In August 2016, The Age published an article outlining yet another twist in Coles’ strategy. The intention, this time, is to reduce the supermarket’s product range by 15%, to “drive the efficiency of the business to fund grocery price cuts and safeguard its market share.”
The notion of reducing the merchandise offer to protect market share sounds strange. But, the strategy problem at Coles runs deeper than that. Let me take you on a short trip down memory lane.
On 31 May 2016, The Australian Financial Review wrote about Aldi’s rapid expansion in Australia. Aldi is now the most profitable supermarket retailer in Australia, with EBIT at 6% against 4.6% reported by Coles, and 5.4 reported by Woolworths.
Independent supermarkets in Australia live on borrowed time.
But, at first glance, it’s easy to think otherwise. IGA currently operate approximately 1,300 stores. Woolworths have a mere 861 stores and Coles 746. That said, Coles and Woolworths stores occupy much more space than the average IGA outlet. Still, IGA handle a large share of the grocery market.