If the Australian grocery war wasn’t already at near boiling point, things are only going to get hotter according to a new report by analysts from merchant bank UBS.
According to the UBS report, ALDI’s set to snare $450 million worth of business away from struggling rival Woolies in the coming three years.
The report says ALDI is now Australia’s most profitable grocery chain and is best placed to win the inevitable cost-cutting war. It also noted that the Metcash-owned IGA chain would take a kicking from ALDI’s cost-cutting and aggressive expansion. The report noted that Coles would be the chain least impacted by ALDI.
For its initial 10 years in Australia, the German-owned grocer has concentrated on the east coast states; however, ALDI now has aggressive plans to move into South Australia and WA.
A recent Nielsen report showed that in the 12 months to April 2016, both Coles and Woolies media spend dropped sharply. Read the report here.
And it appears all bad news for Woolworths. Not only is it losing share to ALDI, but the UBS report notes its customers are also off to IGA too.
“Coles is doing the best job competing against ALDI, and we expect it to be least impacted over the next three years,” the report’s authors noted.
UBS said ALDI currently had about $A7 billion turnover in Australia but that should increase to $A10.6 billion by 2020 as its rollout in other states takes affect.
“ALDI is now the most profitable major supermarket chain in Australia, generating a profit before tax margin of about 5.2 per cent in 2013, and is, in our view best positioned to win a price war,” the report noted.
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