CANBERRA: The supermarket price war is expected to intensify as Aldi and Costco expand, with shoppers to be the big winners. ALDI’S cheap private labelled products and its aggressive expansion into South Australia and Western Australia will fuel the war, an IBISWorld report says.
“Supermarket shelf wars are expected to intensify over the next five years,” the Supermarkets and Grocery Stores in Australia report says. “Aldi’s growing presence and an increasing number of Costco stores will only increase price competition.” Woolworths and Coles, which have dominated the industry for more than 25 years, are expected to keep prices low to maintain market share.
The report said the duo will likely increase their cheaper private-label offering which will constrain revenue growth. This will also create more pressure for smaller operators, including the IGAs and Foodland stores, which have less purchasing power.
Report author and industry analyst Brooke Tonkin said suppliers of branded products have already accepted price decreases over the past five years. “There is little room left to move on supply chain prices,” she said. “As a result, the major supermarkets will likely rely on growth in their private-label sales, where margins are higher.”
She said all players will need to fight “even harder” for market share over the next five years and the fierce competition will likely inhibit any more new entries. Private-label goods already account for about 30 per cent of the nation’s grocery sales compared with more than 53 per cent in Europe and 35 per cent in the United States.
