While the ongoing inquiries into supermarket pricing have been generating plenty of headlines in recent weeks, they barely came up during Coles’ Q3 earnings call on Tuesday. Instead, Coles’ CEO and managing director, Leah Weckert, spent plenty of time explaining how the retailer is providing value to customers as cost-of-living pressures continue to weigh on Australian households.
According to Weckert, Coles has placed nearly 1000 products at ‘everyday’ low prices, but it’s the retailer’s exclusive product ranges targeting both budget-conscious and more affluent customers that are proving to be the real winners.
“We remain committed to providing our customers the best possible value on their grocery bills. We are well positioned in the current economic environment as we continue to invest in value,” Weckert said in a statement to the ASX.
On Tuesday, Coles reported a 5.1 per cent increase in supermarket sales revenue to $9.1 billion, with comparable sales growth of 4.2 per cent.
Coles is simply at its finest
Coles is finding new ways to provide value for its customers beyond cutting prices intermittently by creating a home brand range that can stand on its own.
According to its Q3 results, Coles Simply and Coles Finest ranges are continuing to outgrow proprietary products on a volume and sales basis as customers seek value.
“We have seen our exclusive brand growth grow higher than overall supermarkets gross now for quite a while – and so there definitely has been benefits that have come through into that growth from changes in customer behaviour due to cost of living,” said Weckert.
“We know that one of the key things that customers do when they’re trying to manage their budget is that they will be able to trade into more affordable brands and our own brand is definitely one of those,” she added.
Coles reported exclusive brand sales revenue growth of 8.8 per cent to $3.1 billion, with its launch of 219 new products to the Coles exclusive portfolio – expanding the Coles Simply value range to 80 products and the Coles Finest range to 241 products.
In particular, Coles is targeting consumers who are swapping dining out for eating in with grocery products that replicate a restaurant experience with its Coles finest product range.
“We really are seeing customers go at both ends of the spectrum to look for value, potentially for different purposes,” Weckert stated.
“Supporting customers who in particular, potentially not dining out as much or eating out and choosing to buy the grocery store and create a meal at home and they’re looking to replicate that restaurant experience and so ‘Coles Finest’ products are really helping them to do that,” added Weckert.
For Craig Flanders, CEO of Spinach, Australian supermarkets have been doing a good job of elevating the standard of home brand offerings across the board and are slowly catching up to the UK market which has long been leading the movement.
“There will always be a segment of the market that shops purely on value, and in the current market context, this segment has grown out of necessity,” Flanders told Inside Retail.
“However, there will be a segment that will have an eye for ‘quality at a better price than it was’ – people who have their eye on saving a dollar if they can, but are less likely to sacrifice quality standards just to pay the minimum.”
The premium customer segment that Coles is targeting with its ‘Coles Finest’ range feels the cost-of-living crisis but is not constrained by the same budget crunch as the customer segment that is attracted to the ‘Coles Simply’ range.
“This segment has also grown and is a perfect target for these exclusive ranges owned by the ‘house’,” said Flanders.
“In this scenario they are the supplier and retailer so don’t need to share the margin, allowing them to hit a price point for a quality product that keeps customers and the CFO happy,” concluded Flanders.
