Coles hints of a looming price war with Woolworths again

The price war between the two supermarket giants in Australia continues. On Wednesday, Coles Managing Director John Durkan said the supermarket would not hesitate to revive its price war with rival Woolworths.

In the past 12 months, Coles lowered food and liquor prices by 1.4 percent, while it added over 2,600 products to its Every Day value pricing. By heavy discounting on some products, such as Kleenex tissues, Colgate toothpaste and Sunrice, sales grew between 50 to 80 percent, Durkan discloses.

He says Coles aims to bring down the basket price weekly for its shoppers. Coles’s primary measure, both on a week-on-week and year-on-year comparison, is its own basket. However, it also looks at the competitors although Coles, Durkan insists, is still cheaper and would continue to do so.

Besides its brick-and-mortar stores, Coles is also testing its first online-only store in inner-city Melbourne as it aims to hike volume of online sales. Durkan shared about the new online-only outlet at the Wednesday strategy briefing at Westfarmers when he also tackled the price war.

However, rival Woolsworth is almost two years ahead in the online business, having opened one in Mascot, Sydney, in August 2014. The online store, in Richmond, would serve customers within a five-kilometre radius which includes some of the heavily populated suburbs in Melbourne, reports The Sydney Morning Herald.

As part of Coles’s 2016 investment strategy, the supermarket giant would spend between $1.3 billion and $1.4 billion on capital expenditure in 2017, says Durkan. He explains, “We are customer-driven and that means you do exactly what you say you do, so we, will take an investment strategy based on what we see in the market.”

Investment bank UBS has recently warned that within the next two years, a damaging price war could be risky for all listed retailers. But it said the price war would likely be initiated by Woolworths.

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