Food

Supermarket price wars ‘could finally end’ thanks to BBQ chicken hike

Mar 28, 2018

Big supermarket chains have been locked in a price war for decades.

They’ve been slashing prices in a fierce competition for almost a decade, but the price war between some of Australia’s biggest supermarkets could finally be coming to an end, a retail analyst has predicted.

Coles recently made the controversial move to increase the price of popular barbecue chickens by $1, taking them up to $9. According to reports, the retail giant began by testing the new price in regional supermarkets – but rather than taking the opportunity to promote their cheaper prices, top rival Woolworths actually following suit and did the same.

Then, as Coles rolled out the higher price nationwide – Woolies did the same. Now, Bank of America Merrill Lynch analyst David Errington has described it as an “industry-changing event”.

According to The Australian, Errington said the price hikes could signal the end of a “race to the bottom”, which has seen both supermarkets – along with other top grocery retailers – slashing prices on some of their most popular products in a bid to come out on top.

“A $1 price move is material but more importantly to us is a likely symbol that Coles and Woolworths are now looking at ways to improve profitability without compromising competitiveness,” he said in a note, reported by the publication.

He believes it could be the start of a chain reaction, as more price rises are rolled out across the grocery sector as a whole, and added: “Australian food retailers show they don’t ‘hate’ money… We believe the margins in the Australian supermarket industry have fallen too aggressively in the past two years, and that all participants are likely to allow price inflation to modestly return after a lengthy period of deflation.”

It comes after Coles originally slashed the price of its barbecue chicken down to $8 from $13 on Australia Day in 2016 – leaving Woolworths struggling to match the drastic move.

Meanwhile, in another signal it could be backing off price hacks, Coles recently announced its famous ‘Down Down’ TV ad campaign – which has been running since 2010 – would be taking more of a backseat, to focus on other great aspects in store.

Despite the changes, Coles boss John Durkan last month insisted they would continue to lower their prices overall, and said in an announcement: “Our long-term strategy, as it has been for a while, is to invest in lowering prices.”

Meanwhile, a spokesperson insisted the recent changes to the chicken prices would allow the supermarket to focus on lowering prices of other products, and told news outlets that “hot roast chickens are still almost 20 per cent cheaper than they were two years ago, and this change allows us to invest in lowering prices on other products that are important to our customers”.

A Woolworths spokesperson told Starts at 60: “In 2016 we dropped the price on our hot roast chickens from $11 to a market leading price of $7.90. Earlier this month we reluctantly moved the price to $9 due to an increase in input costs, particularly feed cost, which is a key component of producing chickens for our suppliers. The new price still represents a $2 saving on the everyday price of two years ago.”

The company insisted, however, that it would continue to drop prices on hundreds of other products, focusing particularly on family essentials such as “salads, biscuits, pastas, nappies, meats as well as household cleaning items.”