Last Updated: November 29, 2015

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Technology changes grocery market


Trend: Changing face of grocery shopping.

Bite of the market

Slice: How the Aussie grocery retail dollar is divided.

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THE growing popularity of private-label goods has increased competition between the supermarkets.


But as consumer demands change, the face of grocery retail has undergone rapid change to keep up.

Farmers' markets, online niche retailers, paddock-to-plate producers and global supermarket chains have taken on the might of the established supermarkets.

The size and product range of smaller players, such as online grocery store Aussie Farmers Direct and farmers' markets, grew by 39 per cent and 25 per cent respectively in the past year alone.

A recent report by business analysis group Ibisworld forecast supermarket sales would continue to dominate the retail sector over the next five years, with revenue forecast to rise by 2.3 per cent a year to $97.7 billion in 2018-19.

While the retail landscape has expanded, supermarkets still dominate, with the big two, Woolworths and the Wesfarmers-owned Coles, absorbing a combined 68.8 per cent of the grocery retail dollar.

An increasing population with growing food awareness has contributed to other, smaller food retailers getting a foothold in the market, but they still haven't gobbled up any of the market concentration that has been held by the big supermarkets for more than a decade, with the exception of Aldi, which has had 15.5 per cent growth each year for the past five years.

The Euro giant is expected to expand into South Australia and Western Australia as its market share grows.



"The development of sophisticated online sale options, including phone and tablet options, is expected to further increase supermarket sales," the report said.

"With these functions also come convenient alternative pick-up and home delivery options, further attracting clients to use these supermarkets."

Competition is expected to remain intense, with Costco and Aldi stores changing consumer shopping trends.

Costco opened its fourth Australian superstore at Ringwood in Melbourne last November. Ibisworld said it anticipated Aldi would gain a larger market share and play a significant role in shaping the trading terms of supermarkets and grocery stores.


Growers have reported the ease of dealing with Aldi, saying the supermarket chain pays its bills early and is easy to negotiate with. And with Coles and Woolworths agreeing to abide by the new Supermarket Code of Conduct, they hope that will spread throughout the grocery sector.



As trends change, it seems tech savvy and time-poor Australians are turning to online shopping more and more.


Coles general manager multichannel Brendan Sweeney said Coles online was the fastest growing part of the business.


Coles has invested heavily in its own dedicated delivery fleet, and has recently launched a new website and mobile site to help customers to research and compare products and make informed choices.

Mr Sweeney said one of the barriers to customers switching to regular online shopping was delivery fees.

"Online grocery shopping is definitely set to continue growing rapidly and particularly appeals to busy families with young children," he said.

Professor David Hughes, from UK berry production and marketing group Berry Gardens, told delegates at the Berry Quest conference last month that Australian consumers were still wary of online grocery shopping.

"People often say to me, but what if Woolies gives me the bad fruit and veg?" he said.


"If you asked my son if he trusted Tesco to pick his produce he'd say 'They've already got me, why would they disappoint me?

"There's a lot of distrust of the supermarkets in Australia, but the online market will grow. It has to."

Recently Aussie Farmers Direct joined forces with The General Store so customers could fill their online trolleys.

The online grocery retailers have partnered to provide customers with household staples such as canned goods, dishcloths, sauces and spices, as well and fresh produce.

AFD chief executive Jordan Muir said the move had been in the pipeline for nearly 18 months after an AFD survey showed almost 70 per cent of customers wanted an increased range of products.

Mr Muir said the move was designed to make AFD a genuine alternative to big supermarkets.



The General Store chief executive Brendan Shaw said the aim was to make "the corner store" available online.

"Think of us like a full-service grocer that delivers," he said.


The AFD product range has grown by 39 per cent - from 196 this time last year to 270 now.






A third of AFD customers are using its smartphone app.

AFD has 130,000 active customers and delivers more than 1.25 million products each week across major metro areas in all states.


