Supermarket game of chicken seems over

THE decade-long supermarket wars appear to be winding down as price becomes less important to shoppers, a new industry snapshot has found.

Investment bank UBS has joined the body of experts saying the price wars, which have delivered shoppers $1 a litre milk and $8 roast chooks, are giving way to a truce that will boost supermarket profits.

The analysis from UBS comes after analysts at Bank of America Merrill Lynch this week said a price hike in roast chickens — a key grocery battleground — indicated the “race to the bottom” was coming to an end.

While the steady rollout of everyday low pricing on a range of items at Coles and Woolworths has been wel- comed by shoppers, it has eaten into their profit margins and put suppliers under intense pressure.

UBS analyst Ben Gilbert said its latest survey of more than 1100 shoppers found price was becoming less important as they focused on service and loyalty programs.

“Price is becoming a less important driver of spend, a positive for industry growth and profit,” Mr Gilbert said in a report for investors.

He said the loss of market share by Coles had bottomed out and more shoppers were visiting the nation’s two traditional supermarket heavyweights as growth at German interloper Aldi slowed.

“Shoppers are visiting Coles more often and share of wallet is increasing,” Mr Gilbert said.

“Woolworths’ food is per- forming well, particularly in fresh, albeit there are signs share gains are peaking.”

Bank of America Merrill Lynch analyst David Errington said a $1 hike in the cost of roast chickens sold by Coles had been quickly followed by Woolworths in recent weeks.

Both Coles and Woolworths have vigorously denied they have called a truce in the supermarket wars.