Lower cost items yes, not necessarily purchasing store brands, but lesser quality, quantity and poorer product selections.
How likely to find anyone this side of SkyNews who thinks consumers who have down graded to black and gold because they have a reduced food budget should party because they are spending less?
A pointless discussion splitting hairs over a few percent statistical difference. If we are all cutting back and downgrading and the Food and non-ABs have gone up 8.1%, how much higher would the CPI increase be if we had not? If our standard of living is falling which it is for most it’s hardly a win to say any are ahead by spending less on food.
It’s a while since Choice did a supermarket shop with the standard basket. 2021? Yes I’d like to see an alternate independent assessment. /added
Beans and rice, comes with a celebrity TV recommendation no shareholder of Colesworth should turn down.
Choice must be watching SkyNews…along with CanStar etc.
While Choice’s assessment occurred before recent price rises/inflationary pressures, their conclusion was…
Switching to Coles and Woolworths supermarket brand groceries – also known as ‘private label’, ‘house’ or ‘own’ brand – can offer significant savings. Compared to our national brand basket, you could save $57.67 at Coles and $54.90 at Woolworths for the equivalent private label branded basket – that’s a saving of 40% and 39% at the major supermarkets respectively.
As I indicated above, if a consumer who historically purchased known brands changed to store brands, the potential savings are significant and could be in the order of 40%. These savings would more than offset any recent inflationary price increases.
One doesn’t need another alternative independent assessment. One just needs to go shopping to see price difference between store branded and known branded products. It is also shown commercially by Aldi, which specialises in store branded products and is known by many experts and consumers, as a way to reduce costs on groceries if one isn’t brand loyal and/or willing to have higher imported content in foods they consume.
Well put.
It’s a bold assumption those most stretched for budget are those not already buying the cheapest and lowest cost store brand or Aldi products. How likely this is not already fact?
As previously stated.
However the recent price increases of grocery products were not what Choice assessed back in 2021. It’s an unknown whether the store branded and Aldi products have also increased in cost by the average 8.1% over 12 months, by less, or more.
UBS measured just supermarket prices. The ABS does not report supermarket prices independently of the other items in the index. The two measure slightly different baskets from different sources. The ABS includes take away food in its measure. UBS does not. How likely those on a tight budget buy take away?
Business (and analysts) work on a percent profit that ‘has’ to be made. It is referenced as return on investment, return on capital, margins, and so on. For public companies being profitable is not enough. There has to be enough perpetually increasing profit or the share price of a public company can collapse leading to all sorts of issues. If there is a 10% price rise at each step in the pipeline from producer to end-customer, simplistically there is going to be another (eg) 10% of every 10% added at each step, all fuelling the inflationary amount of the final price in shops.
Pricing is what the market will bear (no surprise) but as an example of rewards points manipulation a product has been $45 and recently was upped to $49.50, but every few weeks there have been 900 rewards points (valued at $4.50) offered for buying it. It is arguable whether the rewards points are a discount or the price has been artificially raised to make it appear the rewards points are a deal. Nothing is free and how the ‘payment’ is packaged varies widely, often with complex opacity.
In our corner of Melbourne all the F&V shops near a Colesworths compete with Colesworths pricing within cents of being the same, although sometimes better (or worse!) quality. Since Colesworths typically anchor in shopping centres surrounded by independent F&V, butchers, and seafood mongers, contrary to the article most here have higher prices than the Colesworths as if Colesworths owns them for faux competition. One strip centre F&V/deli literally next door to an Aldi ‘competes’ using pricing similar to a free standing Woolies across the street.
Confirms the point of the original post - that Colesworth used inflation to increase profit and in the process made inflation worse. The Crikey summary of your first article is:
Coles and Woolworths are making way more money than their British counterparts Tesco and Sainsbury, The Guardian has found, as Australia struggles through a cost-of-living crisis. Profitability is up 5.3% at Coles and 5.9% at Woolworths compared with 3.8% at Tesco and 3% at Sainsbury’s. The paper found that 72% of people are buying less as a result, and added profit margins are “a likely inflation trigger”. So why is our duopoly doing better? Because it’s a duopoly — there’s a lot more competition elsewhere, one expert says.
This is a great example. Your charts show clearly that ratchet effect – retail prices always rise immediately after a wholesale price increase, but don’t fall when wholesale prices fall.
“There oughta be a law against it”. And consumer advocates should be right on the case.
I can’t bleat about it any more than I have, but this article is the best so far – supermarkets have increased their margins by increasing prices more than input costs, in the knowledge that consumers are adrift from their pricing moorings, and have no point of reference as to what is a fair price for anything. The result is more unearned profit for the cosy duopoly and an increase in national inflation beyond what it would otherwise have been.
Meanwhile the government, Choice and other consumer advocates are keeping their heads firmly in the sand on this.
