Reflecting on the ongoing Supermarkets "Price War"

Lwhirlpool_guy on 28/02/2014 - 23:26
Last edited 28/02/2014 - 23:46

Dearest OzBargainers,

First time forums poster here. Tonight was a calm and quiet night, I was perusing the recent Coles and Woolworths printed catelogues on the couch. While I enjoyed the catalogues very much, a few unsettling thoughts and questions came to my mind:

  1. This supermarket "price war" has been going on for many months and the fierceness seems to be as strong as ever. There seems to be no end in sight.
  2. While all of us are enjoying low prices, I cannot help but thinking for the local farmers and suppliers. Are they being squeezed hard by Coles / Woolies? If so, how hard? What's the true cost of this price war?
  3. Is this going to be sustainable for Coles / Woolies themselves? Will there be "cease-fire" one day, or would the conflict escalate further?
  4. What would life on OzBargain be like after such "cease-fire"?
  5. May be I am a fool. The media (SMH) keep saying that there is a "price war" between the two supermarket giants. May be, just may be, I was suckered by media sensationalism.

Would love to hear your thoughts.

Cheers!

General Discussion

Comments

  • [Deactivated] on 28/02/2014 - 23:53
    +1

    I thought the "price war" had been going on for years. The tactics have just changed a bit in recent times.

    Coles/Flybuys vouchers at the end of the receipts have certainly been a challenge to Everyday Rewards. Their Gift Card for Easter promotion just doesn't stand up to it, although I'm lucky enough to be taking advantage of both promotions.

    I don't know the full details about whether Coles or Woolworths are paying their suppliers more or less. I saw some reports that they were paying the milk suppliers more for the $1 a litre milk but I also saw other reports that claimed this wasn't the case.

    Coles and Woolworths are in direct competition with each other as are other companies in similar markets. It's in their very nature to compete on price and market share and the same would happen in any industry.

    I'll just take the best deal from either and if they don't have a good deal on the products I want I'll go to the green grocers, Aldi and IGA. I want the best of all worlds so I don't mind the price war.

    OzBargain will be around for a long time and it is useful for many purchases, not just grocery purchases. Now where did I put my free sample of toothpaste?

  • [Deactivated] on 01/03/2014 - 00:51

    All I know is that I want that intentionally irritating Coles ad voiceover woman to DIE IN THE WAR!!!

  • leiiv on 01/03/2014 - 01:46
    +5

    All I know is that fruits and veggies in general are expensive both in Coles and Woolworths, with the exception of two or three types each week. Where is the "price war"??

  • blueskyfridays on 01/03/2014 - 07:31
    +1

    Coles and Woolworths have some of the highest margins in the world. Anything they do is out there to maximise their profit only.

    Agree that their fresh produce is really expensive and that they would put a few things on special, expect the manufacturer to take a hit in rate/price but reassure them things will be ok because they make up for it in volume.

    http://www.afgc.org.au/doc-library/category/1-publications.h…

    From the report on milk:

    Since the pricing was introduced in January 2011, the wider price gap between private label and branded milk has resulted in a lift in sales of lower-priced products, at the expense of brands, thereby weakening the overall wholesale returns to processors.
    The shift in sales has not only occurred from branded milk to private label, but also from the non- grocery channel to grocery – with a corresponding decline in white milk returns for processors, distributors, franchisees and small retail.

    • cloudy on 01/03/2014 - 08:37

      Can you show me the source that says they have the highest profit margin in the world? Or are you referring to another margin?

      • blueskyfridays on 01/03/2014 - 11:58
        +1

        In that link above I've posted, it's on the bottom of page 14, and continued into page 15.

        AT Kearney's assessment was at EBITDA and as at 2009, but it probably holds true now as well. Their measurement is an EBITDA margin, i.e. before financing costs, tax, depreciation and amortisation.

        Coles was actually turned around by a team from Tesco.

  • shmahoo on 01/03/2014 - 09:24

    I think (imho) that the world is just getting more competitive, and the two supermarkets are just trying a few different things, especially now that some marketing dollars have been freed up now that ACCC has clamped down on the 10c per litre type of fuel vouchers.

