Coles set to reignite supermarket price wars but will suppliers come to the party?

Coles chief John Durkan has restated that Coles Supermarkets is ready to lower grocery prices in order to increase transaction volume and is prepared to take on Woolworths – and all other supermarket and independent rivals.


Mr Durkan said that Coles had invested $1 billion in the supply chain over the last five years to drive efficiencies at Coles, especially across the supply chain to create lower costs that would feed into lower prices at the checkout and growth, with more transactions and more consumers.


In what is a warning to smaller grocery and convenience stores, Mr Durkan told The Australian newspaper last week that Coles would be competitive whether against Woolworths, Aldi, Costco, the independents or anyone else.

While Woolworths indicated in March it was lowering prices to win back sales from the likes of Coles and Aldi, Costco Australia managing director Patrick Noone said that nothing extraordinary has been seen on Australian grocery prices.

Coles remains committed to its low price Down Down Every Day price strategy, with prices to drop generally under a new Deeper Down campaign, instead of in several categories such as milk and bread according to Mr Durkan.

Supplier support for another price war is unclear as a price war may increase volume growth but not dollar value significantly against risks of further price deflation. Additionally it could move market share away from smaller competitors and hit supplier margins and profits, forcing more closures, takeovers and mergers.

Major food and beverage supplier Lion Dairy & Drinks has indicated the company would look for benefits from further lower prices. Managing director Peter West said that as part of any further price war between Coles and Woolworths, Lion would need to see a volume benefit such as gaining more shelf space.

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