Prices are rising in Australian supermarkets, particularly for fresh fruits and vegetables, research shows. There has been a strong rise in supermarket produce prices for the first time in 18 months, according to Deutsche Bank.
The supermarket sector has been under pressure from German budget supermarket Aldi, which has been driving prices downward. However, prices for fresh produce rose almost 7% in fourth quarter of 2016. This is a massive increase on the 0.7% rise documented in the September quarter of the same year. It is speculated that this price rise is due to Aldi’s smaller offerings in the fresh produce sector.
This price surge had a noticeable effect on supermarket prices as a whole, which you can see in the chart below.
Upon closer inspection, Deutsche Bank found that the price rise was more evident at Coles supermarket than at Woolworths. Looking at the chart below, it’s clear that the two supermarkets have had quite similar prices until early 2015, when prices at Coles began to surge upward.
Deutsche Bank notes that this is because Woolworths supermarkets have more to gain from food inflation, whereas the revenue of Coles is cushioned by the varied portfolio held by Wesfarmers. Woolworths has been pursuing a turnaround strategy that has included closing 30 stores and the termination of 500 jobs.
The turnaround strategy has recently led to the appointment of former Tesco executive, Claire Peters. Peters will assume the role of managing director of Woolworths Supermarkets in July, and will report to chief executive Brad Banducci. Peters will be the first woman to hold this role, and has said that she looks forward to continuing the customer first strategy.
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