Professional Documents
Culture Documents
Supermarket Industry in Australia
Supermarket Industry in Australia
Supermarket Industry in Australia
PESTLE ANALYSIS:
COLES
Mission Statement: “To give the people of Australia a shop they trust, delivering quality,
service and value”
In 1914 GJ Coles, opened the first Coles store in Smith Street, Collingwood, Victoria. Today, Coles
is present in every Australian state and territory with 741 supermarkets, employing over
100.000 staff members. (Coles.com.au, 2014)
In 2007 Wesfarmers acquired Coles-Myer group, since then, Coles has more than doubled its
earnings before interest and tax, which has helped generate significant shareholder value for
the Wesfarmers Group.
Key Strategies:
Reduce the cost of the weekly shopping basket -Lower everyday prices
Coles offers staple groceries at very low prices. Since 2011, the price of milk has been
retailed for 1$ per litre.
WOOLWORTHS
Mission Statement: “Every man, woman and child needs a handy place where good
things are cheap”
The first Woolworths store opened in 1924 in Sydney, Australia. The Founding CEO, Percy
Christmas, stated a key principle for Woolworths: Every man, woman and child needs a handy
place where good things are cheap. Woolworths is widely regarded as a strong, down to earth
and family oriented company with ethical values and a hardworking, responsible culture.
Today, Woolworths has more than 3,000 stores across Australia and New Zealand that span
food, liquor, petrol, general merchandise, home improvement and hotels. Woolworths is a
proud, home-grown Australian business, employer of more than 198,000 people and committed
Key Strategies:
ALDI
Mission Statement: “All people, wherever they live, should have the opportunity to
buy everyday groceries of the highest quality at the lowest
possible price.”
ALDI began operations in 1913 with the opening of a small food store in the German town of
Essen. Soon this little “service store” become a popular place to shop
The company has been operating internationally for over 50 years, with 7,000 stores worldwide
serving millions of people across three continents. The first Australian store opened its doors in
January 2001, ALDI has continued to grow and now over 300 stores successfully operate in
Australia. (Corporate.aldi.com.au, 2015)
ALDI understands that its customers want value for money but do not want to compromise on
quality. ALDI uses a lean approach to its business operations to offer its customers quality
products at competitive prices.
Key Strategies:
COMPANY ANALYSIS
Coles Supermarkets
A. Market Opportunity Analysis
Coles is one of Australia’s largest retailers providing fresh food, groceries, general merchandise,
financial service, liquor and fuel through national stores network and online (Coles, 2014).
One of the main strategies of Coles is to cut cost by improving its supply chain management. On
the other hand, Coles has put more infestation to improve make the transformation (Buffin, n.d).
Almost 90% of Coles brands are Australian made, it comes from fresh produce local farmers.
There is also ‘Australia First’ sourcing policy in order to support the Australian food industry
(Kenyon, 2012).
Coles has contracts with transport provider in order to conduct the logistic activity. Suppliers
have to arrange inbound freight to deliver the goods to Coles Distribution Centres. Otherwise,
suppliers can use Coles Collect Coles system so that they just need to ask Coles to collect the
goods from their place. This system aims a better planning and efficient inbound service both
for Coles and the suppliers. Coles has the ability and management system of its distribution
from suppliers to Coles Distribution Centres and Coles Distribution Centres to Coles
supermarkets shelves. This supply chain improvement allows Coles to manage the product flow
and ensure that DC capacity is effectively utilized.
Communication is one of the most important parts of the whole supply chain system. Coles has
launched the Coles Supplier Charter that contains all of the information for the suppliers when
they work with Coles. Coles will conduct all the dealings with the suppliers in accordance with
the Coles Supplier Charter (2014). Furthermore, there is Supplier Portal (n.d.) to support the
efficiencies and give a better communication between the two parties. This portal also provides
information to assess suppliers’ performance and identify opportunities along the value chain.
WOOLWORTHS
A. Market Opportunity Analysis
In June 2014, Woolworths was still the largest retailer by market share owning 39.6% of total
market share (Bariacto and Di Nunzio, 2014). The two most prominent drivers of value which
help to secure such market share are competitive pricing and fresh produce. Lately, a new value
driver has emerged: widening access to produce through nation-wide network of physical
stores as well as online shopping and delivery. Below is SWOT Analysis that highlights
Woolworth’s strengths and weakness in the face of opportunities and threats in the market.
Woolworths’ customers want the freshest quality for good value. Integrated supply chain with
in-built features to keep food as fresh as possible provides sustainable competitive advantage
through cost-savings and quality control. The introduction of the new convenience store format
in urban areas where high rise block apartments have thrived in recent years (Cummins and
Sprague, 2014), is predicted to capture the rising market of urban dwellers. Having a portfolio
of store formats such as convenience/petrol, full-line, new market, metropolitan, etc. brings
sustainable value to the customers by reaching them at convenient locations.
Woolworths also owns important intangible resources which contribute to the maintenance of
its sustainable competitive advantage. These include its well-established brand, market leading
online shopping channel with recipes and convenient shopping lists, and new technologically
advanced supply chain and logistics system Mercury II (Mitchell, 2014) aiming to create
efficiencies in the logistics of food as well as liquor and general merchandise.
Woolworths’ value-creating capabilities include Responsible Sourcing initiatives as a response
to the growing concern over the treatment of farm animals and profitability of Australian
farmers. In order to meet future demand, Woolworths helps suppliers gain certifications in the
form of grants and research (Woolworths Limited, n.d.). Moreover, Woolworths benefits from
being part of a conglomerate of various brands which shield the food retail brand from loss of
market share and profitability.
wide range of fresh Australian produce. In order to create cost-savings in the procurement
process Woolworths is helping its suppliers to specialise and encourages monoculture which
yields more produce (FlavourCrusader, 2015). The drawback here, however, is that such
produce is more prone nature’s disasters like flooding, diseases or pests.
