Aldi cuts a thick slice of Woolies

22 May, 2017
The Australian

Aldi’s rapid expansion continues to come at the expense of Australia’s biggest retailer, Woolworths, according to the latest Roy Morgan consumer research data, which shows the international supermarket is muscling in on Woolies more than Coles, for now. 

Aldi’s share of the Australian supermarket sector grew to 13.2 per cent in the year to March 31, compared with 12.5 per cent in the year ended September 2016, the research showed.

That growth comes as an increasing headache to Woolworths, which saw market share drop to 35.7 per cent from 36.3 over that period while Coles remained flat. Just 2.5 per cent in market share now separates Coles and Woolworths. 

“The supermarket industry in Australia has been under increasing pressure from the structural changes driven by Aldi’s discount format, which has contributed to lower prices across the industry and falling margins at both Woolworths and Coles,” Moody’s senior credit officer Ian Chitterer said.

“We expect Aldi to roll out stores at around 6-8 times the rate of Woolworths and Coles over the next few years.”

Established Australian supermarkets are also sweating about the looming entry of another low-cost competitor, Lidl, which is currently gearing up for an aggressive push into the US. 

Lidl has brought on more than 1400 staff in the US before its big push this summer with Ireland CEO Brendan Proctor saying “this is the right time for us to enter the United States”. Mr Proctor promised to undercut Walmart, America’s largest grocer, by up to 50 per cent. 

Increased competition has been a major part of the lean years seen by listed Australian food retailers. While Metcash and Woolworths have seen gains in 2017, they remain well below highs.

Woolworths (WOW) peaked in 2012 near $39 but have since lost around a third of their value to last sit at $25.93, while Wesfarmers (WES) struck its highest point in 2014 at $47 but has seen much shallower falls, currently trading at $42.93.