Caution is needed when comparing the data. The retail meat graphic Y axis is in cents per kg. The live weight saleyard graphic uses a NLRS Indicator Value for the Y axis. The two are not exactly the same. The X axis (time periods) for each also differ. Most notably the live weight NLRS indicator data is current up to the current week of this year (last week of July 23). The retail meat pricing data is only current up to 31 March 23.
Hence we don’t have the most recent 4 months of retail average price data to compare with the more recent live selling data. How the two values have trended since 01 April isn’t evident, unfortunately.
While the live selling prices and retail prices have a connection, there are other costs and factors to account for. It does not change the observation a fall in live selling prices has not been followed by a fall in retail. To note the NLRS indicator in July has fallen back to 2020 levels. But does not indicate retail meat prices will fall back to 2020 levels. One needs to account for the cost increases in transport costs, energy (processing) and wage indexation in the previous 3+ years. The MLA data will take some time to catch up.
Another take on food prices over the previous 12 months to June 23 and the previous year to June 22.
Included in the report data from UBS looking at just Woolworths and Coles across 60,000 line items according to the report. (Added note)
No surprise the data shows the cost of bread and even basic cereals such as rolled oats, wheat biscuit breakfast staples and dairy are one category much more expensive post Covid.
Meat and seafood plus fresh fruit and veg prices stand out for more modest price increases over the past year. Cooking at home from the basics looks to be the way to minimise the household budget pain.
For the so called “value added” products an interesting take on who’s to blame. The added value is all for the brand and retailer?
Looking at 60,000 items sold across supermarkets and looking at food category inflation can be misleading as it doesn’t represent the change in an average shoppers grocery basket. To be applicable it would assumes the average shopper purchases one of each item the price survey collected data on.
It would be better and to have meaningful conclusions, if it is to look at price rise trends for an average shopping basket, say similar to what Choice attempts with its supermarket pricing comparison.
Shopping baskets can have more of some items and none of others. This is where looking at everything isn’t representative of impacts on the average consumer. It could be found impacts are greater on the consumer if higher proportion of an average shopping basket contains items subject to higher price rises, and visa versa if the basket contains items with no or lower price increases.
Maybe Choice could persuade UBS to look at shopping basket impacts which is more relevant to the consumer and calculations of inflation.
We may or may not be typical but our grocery spend has gone up by almost double in the past 4 years. While we watch and whinge and deal with it NZ is taking a more proactive look. Whether it is the right look remains to be seen after a few years for it to settle in.
It’s worth noting the core trends reported by the ABC are the percentage increases provided by the ABS.
The ABC also provided reference to specific product lines using data provided by UBS to illustrate variations between the two major supermarkets. It’s indicative of what consumers would have seen on the super market shelves for those examples. I’ve no issue with understanding the data presented,
It’s unlikely any household or shopper’s weekly basket is the same as the published analysis from any source. Is one a black and gold rice and beans family, or one who only buys organic certified raw foods, or more accustomed to caviar and Wagyu? A great many consumers seem to be saying that the ABS version of the rate of inflation and hence that of government does not reflect the lived reality in their household.
In compiling our grocery list we first study retail sales data to make sure we include items regularly purchased by average Australians. The intent is to compile a list of commonly purchased items that we can compare on price, rather than a basket that’s representative of an average weekly shop.
What I’d like to see. 100% transparency where the historic product data of brands and package sizes with weekly shelf prices is mandated by legislation to be accessible to the public. Five years history for all the major food retailers would be a meaningful target. That way us consumers can see for ourselves. It’s also a way to keep track of ‘shrink-flation’.
Our lived experience excludes caviar.
What has changed for us is we now buy less of certain products and others less often. It’s difficult to imagine exactly how it is for consumers with a no brand “rice and beans” trolley. Not to forget the budget pressure from other needs such as rent and utilities.
one of the articles that explains the smoke and mirrors of how Coles and Woolworths profit margins on groceries are being reported:-
“Woolworths used to own petrol stations and, importantly, a liquor and hotel portfolio that contained Dan Murphy’s and BWS, along with hundreds of licensed venues with thousands of poker machines.
Those assets have since been sold or spun out of the business through the separate listing of Endeavour Group, which started trading in 2021.”
" But 10 and five-year comparisons of the overall business are problematic, because Woolworths formerly enjoyed the returns of its liquor retailing and pokies portfolio which generate much higher margins than groceries.
The current margins look low in comparison.
But when you compare profits solely derived from groceries, it’s clear that Woolworths and Coles have enjoyed a leap in margins during the cost-of-living crisis."
another article
“… what have the latest profit results from Australia’s two big supermarkets, which hold roughly 70 per cent of the grocery market between them, told us about price rises?
Profit margins rise for Woolworths and Coles
One thing that is indisputable from both companies’ results is that they are making more profit from every dollar consumers spend in their stores that they did in the same period last year.”
