Shoppers flock to Aldi despite love for Australian-made or owned businesses as cost of living bites
It’s known for its no-frills efficiency, occasionally odd assortment of weekly specials and a raft of products that bear more than a passing resemblance to well-known brands.
But amid a cost-of-living crisis, claims of price-gouging by big supermarkets and unprecedented political scrutiny, discount German retailer Aldi is cashing in.
Though surveys suggest Australians may prefer to buy locally made products or shop at certain stores or locations, all that is going out the window, analysts say, as shoppers increasingly choose Aldi’s imported, no-name brands and cheaper alternatives over loyalty to the big, Australian-based supermarkets.
Monash University marketing expert Associate Professor Fiona Newton said recent changes in shopping habits could largely be attributed to the need for families to simply put food on the table.
“We’re in a cost-of-living crisis for many families in Australia,” she said.
“Depending on where you sit with your finances depends on, to some extent, the degree to which you have choice.
“If you are on a very tight budget, then you may feel that you have no other choice but to shop where that item is going to be the cheapest, because you have to put food into tummies.”
Consumer group Choice this week revealed the average cost of a basket of 14 household necessities at Aldi came in at just over $50, while the same basket would see shoppers pay $66 at Coles and more than $68 at Woolworths.
Camera IconPoppy Maxwell is a big fan of Aldi Supermarkets. Credit: Justin Benson-Cooper/The Sunday Times
The Australian Retailers Association, which represents the big supermarkets, criticised the report and its comparison of products which Choice confirmed were not all “like for like”. ARA chief executive Paul Zahra said a more robust sample size would have given consumers a better idea of the average cost of their basket.
Despite those issues, shoppers like Poppy Maxwell said shopping at Aldi was a no-brainer because she knew it was the cheapest place to do her food shop.
The mature-age university student said shopping at Aldi meant she could stick to her budget while still getting quality food.
“Obviously cost of living is hard on everyone . . . so that’s definitely affected me as well as being a student and supporting myself. It means making those hard budgeting decisions,” she said.
“The prices are cheaper on the whole at Aldi so a whole week’s grocery shopping is a lot cheaper than it can potentially be at Coles and Woolies if you shop right.
“It’s not the same name brands but oftentimes they taste exactly the same so I’m happy to shop at Aldi for my budget.”
She said she noticed a difference in price in most items, including vegetable gyozas at Aldi’s costing $9.99 compared to KB’s vegetable gyozas costing $17 at Coles.
When asked if she’d continue her current shopping habits into the future, Ms Maxwell said she would change stores if Coles or Woolworths provided better-quality products and had cheaper prices.
“I find a lot of the time the fresh fruit and vegetables at Coles and Woolworths is not as fresh. It goes bad so quickly so it’s just really inconsistent as well,” she said.
“They’re not good enough for the price.”
Camera IconMonash University Associate Professor Dr Fiona Newton. Credit: Supplied/Supplied
Marketing and retail analyst Barry Urquhart told The Sunday Times shoppers had evolved from being discount and bargain shoppers to “smart shoppers”.
“Surprise, Aldi is cheaper,” he said.
“The one word that is associated with Aldi and not with Coles or Woolworths is that it is a discount supermarket — the others are supermarkets (and) therefore it resonates immediately.”
Aldi chief executive Anna McGrath told a Senate probe into supermarket prices earlier this year that shoppers saved an average of about $2500 per family each year by spending with the retailer.
Ms McGrath said affordability did not come at the expense of suppliers or employees, but rather was due to the operation being “significantly less complex” than competitors.
“Everything from our smaller stores, our limited product range and even the way that we serve our customers means our business is simpler to operate,” Ms McGrath said.
“These efficiencies lead to reducing our operating costs and this affords us the ability to maintain our low-price position.”
In response to questions this week, an Aldi spokesman said they’d seen existing shoppers increasing their shopping frequency, while there was a whole new cohort of shoppers who were turning to Aldi for the first time.
“Our data shows that we have over 4 per cent more households shopping with us,” he said.
