Woolworths and Coles have taken over Australians’ lives

JULY 16, 2014
news.com.au

ONCE upon a time, you strolled down the supermarket aisle and picked up your groceries for the week.
But that’s not enough for Coles and Woolworths who are looking to increase their share of your wallet. The two supermarket giants have spread their tentacles into aspects of your lives that reach far beyond milk and bread. Now, Coles wants to be your bank.
Just how much does Coles and Woolies own?
GROCERIES
Well, duh. Coles and Woolworths are all up in your business when it comes to trolleys clanging (no, not like the song) and running off in every direction except straight ahead.
According to Roy Morgan analysis released in February, between them, Coles and Woolworths have a market share of 72.5 per cent of the $82 billion grocery sector. While Coles appears to have momentum after spending millions on blasting “Down Down” ads on the airwaves for the last few years, Woolworths actually leads the play with 39 per cent. Coles has 33.5 per cent.
In addition to total grocery sales, both companies are now also commanding more direct dollars from you through an amped up private label strategy (commonly known as home brand), a game plan borrowed straight from UK brands including Tesco. A 2012 IBISWorld report predicted private label goods would make up 33 per cent of all supermarket sales by 2018, up from 13.5 per cent in 2008.
German discount supermarket ALDI has steadily grown from 2.9 per cent in December 2005 to 10.3 per cent by the end of 2013. Metcash’s IGA supermarkets hold 9.5 per cent while “other” supermarkets have seen their share slashed from 14.1 per cent to 7.7 per cent in eight years.
PETROL
A few years ago, our roads and highways were littered with petrol stations which bore the brands of fuel giants — Shell, Mobil, Caltex and BP — or independents. But now, petrol has just become another aspect of the grocery game after Coles bought out Shell’s retail outlets in 2003, quickly followed by Woolies announcing a joint venture with Caltex. 7-Eleven later bought out Mobil’s retail operations.
Woolies and Coles are no longer allowed to offer you any more than 4 cents a litre off pe
Woolies and Coles are no longer allowed to offer you any more than 4 cents a litre off petrol if it’s linked to a grocery buy. Source: News Corp Australia
According to the ACCC, Woolworths and Coles make up almost half our petrol retail market. Each supermarket has 24 per cent market share.
While cheaper petrol seemed like a no-brainer for shoppers, deep discounting to as much as 45 cents off per litre was of significant concern to the competition watchdog which ruled the two conglomerates could not offer more than 4 cents off when linked to a grocery purchase. The ACCC said the long-term health of the petrol market was under threat and that it could lead to higher prices down the road.
LIQUOR
The supermarkets have massive interests in alcohol sales in Australia and leverage their might in groceries to get you to walk into their bottle shops with their discount shopper dockets.
BWS, Cellarmasters, Dan Murphy’s and Langton’s. They’re all owned by Woolworths. According to the McCusker Centre for Action on Alcohol and Youth, citing IBISWorld figures, Woolworths accounts for almost 40 per cent of all alcohol retail sales in Australia. By 2013, Woolworths operated 1,355 liquor outlets across the country.
Woolworths account for almost 40 per cent of liquor retailing in Australia.
Woolworths account for almost 40 per cent of liquor retailing in Australia. Source: News Limited
On top of that, Woolies also has a 75 per cent stake in Australian Leisure and Hospitality Group, which controls a portfolio of over 460 liquor outlets including clubs, pubs and bottle shops. These venues are home to around 12,000 pokie machines in hotels nationally, which is a huge profit driver for the business.
While a smaller player in this space, Coles’ parent company Wesfarmers still commands a 20 per cent share of the national liquor market. It has over 630 Liquorland stores as well as scores of Vintage Cellars and First Choice Liquor.
Additionally, both companies have dozens of private label wines and beers — except you’d never know it. Unlike the private label goods on supermarket shelves which are branded “Coles Finest” or “Woolworths Select”, their alcohol products are conspicuously missing any link to Coles or Woolworths on their labels. Brands owned by either of the two include Cradle Bay, Bay Estates, Oak Lane, Iron Hill and South Island. Check out this website for the rest.
INSURANCE
Both Coles and Woolworths have been in the insurance business for a while now. Coles’ “Little Red Quote” ads have been infuriating anyone with hearing since the beginning of last year, while its insurance offering was rolled out in 2010. It now has 350,000 customers. Coles’ offer is underwritten by Wesfarmers Insurance, which has just been sold off for a billion dollars.
Woolworths has been in the business since 2011.
But what’s most interesting about the supermarkets play in the insurance game is their ability to use the data collected on their shoppers through its loyalty rewards program to target them for insurance offers. Woolies even dropped a reported $20 million for 50 per cent of a local data firm to beef up its expertise in that area.
As reported by AdNews , Woolworths executive Penny Winn told a media industry event last year: “What we’ve been able to do is take our insurer’s car crash database and overlay it with our Woolworth’s Rewards database.
“Because you see, customers who drink lots of milk and eat lots of red meat are very, very, very good car insurance risks versus those who eat lots of pasta and rice, fill up their petrol at night, and drink spirits. What that means is we’re able to tailor an insurance offer that targets those really good insurance risk customers and give them a good deal via direct channels instead of above-the-line [advertising]. And it helps to avoid the bad insurance risks.”
What it means is that what you do in one area of your life — grocery shopping — could have bearing on something else entirely. And without you really understanding why your insurance policy is more expensive than your neighbours. Maybe you’re not buying enough red meat from Woolies?

FINANCE
Coles boss John Durkan worked for UK supermarket Safeway for 17 years.
Coles boss John Durkan worked for UK supermarket Safeway for 17 years. Source: News Limited
Yesterday, Coles announced it was expanding into the financial services industry. In other words, it wants to be your bank. It’s already issued 400,000 Coles credit cards since 2010 but now in a joint venture with GE Capital, from 2015, you’ll be able to access a wider range of financial products such as loans.
Coles said its banking customers would be offered additional rewards such as discounted groceries to people also signed up with Flybuys or its other products.
The initiative is another move straight out of UK supermarkets’ playbook. Sainsbury and Tesco have had banking operations since 1997. Both supermarkets may be lifting ideas from the UK as their senior ranks are infiltrated by executives with experience among UK companies. Coles’ new boss, John Durkan, spent 17 years at UK outfit Safeway while Woolies chief Tjeerd Jegen spent time with Tesco in Asia.
Choice director of campaigns Matt Levey told news.com.au the expansion of Coles into finance wasn’t necessarily a bad thing for consumers. He said: “The banking market has four large players and if we see supermarkets come in and shake it up, it can have great benefits.
“It’s all about how good those products are going to be. You might get a supermarket product because it’s tied to a rewards program. Our advice would be to take things on their merit and don’t distort those decisions because you might have to change your shopping habits to chase a discount.
“It’s not necessarily a bad thing, but be alert.”
A Woolworths spokeswoman told news.com.au that the company’s strategy was publicly available and it saw itself as a retail group.
Coles spokesman Jon Church said: “Our core business is retail and it’s predominantly as a food retailer. The other elements have built up around that as a result of bringing customers value and choice. Customers decide how Coles grows its business – if they don’t buy the products, we don’t sell them.”