I have used Coles for about the l last ten years or so. The first time (a few months ago), my care worker and I were in Coles. I was wanting to but some lamb loin chops that were “on sale” for $19 per kilo. When I was looking at the different trays to buy the cheapest one of the discounted ones, I noticed that were weighed at $23 per kilo. I chose two trays as did my care worker and I asked her to take a photo of the special tag on the shelf. At the check out when the girl scanned I pointed out that I was being charged more per kilo than advertised. The checkout girl called for someone to go and look and my care worker showed the checkout girl the photo of the tag. A department manager was called and after some discussion we were given the first tray for free. The manager didn’t know how to re weigh the second tray so she just charged me $15 (the tray was priced for over $30. We left the store quite happy about out purchase.
Unbelievably on the next fortnight the EXACT thing happened but this time with lamb cutlets, something I couldn’t guess at how long since I’d bought any, because of the RIDICULOUS price they’ve become in recent years. So my care worker and I picked three trays each. We got the first for free but this time they weighed the other trays and charged us at the “special tag” price.
The disappointing thing was we were treated like we were doing something wrong. One staff member asked were we hanging around the lamb each shopping day to catch Coles in any possible error. I answered by saying "Sure why not? Coles makes billions of dollars a year, so why should they not be caught out when they’re incorrectly pricing goods, which is completely unfair to customers? I’m guessing these particular scenarios occured because I shop fortnightly on Tuesday. Tuesday is the last day of the “specials” in the previous week’s catalogue. Anytime I buy something on special, I always lift the yellow tag to check what the original price is. So, so many times the special price is the same price as the original and I believe the yellow tag is put there so one will impulse buy, because of said tag. It’s wrong but I don’t complain about it as it happens too often and would add too much time to my shop, I just don’t buy the item. It also seems that once you have complained a few times, the staff treat you differently, like you are a pain in the butt.
I have been shopping more at Woolworths and I think it won’t be long til I drop Coles completely. Their customer service is lacking greatly. I’d say 90% of the time if I ask someone do they have any stock out the back for an item they tell you “if there’s none on the shelf, that’s none left” or my favourite “it’s not my department so I can’t help you”.
Aldi is also somewhere I frequent more. Their chicken Kiev or chicken tenders are to die for. The tenders are just that, the tender bit from the chicken breast and not some compressed meat. Thier lamb is also wonderful, be it a leg or loin chops for example. They have great specials as well.
My hands down favourite about Aldi is the staff. They are SO willing to help you, they almost always go out the back to look for an item you enquire about and when they don’t it’s because they know that they have run out of stock. They are very pleasant and the checkout staff are also wonderful. In a time where shoppers are being constantly price gouged, Aldi is very worth a look.
Shame that it’s a foreign owned company.
Australia companies need to learn about good service.
You must go to a different Aldi than I do ! In our local Aldi I have seldom seen, let alone engaged with, floor staff! They are scarcer than hen’s teeth. If you do happen to see a free range staff member they seem to run away and hide. It’s one of my main objections to Aldi, not being able to find anyone to ask questions of. And if you wanted help to carry something heavy from the store that’s just not an option - you’re on your own.
In theory Coles is not compelled to raise prices, so the theoretical answer to your question is no.
However, real world conditions compel them to do so. The same theoretical world would tell us that the costs of rent, supplies and labour also did not have to increase.
The disclosed annual profit for the 2023 financial year is less than 3% of turnover. Food inflation for the same period is reported at 7.5%. If Coles didn’t increase prices, the would be reporting a multi billion dollar loss, likely leading to cuts in staff and stores.
The company’s annual report lists an annual increase of 2.9% in income before interest and tax. This is less than half of the inflation figure and means that Coles would not have passed on the full increase in costs to customers.
Simplifying ‘real world conditions’ and ignoring Coles balance sheet, reality is a company has to make a profit and that has to be enough profit to satisfy the analysts and money men or their share price will tank and they could be subject to a friendly or hostile takeover.
Discounting a 2.9% increase before interest and tax seems disingenuous for the topic as they are running a profit, but perhaps not enough profit to satiate the above referenced groups. Other than the tenets of capitalism and the money men there seems little justification that a company has to increase profits at or above inflation every year. But regardless that is our reality expectation over time.
Or what?
Oh I see, they would record a loss. So you are saying they must increase their prices or record a loss.
On the figures available how do you know that if they failed to raise prices the outcome would not be to make a smaller profit or to break even?
Go broke.
Supermarket sales of $36 billion, inflation of around 7.5% so price increase of around $2.7 billion. Reducing revenue by $2.7 billion turns the profit into a loss. If you replace the 7.5% increase with the higher percentage that the public think their grocery bill has increased, the loss would be more substantial.
Public perception is that the supermarkets are increasing profit margins in inflationary times. This point is therefore relevant.
The article you referenced, your associated “Must?” and my reply relate to increasing prices, not increase in profit. In the world of fantasy they don’t have to increase prices. Given cost increases in recent times, do you think Coles should today be selling groceries at 2023, 2022, 1995 or 1923 prices?
Our system rewards the capitalists (investors and senior management) paid for by those least able to fund them. Using the 2.9% might keep the top end happy, but the bottom end usually is not ‘keeping up’ and being squeezed. Cake anyone?
In my fantasy I could imagine Coles holding prices and achieving a reduced profit from say $1 billion to $750 million but we both know that would incur the wrath of ‘the capitalists’ 
The general percentage of food inflation applied to the gross turnover of Coles does not produce a useful number, it has no meaningful comparison to the their reported profit.
The shareholders would also agree.
The financial books did not, however, meet shareholder expectations, with Coles shares falling more than 5% early on Tuesday after investors reacted to the results.
