Supermarkets brace for new rival

Posted February 14th, 2019 by admin and filed in 杭州夜生活
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Supermarket shopping could soon become a lot cheaper as local giants Coles and Woolies brace for the possible arrival of German discount Lidl.


While Lidl is yet to confirm its foray into Australia, reports have suggested it is conducting preliminary work on expanding Down Under.

The Australian newspaper has reported that Lidl recently applied for trademark protection here and has contacted local logistics firms to help set up the infrastructure needed to open a chain of supermarkets.

Ratings agency Moody’s says the German giant’s move into Australia would eat into the billions of dollars in profits reaped by Woolies and Coles, who have dominated the local supermarket sector for decades.

Both Woolies and Coles have already come under pressure from the arrival of another German discount rival, Aldi, in 2001, forcing them to lower prices.

Senior Moody’s analyst Ian Chitterer says grocery prices are likely to be slashed further if Lidl expands to Australia.

He argues that Aldi, which already competes with Lidl in Britain and Europe, would probably cut prices and ramp up the roll out of its stores in Australia to help prepare for the entry of another player in the local supermarket sector.

“Woolworths and Coles will need to follow Aldi’s price reductions on their private-label products to maintain the gap and this will ultimately lower profitability because the volume of goods sold would remain broadly constant,” Mr Chitterer wrote in an analysis released on Thursday.

Mr Chitterer estimates Woolies’ underlying earnings could fall by about $270 million if it cuts prices on its private-label goods by five per cent.

Woolies and Coles control about 61 per cent of Australia’s supermarket sector, Moody’s estimates.

Aldi has lifted its market share to about 11 per cent and is expected to continue expanding its store base by about five per cent a year for the next five years – double the growth rate of its bigger rivals.

“We believe that if Lidl enters the market, the two competing discounters can increase their combined market share toward 20 per cent over the next five to seven years,” Mr Chitterer said.

Woolworths chief executive Grant O’Brien announced on Wednesday his plans to step down amid disappointment over his company’s sales amid fierce competition from Aldi and Coles.

Woolworths has also downgraded its full year profit guidance by $300 million to $2.15 billion, and is axing 1,200 jobs.

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