Supermarket Price War Tactics #1

The situation on the shelves The tactics behind the supermarket price wars Australian grocery market coles 2011 sales 2011 sales $320m SALE $36.2bm Brand names 1000s of products price-reduced, yet profits up Private labels Brand names coles 71% Private labels % 2016 TH 33 2010 woolworths 25° Shelf space doesn't change How they're doing it Deletion of competition Control of Reproduction of similar products Lower costs to Suppliers put in price competition private labels display & sales Costs lower for private labels Contract Advertising Manufacturing Fees charged to brand names and private labels suppliers * Rival products placed on the bottom or top shelf * Private labels put at eye level * Price can be manipulated * Reducing the third, fourth and fifth most popular products in a product area * Direct to core suppliers *Mimicking the goodwill and packaging of established brands Ullage (transport damage) Warehouse pallet fees Distribution centre costs Promotion fees Catalogue fees Who and what's affected The entire grocery manufacturing industry YOU the Smaller retailers Smaller brands Manufacturers consumer Smaller retailers have to buy at a higher cost price than Coles and Woolworths, and therefore can't Competion wiped out, production sent off-shore, less manufacturing on-shore Manufacturers are forced to reduce • Reduced choice • Reduced product quality • Reduced future choice Big brands remain, while small or niche brands disappear their price and quality to ensure a contract compete on price