Coles takes aim at the corner store

Colin Kruger
January 10, 2013
SMH

Coles has opened a new front in its food price war but this time its larger rival, Woolworths, is not the target.

The company is now offering $1 per litre milk through more than 600 Coles Express outlets Australia-wide in what is seen as a direct attack on the traditional corner shop – a sector which is already suffering in the cross fire supermarket giants’ food price war.

Coles has not added its $1 bread to its convenience store offering but did cut the price of its Coles brand bread from $2.49 to $2.30.

According to a recent report from industry research firm Ibis, consolidation is inevitable in the same way that Coles and Woolworths have cornered the supermarket sector.

The president of the Queensland Dairyfarmer’s Organisation called for consumers to boycott the cheap Coles Express milk and support their local independent corner stores which are being squeezed out of business.

‘‘Dairy farmers see that the market has failed and this is yet another urgent example for the ACCC to investigate predatory pricing,’’ he said.

Coles corporate affairs chief Jon Church denied the price cuts would put pressure on independent convenience stores, saying ‘‘the volume of milk and bread sold at Coles Express is very small compared to Coles supermarkets and will not make a material difference to other convenience stores”.

“We have aligned prices with supermarkets because customers told us they did not understand why they should pay more for the same product at Coles Express. We thought they had a point and so we now offer the same price for these products whether bought at our convenience stores or supermarkets,” he said.

According to Ibis, Coles and Woolworths have already created tougher trading conditions for traditional convenience stores via cheaper prices at the supermarkets.

‘‘A renewed focus by supermarket on everyday staple items such as bread and milk, coupled with significant price reductions in these categories caused further frustration for convenience operators who relied on such goods to attract consumers in the first place,’’ said the Ibis report.

Their direct entrance into the convenience market, via alliances with petrol retailers, has intensified competition further.

“These heavily discounted offers on products such as milk, subsidised by the major chains against their many other product categories, might seem to be a win for consumers in the short term, but the long term outcome is a further erosion of competition in the marketplace and increased plight for small retailers,” said Australasian Association of Convenience Stores (AACS) executive director Jeff Rogut.

The supermarket giants are not the only players driving industry consolidation.

7-Eleven has lifted its share of the market to more than 650 stores with the acquisition of around 300 Mobil petrol stations in 2010.

Woolworths operates 550 outlets which are co-branded with Caltex.

‘‘Independent convenience stores need to implement new strategies to compete with convenience outlets operated by large companies like Coles and Woolworths. Larger players will effectively crush those that continue to offer the same product range and methods of doing business,’’ said Ibis.

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