Following Tuesday’s news that Woolies is to shed staff and close unprofitable stores comes a report out today that shows arch-rival ALDI is set to grow 16 per cent in Australia year on year.
According to Moody’s Investors Services, ALDI’s 10 year concentration on the eastern states has given it an incredible foothold in the local market but it is its plans to roll-out stores in South Australia and WA is where the real growth is expected to come from.
The report said: “We expect ALDI to expand its store base by around 16 per cent per year over the next two years.
In May, B&T reported that ALDI had significantly ramped up its ad spend over the past 12 months, up $5.8 million year on year to $34.7 million to April 2016.
“In contrast we expect Coles and Woolworths to increase their store numbers at a growth rate of below three per cent.”
And the ALDI effect has well and truly bitten the once untouchable duopoly of Coles and Woolies. The German-owned retailer is clearly winning the “we’re cheapest” battle and even though the other two have reduced prices and increased their home brands Fairfax Media has reported that their share of market has dropped from 75 to 70 per cent in recent times.
Following yesterday’s announcement of super low inflation rates in Australia, the grocers can take some responsibility with news grocery prices have dropped YOY by as much as two per cent. However, that’s not great news for agency land as lower grocery prices mean profits are down and that can translate to lower marketing and ad spends.
Nor does Moody’s believe ALDI’s expansion will cannibalise its existing market share. “Each new store can take market share without cannibalising other ALDI stores, a dynamic Coles and Woolworths do not benefit from, owing to their existing nationwide footprints and higher store densities.
“We expect the significant rollout of new Aldi stores, combined with the increase in marketing spend, to result in continued competition and price deflation, negatively impacting the comparable same-store sales of its competitors over the next two years,” Moody’s said.