ALDI Supermarkets
A. Market Opportunity Analysis
Supermarket industry in Australia is dominated by two big giants – Woolworths and Coles.
However, since its opening, ALDI is slowly catching up. Although ALDI keeps a close eye on their
competitors, it always sets its own course. It picks and understands its target customers, and
never tries to copy the strategy of its competitors. This is why ALDI is special:
Strengths Weaknesses
• Targeted product offerings •Manual system used
•Simple operations •Narrow product range
•Private label sourcing •Limited number of staff
•Price edge over competitors •Poor quality control management
•Low profit margin •Minimal perishable goods
•Deep pockets of parent company
•Good relationship with suppliers
•Limited partnership
Opportunities Threats
•Electronic commerce •Staff turnover
•Increase market penetration •Product recalls
•Product quality improvement •Aggresive marketing of its
•Succession planning for staff competitors
•Loyalty club card
•Customer service
The most important for customers is ALDI’s price control, which is its key success factor. It is
able to sell low-cost products through its effective lean management system; low-cost but highly
productive staff; healthy financial status; economies of scale from procurement; and efficient
transportation and distribution systems.
ALDI uses lean production aims to produce more using less resource. Whenever local supplier is
available, ALDI taps them to reduce the need for long and costly delivery journeys. Products are
received exactly when they are needed to eliminate large inventories. They use the bar codes
attached to each item to forecast sales (Business Case Studies, n.d.b).
To minimise its staff requirements, ALDI limits its trading hours (Coriolis Research, 2000). It
opens from 8am until 8pm from Monday to Saturday, and from 10am until 4pm on a Sunday. It
also provides training to its employees for them to perform a variety of duties throughout the
store (Business Case Studies, n.d.b).
As an international retail store, ALDI receives financial assistance from its parent company. Its
German parent company ALDI Sud invested around $2 billion to support its expansion plan in
Australia (Speedy, 2013).
ALDI buys in bulk to allow it to negotiate better with its suppliers. Furthermore, once a price
has been negotiated with the supplier, no additional trade spending is made –no slotting fees,
introductory allowances, promotional discounts, volume allowances, even funding, voluntary
donations, etc (Coriolis Research, 2000).
Given these, Moody’s Investors Service predicts that ALDI will pose a long-term challenge to
Woolworths and Coles. It expects ALDI’s store growth to continue at 5-6% a year over the next
five years, thus surpassing the big two (Pash, 2015). As of November 2014, ALDI has already
opened more than 300 stores in Australia and is expected to open more than 400 stores across
the eastern seaboard by 2016 (News.com.au, 2014). Each store is estimated to bring a profit of
$10-20 million annually, with non-food items accounting for about 30% of its sales (Heffernan,
2014).
ALDI wanted to enhance the efficiency of its supply chain for the suppliers in packing and
transportation areas. Together with CHEP, a leader in supply chain management and also pallet,
container, and crate pooling provider, they have launched a new system of reusable plastic crate
for their fresh produce supply chain called Gen 3. Hafiz (2013), states that by working with
CHEP on the Gen 3, ALDI achieves a one-touch solution and increase the efficiency in many
points of its supply chain. She also says that the efficient supply chain means their customers
are not paying for unnecessary overheads. To do so, ALDI has to simplify as many operations as
possible to cut down the costs and maintain the low price goods.
According to aldisuppliers.com.au (2013), ALDI’s delivery system is divided into domestic and
international supply. For domestic supplier can deliver their palletized goods to ALDI’s
distribution centre or use ALDI logistic to pick up the goods from suppliers’ warehouses;
whereas, for international supply, it is suppliers’ responsibility to deliver and arrange the
shipment to Australia with the assistance of ALDI internal logistic or its logistic supplier
partners.
To communicate with its suppliers, ALDI has an online supplier network that contains all
information needed to work together. In addition, supplier’s bargaining power is low. If the
suppliers do not agree with the price given by ALDI, then ALDI will find other suppliers
(Brandes, 2005).
SUMMARY ANALYSIS
As we have seen, the value drivers for the supermarket industry are mainly focused on cost,
accessibility and relationships. We can conclude that all three supermarkets analysed, create
value in very distinct ways to bring their individual competitive advantages forward.
ALDI has had a huge impact on the Australian consumer perception towards private label
groceries. ALDI stores offer includes limited choice but well-presented stock at a very low price.
It largely appeals to the low income/discount-seeking customer, stores are mainly situated in
lower-income areas, accessible and close to their target market.
Coles, caters to the price conscious shopper by focusing on delivering value for money. Coles is
now offering staple groceries, such as milk and bread, at a low price. The company has largely
improved its service since it was acquired by Wesfarmers, increasing supply chain efficiencies
and revamping the quality and quantity of their private label products. (Armstrong and Adam,
2015) Around 90% of Coles brands are Australian made. Coles has an ‘Australia First’ sourcing
policy that supports the local food industry, which is extremely important to Australian
consumers.
On the other side of the spectrum we find Woolworths. Woolworths creates value through its
investment in integrated supply chain of various brands which yields cost savings. Its large
portfolio of brands allows it to invest in online shopping channels and new store formats in
order to make its products accessible to various customers in various locations. Woolworths
also attempts to transform its value from ‘cost’ to ‘symbolic’ and gain competitive edge over its
rivals. It delivers value in the form of Responsible Sourcing, which differentiates it brand to
appear more ethical and socially responsible rendering the retailer less prone to price wars.
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