02.The power of Aldi
Aldi wins again
Given its impressive track record in our previous price surveys and promise of “permanently low prices”, it’s no surprise that Aldi’s basket is once again significantly cheaper than its competitors. It cost us just $94.30 – 25% less than a comparable basket from Coles and Woolworths (see table, right).
Cheap and cheerful
Aldi’s philosophy is that all people “should have the opportunity to buy everyday groceries of the highest quality at the lowest possible price”. While we haven’t compared the quality of Aldi products with equivalent brands, Aldi is certainly hard to beat when it comes to low prices. So how do they do it? If you’ve shopped at Aldi, you’ll know it’s a no-frills experience. A spokesperson told us: “We can keep our prices low because we run a lean and efficient business, and concentrate on selling a select range of exclusive brand products. We don’t spend money on expensive brand marketing campaigns, customer loyalty programs or merchandising and point-of-sale displays.”
‘Aldi effect’ equals 5% less
It’s not just Aldi shoppers who benefit from its low prices; the ACCC inquiry found consumers pay 0.8% less at Coles and 0.7% less at Woolworths if there’s an Aldi store within 1km, compared with no Aldi within 5km. Our results suggest shoppers in the eastern states (where Aldi has a presence) pay less for groceries, with the top 10 cheapest cities in our survey all located on the east coast.
Coles and Woolworths price-match Aldi on products they consider to be directly comparable to Aldi’s products – primarily their private label items. The ACCC inquiry found that on average Coles customers paid 5.1% less for these products if they shopped at a store within 1km of an Aldi, compared with Coles customers shopping at stores without an Aldi within 5km. Woolworths more recently extended its pricing strategy to apply to all its stores in the states where Aldi is present (except for the most remote stores), not just the stores located near an Aldi. There are more than 200 Aldi stores located in the ACT, NSW, Queensland and Victoria. When we asked about possible expansion to other states, Aldi told us that it’s “focused on its growth along the eastern seaboard for now”.
The “Aldi effect” is a positive one for consumers, but ultimately it’s limited in that it doesn’t benefit shoppers in all states and is only significant on prices of Coles or Woolworths brands comparable to Aldi’s 1000-odd products – minuscule in comparison to the tens of thousands of products stocked by the major chains.
Less than $1 difference for duopoly
While the ACCC report highlights Aldi as a “vigorous price competitor”, it concedes Coles and Woolworths face limited price competition from the independent sector. There’s also little incentive for the majors to compete aggressively on price, which is reflected in our survey results. As in previous years, there was no runaway winner from the duopoly, with less than $1 in difference between the basket price at Coles ($127.67) and Woolworths ($126.87). IGA and FoodWorks, the two independent supermarket chains surveyed, returned the most expensive baskets at $142.68 and $154.73 respectively.