Victoria's farmers' markets are also growing.

Victorian Farmers' Markets Association-accredited farmers' markets sell to 1.6 million shoppers each year, who spend at least $100 million a year, giving the markets 7 per cent market share of fresh food sales in Australia.

VFMA chief executive Sam Edmonds said the peak body had gone from having 19 accredited farmers' markets in 2009, to 38 as of this month.

The number of stall holders has grown from less than 100 in 2009 to more than 800 this year.


When Aldi entered the Australian market in 2001, Coles and Woolworths responded by introducing their own lines of private-label merchandise.

Across both supermarket chains, several product lines were deleted or replaced to make way for the self-branded merchandise.

The majority of Aldi grocery items are private label.

"From the moment Aldi opened its first stores in 2001, we have changed the way Australians view supermarket shopping," an Aldi Australia spokesman said.

"We introduced the concept of discount retailing to Australian consumers."


Quantum Market Research managing director Imogen Randell said consumers had shifted their spending habits since the global financial crisis, feeling cautious about their spending and showing restraint.


Ms Randell said people found it difficult to walk past diced tomatoes in the supermarket being offered at 80c a tin.

"The branded Aussie icon sits on the shelf at nearly double the price and struggles to get put in the shopping basket," she said.


"More than three in four of us believe that when it comes to fresh fruit and vegetables, the quality of Australian produce is better than that from overseas.

"However, this sentiment doesn't translate to food once it has been processed. Apparently a factory is a factory whether it's here or overseas with 55 per cent of us who believe that packaged goods are the same quality whether they are Australian made or from overseas."


But Woolworths has reported that since it swapped to 100 per cent Australian sourcing for its private label canned goods in August, sales of canned fruit had increased for the first time in three years.

"The canned fruit category in Australian supermarkets had been in decline for the past three years, but in the past few months we've seen a 24 per cent increase from last year in sales of canned fruit," a Woolworths spokeswoman said.

"We've sold more than 1.8 million cans of Australian-sourced fruit, which is a fantastic result.

"It shows that customers are voting with their feet."

A mix of local and imported produce is used for Costco's private label brand Kirkland.


"There were items that were out there in the market that we couldn't sell at prices that we wanted to, so we developed the Kirkland brand and then our members just came to love it," regional marketing manager Kyla White said.

All Costco's meat is sourced from Australia for its Australian stores, and for most of its overseas stores.

Aldi, also foreign owned, sources 100 per cent of its fresh meat, 97 per cent of its fresh fruit and vegetables and 94 per cent of its dairy from Australia.

Woolworths has 19 million customers a week and has reported in its Woolworths Trolley Trends report that 72 per cent of its customers were concerned with the cost of living.

"Households are allocating three percentage points less of their overrall budget to food and non-alcoholic drink compared to 25 years ago," the report said.

The report also said a major shift in Australia's ethnic structure had changed shopping trends. Mediterranean, Asian, and Arab/Persian food categories were on the rise, demanding foods such as lychees, pomegranates, red papaya, figs and okra.

Perceived "superfoods" such as kale, blueberries and black garlic were also in hot demand.

"Australians are eating out more than ever, with 31 per cent of the dollars in our food and non-alcoholic beverage expenditure being spent on restaurants, takeaway or school lunches," the report said.

Sunday is fast becoming the new Saturday for trips to the supermarket, with 18 per cent of Australians making Sunday their primary shopping day.

Coles said Australian customers were shopping more often throughout the week and visiting the supermarket at least twice a week.

"In response to this customer preference, Coles has focused on developing stores to suit the requirements of a modern, busy Australian family by delivering features like ready-made meals, time-saving check out innovation and re-designing the entire format of the store to suit the community it serves," a spokeswoman said.


The Ibisworld report said the ability of major supermakets to innovate and use new technologies via store systems, mobile applications, tablets and online advancements would be a major factor in increasing the customer reach.



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