The resurrection of sales growth at Woolworths, mostly at the expense of the Wesfarmers-owned Coles, still has a way to run, according to analysis by Deutsche Bank.
A survey of 2,400, Deutsche Bank’s annual Battle for Baskets report, shows Australian shoppers are now more open to considering making Woolworths their primary supermarket.
“The survey highlights the turnaround and market share shift have further to go, given Woolworths has not yet caught up to Coles,” says Deutsche Bank in a note to clients.
“This is the second year we have run the survey and follows on from the early signs of Woolworths’ turnaround highlighted by the 2016 edition.
“Coles has been the primary loser but independents and even Aldi appear to have given some customers back to Woolworths.”
Australian food sales at Woolworths were up 4.7% to $9.63 billion in the first quarter of 2018. Like for like sales were 4.9%.
At the Wesfarmers-owned Coles, headline food and liquor sales for the first quarter were $7.97 billion, up 1.5% on the same three months last year. However, comparable food and liquor sales increased just 0.4% and comparable food sales were up 0.3% for the quarter.
The Deutsche Bank survey, run by Colmar Brunton, assessed year-on-year change in consumers’ grocery shopping behaviour.
Here’s how Deutsche Bank sees market share among the supermarkets:
“Our data highlight that Woolworths has made significant progress, improving across just about every metric we test for — loyalty program and service improved the most, but fresh, private label and other factors also showed improvement year on year,” says Deutsche Bank.
“It is not only loyal Woolworths shoppers who have observed the improvement; unlike last year, consumers who primarily shop at other formats are beginning to take notice.
“These shoppers are now more open to considering making Woolworths their primary supermarket – although, as we will see below, hasn’t fully translated into results yet.”
However, Woolworths remains behind Coles in the eyes of the consumers despite these improvements.
How consumers rated the supermarkets:
“We believe Woolworths is likely to continue to regain the market share it lost to Coles over the past five years,” says Deutsche Bank.
“This began in earnest 12 months ago. Our survey from last year highlighted some early signs of the recovery, and this year’s survey, as well as continued supportive supplier feedback suggests the recovery should continue.
“As such, in the context of reasonable market conditions, we expect mid-single digit sales growth which should drive operating leverage.”