The online world has been discussing a new Moody’s report which assesses the prospects of Australia’s largest supermarket chains. With increasingly savvy customers seeking out the cheapest prices, traditional market leaders have been unsettled by newer entrants into the marketplace. For the best example of an ‘unsettling factor’, look no further than German-based retailer Aldi.
According to the credit rating agency, the German company will face a serious challenge to Australian market leaders such as Woolworth and Coles. Though most of the data revealed that Aldi’s customers were often switching over from smaller, local chains, the folks over at Moody’s believe that the company will slowly work its way into mainstream profits.
Moody’s VP and analyst Ian Chitterer discussed the report in a note mailed to investors. “In such an environment, and based on international experience with the growth of discounters, we expect the market shares and margins of Woolworths and Coles to come under pressure over time,” Mr Chitterer wrote.
“It is important to note that the credit quality of the big two – which together account for 60 per cent of Australia’s grocery market by value – is supported by strong margins, healthy cash flows and ongoing cost reductions. Accordingly, we do not expect their credit quality to be materially impacted by competition from Aldi over the next 12 to 18 months.”
The agency offered a positive estimate of the store’s fortunes in the future, with analysts predicting a five to six percent bump each year for the next five years. This is in stark contrast to the economic prospects of ‘the Big Two’, who are set to expand by one or two points a piece.
Woolworth’s CEO Grant O’Brien told the ABC that the chain was preparing for the future by adapting to the modern consumer. “They’ve certainly been more value conscious than they’ve been, and that’s a continuation of the trend we’ve been seeing,” Mr. O’Brien said. “So smaller baskets more often and that’s aligned with modern busy lifestyles.”
WYZA is Australia’s premier lifestyle and entertainment website for retirees. Visit their website today!