    Extra "half price" type specials, and the like, only go some way to cover the extra high cost that we are paying for fruit and veg from the duopoly. Seriously, compare the cost to your local greengrocer. You will probably be surprised at the difference in quality and price, both which are firmly in the favour of the local greengrocer, in my experience. Your mileage may vary, of course.

    At least my milk doesn't have that deadly chemical permeate in it anymore! ;)

  • ethereal88 on 01/03/2014 - 10:36
    +2

    What low prices. Standard price for kettle chips is close to $5 for a bag of potatoes that shrink every year. 185g to feed 7 servings? Pfffft. The price of non special items ranges from ridiculous to a joke. Blame the retarded high wages ($50 public holiday, $34 Sunday, $24 casual, $20 part time to stack shelves and that isn't even the late night shift rates) the sky high rents and electricity and simple gouging.

    • cloudy on 01/03/2014 - 11:39

      Are Sunday rates really $34?

      I used to tutor masters students on subjects and thought charging $40 pH usually at 1 sessions was reasonable for my 7 years of uni, I should just work at checkout at a supermarket instead.

      • ethereal88 on 01/03/2014 - 16:19

        Yes I worked there. Others got Sundays way more often than me.

  • ilostnemo on 01/03/2014 - 14:13
    +1

    I went to dinner with an apple/pear farmer, who over the years has reduced his crops. He is a 3rd generation farmer. He told me he last received $1 a kilo for apples and 50c a kilo for pears.

    He said he had to comply with there instructions ie chemicals.

    There is no money in it anymore for the farmers, but we still enjoy the bargains.

    I go to woolworths a lot (convenience) and I'm shocked that the majority or people don't have a reward card, I'm sure they've bought due to the advertised price but if you don't have your card, you pay full price.

  • tonyjzx on 01/03/2014 - 16:41
    +2

    wow OP

    the FMCG war has been going on for more than 10 yrs

    i understand where this is going and you can wage your own personal campaign

    ie, i dont use petrol vouchers and try to not buy from colesworth

    i prefer aldis or iga but sometimes… the products they sell are compelling

    eg. i bought the coles chunky pies for $4, they're great and the telsra elites for $10

    a bargain is a bargain but also realise a one man fight doesnt amount to much

  • Kanasuke on 02/03/2014 - 11:28

    I think you are touching on a topic of morality that is quite difficult, because like you I don't easily waive the struggles of the local farmers or suppliers who are facing increased competition. (But who isn't?).

    However I believe competition to be a fact of life. I empathize with the companies who fail, but it seems there is no way around it.

    Market competition is not nearly as evil as the mainstream media paints it. Market competition unlike competition among wild animals, is not a zero-sum game because your gain equals my gain. You doing well means I do well. In fact it is the exact opposite of competition in nature among animals.
    see When Ideas Have Sex, TED talk by Matt Riddley

    As you pointed out already, when customers choose more efficient producers, it causes all of society to be richer, because inefficient ones are being bidded away, leaving more robust, more productive individuals who sell to us at cheaper prices (what we do at ozbargain). And all of us benefit from this. Farmers have cheaper computers. Local suppliers have cheap clothes, toiletry and cheaper tickets to Japan. The average worker is vastly richer in 2014 compared to 1970, not because his wages have rose, but because the price of goods have fallen.
    https://mises.org/daily/1973/What-Is-the-Free-Market

    There is only one group of people who hate competition more than anything.
    It's the capitalist. Quite ironically, there is nobody else who hates competition more than them, and they will do anything to stop others from cutting into their margins.

    So when the media spins a story about how we need to use the state to do something about competition, I just don't buy it.
    In fact I don't even read NewsCorp stuff anymore. Not to mention it is actually immoral to try to do something about it.

  • tooblue on 02/03/2014 - 17:05

    Would you rather:
    a: an oligopoly market, consumers pay hight price, supermarkets squeeze farmers and make huge profit
    b: a competitive market, consumers pay reasonable price, supermarkets squeeze farmers and make reasonable profit?

    What makes you thing they won't squeeze farmer if the consumers pay high price?

    Too young too simple. sometimes naive.

    • leiiv on 02/03/2014 - 21:02
      +1

      In a competitive market, the farmers can probably sell their products direct to the customer.

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