bakes bread on- site at more than 630 of its su­per­mar­kets. A Wool­worths spokesman said it was also fo- cused on low­er­ing prices on bak­ery goods and, as of yes­ter­day, its most pop­u­lar prod­ucts would be markedly re­duced.

Brumby’s Bak­ery owner Re­tail Food Group said it was not wor­ried by the moves.

“Brumby’s Bak­ery is con­fi­dent they will be able to sus­tain their cus­tomer base should there be a price war be­tween ma­jor su­per­mar­ket brands,” a com­pany state­ment said.

It said Brumby’s, as a spe­cialty bread re­tailer, of­fered artisan and qual­ity goods, while ma­jor su­per­mar­kets based their busi­ness on scale and quan­tity.

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