Coles boss says shoppers have cut back on meat, treats and bottled water

Coles chief Leah Weckert hopes the string of public inquiries into Australia’s supermarket sector has now drawn a line under claims of price gouging as she reveals cash-strapped customers are cutting back on treats and buying less meat and bottled water to save on their weekly shop.

Along with rival Woolworths, Coles over the past two years has been at the centre of multiple inquiries into its conduct and pricing practices.

More recently in March, the competition watchdog’s final report into the sector revealed Coles and Woolworths were some of the most profitable supermarkets in the world, but found no evidence of price gouging.

“What we really need to move onto now is a conversation which really addresses the underlying impacts of inflation on food and get in place policies that really help us to address those,” Ms Weckert told The Nightly on Wednesday, pointing to energy, labour and fuel, which have a “very big impact on the cost of food manufacture”.

“It is those underlying inflationary impacts that are the things that are driving (prices) up for families on food, it is not price gouging from supermarkets.”

The comments came as Coles on Wednesday reported a 3.4 per cent jump in group-wide revenue across its supermarkets and liquor divisions to $10.4 billion for the three months to the end of March.

Ms Weckert noted there was continued cost-cutting behaviour from customers during the quarter, with shoppers reducing consumption on treats, alcohol, meat, and bottled water as they look for further savings.

“Our most popular and well-performing specials every week would be the ones that are the 40 and 50 per cent off,” she said.

“We are very aware that it’s about two thirds of customers that are still battling to balance the household budget each week . . . and it’s those customers that are really changing their behaviour.”

Ms Weckert added its Flybuys loyalty program continued to be popular as shoppers take advantage of its current promotion allowing them to cash in on points to redeem a range of Curtis Stone glass containers.

She said this was a sign more people were cooking at home and ensuring they ate all the food they buy.

“And those storage containers obviously are very helpful in making sure that you’re able to do that effectively at home,” Ms Weckert said.

Sales at Coles’ 858 supermarkets grew to $9.4b, up 3.7 per cent from $9.06b. Excluding tobacco, sales increased by 4.7 per cent.

At Coles’ struggling liquor arm — which recently launched a simplification program that will see its Vintage Cellars and First Choice Liquor Market chains folded into the better-known Liquorland brand — sales grew 3.4 per cent to $813m.

Coles investors gave a tepid reception to the results, with shares lifting to $21.55 in the opening minutes of trade, before closing down 0.8 per cent to $21.22.

Over the March quarter, supermarkets inflation was stable at 1.5 per cent. Coles said meat and fresh produce drove inflation due to continued increases in livestock costs, the impact of cyclone Alfred and the cycling of abundant supply in some categories, such as avocados in the December quarter.

Asked if the economy was past the inflation bubble, Ms Weckert said some packaged categories have moved into deflation.

“If you take a lot of the non-food categories, like your cleaning and health and beauty and the likes, they are categories that are now in deflation and have been for a little while now,” Ms Weckert told media earlier on a call.

“There are other categories though in the food space which are still experiencing inflation, primarily because there’s changes in pricing around ingredients.

“The two I would call out there are products that have cocoa in them, but also coffee, and so we are continuing to see cost price increases come through from suppliers because of those two ingredients.”

Coles said the period marked the first quarter where it was able to fully operate its automated distribution and Ocado customer fulfilment centres in the east coast. This has led to improved product availability.

Ms Weckert believes US President Donald Trump’s tariffs will have minimal impact on the business, but said Coles would monitor for any indirect effects, particularly around cost of beef processing.

Looking ahead, Coles said supermarkets sales growth so far in the final quarter had been broadly in-line with the March quarter.