The shelf price war threat between Coles and Woolworths appears to be easing

Marianna Massey/Getty Images for Woolworths

The threat of a price war between the big two supermarkets, Coles and Woolworths, has eased, according to analysis by according Deutsche Bank.

“Our supermarket pricing study shows pricing in the September quarter was flat year-on-year, which is unchanged from the June quarter,” say analysts Michael Simotas and Daniel Wan.

Both supermarkets have continued to cut private label prices, but Woolworths’ investment in branded products moderated slightly.

Coles has continued to control its pricing with branded goods showing strong inflation.

Deutsche Bank says the price gap between Coles and Woolworths is now similar to 2012.

“We believe the likelihood of a price war is lower now given Woolworths has moderated investment and Coles has not responded aggressively,” the analysts write in a note to clients.

This chart shows prices for both converging:

Deutsche Bank creates an index of prices of seven discrete baskets of about 100 goods across Coles, Woolworths and IGA.

In the September quarter, fresh food prices fell 3.2% compared to a deflation of 1.6% in the June quarter.

Most of this was fruit and vegetable prices. Meat and seafood prices increased slightly.

Packaged groceries increased 1% after a flat previous quarter. Brand products increased to 2.8%.

Woolworths’ branded goods prices fell 0.8% while Coles increased 5.7%.

“Importantly, Coles does not seem to be matching Woolworths’ price investment on branded products, which is unchanged from the position it took in the prior quarter,” says Deutsche Bank.

Here’s the index, showing a flat September for prices:

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