‘Coles posts $1.1bn profit amid grocery price surge and cost-of-living crisis | Coles | The Guardian
Price reductions associated with a $250 million reduction in profits would save each Australian household an average amount of less than 75 cents per week. When you factor in the associated loss of Government revenue and reduced returns to shareholders, including most people with money in super, the benefit would be even less.
That would be be same system that provides over $200 Billion per year in welfare, which indicates that it supports an audience wider that just capitalists.
I disagree. What 7.5% p.a. inflation means is that groceries costing $107.50 today would have cost just $100 12 months earlier. Applying this to the $36 billion of sales for 2022-23, means that the same items would have cost $33.448 billion in the preceding year. If Coles charged 2021-22 prices in the 2022-23 year their groceries revenue would have been just $33.448 Billion, with a corresponding reduction in gross profit and changing the $1 billion net profit to loss of over $1Billion.
Without trying to analyse P/L I am aware some view P/L more like ‘profit last year was $1 billion. This year it was $750 million. We lost $250 million.’ Your attempt to simplify the P/L equation seems to fit that.
The figure you have used is for food and non alcoholic beverages. Coles also sell alcoholic beverages, clothing, footwear, household equipment and various other bits and bobs that are not in your index. By definition that CPI component is an index number, it is distilled from samples of goods’ prices across the market it certainly does not represent only Coles and what Coles make their money from is not entirely within the scope of that index.
There is also the problem that the index is in part derived from Coles data as they are major players in food and beverages. So the 7.5% figure historically includes the consequences of Coles’ pricing decisions. You are trying to explore what their profit might have been had they made other decisions using the index derived from not making those decisions. The index would have been another figure if they had actually made those hypothetical decisions to make less profit.
You also assume (on top of your notionally derived gross turnover) that any change there will directly translate into percentage profit change which has built in all kinds of assumptions about cost structures are the way that costs change with turnover. You are wishing out of existence many decisions and consequences in the real world by assuming there is no change.
That assumes business costs for 2022-23 and 2021-22 are the same for both years. While some costs would have remained fair static, others would have increased as well (example being electricity). Any increased costs would have impacted on profit.
I have seen ‘bush economists’ claiming that the increase in percentage profit margins being greater than inflation being proof that the supermarkets have been price gouging and profiteering from inflation. This may not be correct.
If a business works on percentage gross margins for its products, which supermarkets do, if all costs also increased with inflation along with all items being sold, then the percentage profit margins would remain constant. This is the reasoning behind the ‘proof’ of the ‘bush economists’.
However, if all costs don’t increase in line with inflation, then this would increase the percentage profit margins. This could partly explain why the percentage profit margins have increased greater than inflation as costs like labour which is a high cost for supermarkets, may have remained static (EBAs negotiated before inflation impacts) over the period in question. These static costs are likely to impact future years when things like lease agreement or EBAs are renegotiated. This is where the ‘bush economists’ proof may fall over.
A simple metric is the cash flow. Page 29 Coles FY23 annual report.
Receipts from customers: up 5.1%
Payments to suppliers and employees: up 5.6%
Hardly sounds like price gouging going on there. The opposite I would think.
This is a tutorial from an insider who worked at a major grocer in the USA, a market with many variables from our own. The major differences are the effects of competition there and a duopoly here and the ranges of suppliers. It covers what ‘armchair, bush, and corporate’ accountants deal with as well as a nod here and there to ‘the capitalist minded’ in the grocery business. I would be surprised if the underlying methodology was much different here even if percentages are.
One can come to different conclusions based on personal biases. Are dividends, executive perks, market share, cash flow, or re-investing in the business relatively more important in their business models or annual plan? Community welfare rarely gets a direct nod in KPIs but customer satisfaction rankings are sometimes used as a proxy. I’ll ignore the range of issues they have to deal with in one or another way from sustainable practices, real estate, utility costs, employee expenses (wages and entitlements), and so on.
Consider reports over time where some suppliers/producers keep struggling while the duopoly makes year upon year top profits. The most highly publicised was the $1 milk where the dairy farmers were reportedly to the wall while the duopoly had their own purposes as well as solid and growing profits. Even a ‘bush economist’ might ponder what is happening behind the curtains on the executive floors rather than to authoritatively state what is happening, unless ‘there’ as part of it.
Should we move on?
While Coles shares fell 5% in response to their 2023 results announcement, Woolies stood out the next day. Woolworths posts $1.62bn profit with dramatic lift in margins despite cost-of-living crisis | Woolworths | The Guardian
The Woolies share price subsequently rose 5%. The market has spoken.
Perhaps consumers shopping at Coles are really paying less than when shopping at Woolies. Or could it be that Woolies is better at reducing its business costs and banking the savings?
“It’s moments like these” - rather than spend time analysing annual financial reports it may prove more productive to spend the time to shop around?
Ask Choice!
I came across a similar issue in Coles recently: I selected a 500gm frozen pack of prawn cutlets based on the shelf-marked special price of $17 against the normal price of $24.
At the checkout, it scanned as $24. (You do have to keep an eye on the scanned price, don’t you?) I pointed the discrepancy out and the checkout operator called for someone to check the price. I hated that I was keeping other customers waiting while that was done!
Another staff member eventually came, then went and checked on the prawns - right down the back of the store, of course - and returned telling the checkout operator that the shelf price was shown as $17 but it should have been $24 as the special price ended the day before. The checkout operator then put the prawns through at $17.
I thought that at Woolworths I would have been given the item for free, but I didn’t say any more as I had already held up the queue for more than 5 mins.
This happened about a month ago and I recently noticed a leaflet detailing Coles policy on such matters: Incorrectly priced items should be put through for free. Maybe that is a recent policy change; I haven’t asked. Everyone is too busy. There are about 8 checkouts at my local store but there are seldom more than 2 open.