“We’ve seen more and more customers turning to Aldi for our everyday low prices across our entire range, creating savings for customers across a whole basket, not just on a select range of products.”
Aldi, which came to Australia in 2001, has 9 per cent of the market. By comparison, Coles and Woolworths combined have about 67 per cent, according to the Australian Competition and Consumer Commission. That’s an issue the watchdog plans to examine further as it continues its inquiry into the sector.
While some of the popular shelf items bear a stunning resemblance to some Australian favourites, on its website Aldi states that 100 per cent of its fresh meat and eggs are Australian grown, while 97 per cent of fruit and vegetables and 82 per cent of dairy products are Australian grown or made.
In response to questions about their investment into the Australian community, Aldi pointed to its partnerships with Camp Quality, Foodbank and OzHarvest.
Federal Assistant Minister for Competition Andrew Leigh in June said while people weren’t surprised that Aldi was cheaper, revelations in that quarter’s Choice report of a 25 per cent difference was significant.
He said that information was not only important for consumers, but also put pressure on a sector which had “pretty high levels of market concentration compared to other countries”.
In a bid to combat the competition, Coles is expanding its own-brand offerings, as chief executive Leah Weckert noted an extended run of customers being particularly conscious of how much they were spending.
“We have seen a rise in terms of the number of retailers in the grocery space that customers will go to,” Ms Weckert said.
“Competitively priced products and loyalty programs are even more important when deciding where to shop and we are continuing to work hard to deliver value.”
Former Woolworths boss Brad Banducci, who stepped down last month, earlier this year told the ABC, “Aldi, they’re an amazing business. They drive incredible value.”
Asked if consumer habits were likely to swing back as the pressure of family budgets eased in coming months and years, Professor Newton said habits could very well become ingrained and might cause permanent changes in the way people shopped.
“I wish I had a crystal ball,” she said.
“People may start to think, ‘oh, well that’s easy’, and ‘I like this’, and they will stay with it,” she said.
“It takes effort to change what’s become a habit, but for those that have felt frustrated they’ve had to make this decision, but it’s not based on what they really would like to be doing, I think you’ll see them come back.
“If they’ve always valued purchasing Australian made and they’ve had to make changes out of necessity, one would imagine that those values haven’t changed (and) those priorities haven’t changed, and that when circumstances allow they will come back to the fore.”
Who owns what in Australia’s supermarkets?Coles
Coles has 856 supermarkets and just over 990 liquor shops under the Liquorland, First Choice Liquor Market and Vintage Cellar brands.
Founded in 1914, Coles listed on the ASX in November 2018 after being spun out of WA conglomerate Wesfarmers and is worth over $24 billion today. It counts international asset managers State Street, Vanguard, BlackRock, Norway-based Norges Bank and Australian money managers Insignia Financial among its top investors.
Woolworths
Founded in 1924, Woolworths has been listed on the ASX since 1993 and has a network of about 1730 stores in Australia and New Zealand across its supermarkets and Big W and Petstock brands.
Among Woolworths’ investors are super fund AustralianSuper, State Street, Vanguard and BlackRock.
Aldi
The chain is privately-owned by the Albrecht family and has over 10,000 stores around the world. In Australia, it has nearly 600 stores, including 52 in WA.
It was founded by brothers Karl and Theo Albrecht in 1946 in the aftermath of World War II. Formerly the Albrecht Discount, the name was shortened to Aldi in 1962.
IGA
The Independent Grocers Alliance, or IGA, is owned by listed-Metcash. It has a network of about 1300 independently-owned and family-operated stores.
A 24-year-old Joe David opened his first corner store in NSW and called it Davids. which later became Metcash.
In 1988, Davids introduced the global retail banner IGA to Australia.
Costco
Costco opened its first Australian store in Docklands, Melbourne in 2009. Since then, it has grown that network to 15, including two in Perth.
The company’s first location opened in 1976 in a converted airplane hangar in San Diego. It now has a total of 890 warehouses worldwide.
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