Consumers prefer value over local shops – Coles

As inflation takes a bite out of people’s wallets, supermarket behemoth Coles anticipates that they will avoid the epidemic trend of local shopping and instead prioritize deals.

The company also predicts a continued boom in online sales, which jumped more than 40 per cent at the grocery chain in the past year.

In a statement to the company’s annual general meeting on Wednesday, chief executive Steven Cain said COVID-19 restrictions and the impact of floods on supply chains had driven “local shopping” trends.

“These trends are unwinding as (product) availability improves and value becomes more important to Australian consumers,” he said.

Consumer prices have soared since the start of the year, including a nine per cent year-on-year lift in food and drink prices in the September quarter.

The Coles chief previously warned cost of living pressures were already starting to bite household budgets and the company expected to see sales drop off as higher interest rates took their toll.

As consumer prices rose, the supermarket chain saw an increasing number of customers “trading down” to cheaper brands.

Mr Cain told the meeting Coles had introduced “dropped and locked” prices on hundreds of products in recent months and the measure would stay in place until the end of January.

Coles recorded a small increase in net profits and sales in the 2022 financial year, despite COVID-specific costs of around $240 million.

Chairman James Graham told shareholders the 2022 financial year had been “marked by significant outside events”, including lockdowns, the Omicron virus wave and widespread flooding.

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“(These) all added pressures on our supply chain, store operations and product availability,” he said.

Coles reported a slender year-on-year increase in supermarket sales in the first quarter of the 2023 financial year but alcohol sales dropped as a pandemic bump in liquor demand dwindled.

Management remained bullish on the potential growth in the company’s online trade, which was up to nearly $3 billion in the last financial year – a 42 per cent increase – and accounted for nearly eight per cent of total sales.

Coles is developing four automated distribution centres, in Sydney, Melbourne and Brisbane, to back up its online business and Graham said the company held a “very positive view” for its long-term prospects in e-commerce.

“We believe that it’s really important for us to be able to offer our customers the ease of access at anytime, anywhere,” he said.

The company announced in September it was selling its fuel and convenience store operation, involving 710 Coles Express sites, to supplier Viva Energy for $300 million.

The sale is expected to be completed in the second half of the 2023 financial year, pending regulatory approval.

Graham said the service stations, which would be progressively rebranded, would continue selling Coles products and accepting customer dockets for fuel discounts.

With AAP.