Wesfarmers says Coles groceries are cheaper now than 8 years ago

Ian Waldie/Getty Images

Wesfarmers CEO Richard Goyder is pleased with the momentum in the Coles supermarket business.

“Coles has made a strong start to the 2016 financial year, reflecting the ongoing execution of Coles’ value-led strategy, improvements to its fresh offer and the contributions from new and re-furbished stores,” he told the company’s annual general meeting.

Prices of Coles food and liquor price fell 1.3% during the first quarter of the 2016 financial year, the strongest quarterly deflation in two years.

“We estimate that a typical family shopping at Coles is now more than $600 a year better off than they would have been before we acquired the business in 2007,” he says.

“It is important to note that we have provided this benefit to customers while still improving returns to shareholders.”

Coles is tracking ahead of Woolworths which last month issued a profit warning on flat sales.

And both supermarkets cut prices over the three months to September: Coles by an average of 1.3% and Woolworths by 1.82%.

The supermarket sector in Australia is in upheaval with the arrival of low-cost global players Aldi and Costco starting to take market share from the established players in Coles and Woolworths.

The new entrants to the market have much more efficient operating models, using less floor space and less staff. According to Deutsche Bank, Aldi employs 24 staff per store in Australia compared to the 110-120 at Woolworths and Coles stores.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.