dipped by 1.6 per cent to 27.6 per cent, despite a sales boost from its Little Shop promotion. The research also indicated that Aldi’s market share has climbed to 11.4 per cent, while the Metcash IGA independent stores suffered a slight decline in share to a current level of 7.1 per cent of the market. Costco is building its market share and, interestingly, the Foodland and Foodworks banners’ 2018 market share were 9.1 per cent, underscoring the importance of the supply contracts they have with Metcash. Woolworths is likely to be on track for a further gain in 2019, with its third-quarter sales of FY19 bettering Coles in sales growth and comparable sales gains. Woolworths lifted sales in the most recent quarter by 4.1 per cent compared to Coles’ 3.2 per cent increase in the battle of toy collectables, which have given both chains some impetus. However, neither supermarket chain is simply relying on promotional gimmicks to hold the international competitors at bay and defend its market share. Both are reworking supply-chain logistics, store formats, promotion and marketing strategies, while finetuning product ranges and their online sales platforms. The fresh food opportunity The changing dynamics at Coles and Woolworths are aimed at defending their dominant grocery market positions but represent a major challenge to independent supermarkets, particularly as the two giants start thinking small in store formats. Coles and Woolworths are trying to capture shoppers looking for convenience and buying smaller baskets of goods but making more frequent visits to stores. The fresh food offer is one of the key opportunities they have identified in the convenience strategy, which is about creating a point of difference to the large-format Costco and Kaufland hypermarts and the narrower product ranges of Aldi. It is a logical strategy to adopt against the international retailers, but it creates a potentially significant problem for independent stores in that this has been their proposition to grocery shoppers. Coles is reformatting 200 stores as part of its convenience strategy which includes a merchandise revamp to focus more on “food for now” and “food for later” product ranges. Coles believes the convenience focus in 200 stores – in parallel with an enhanced value proposition in another 200 lower-volume stores – could add $1 billion in additional sales over the next five years. The strategy incorporates changes in its $1 billion Coles online division, which built a solid customer franchise but remains unprofitable. Proposed changes include abandoning free delivery and a trial in Sydney stores of UberEats deliveries of selected products. Knowing the catchments The renewed interest of Coles and Woolworths in smaller-store formats not only reflects a need to respond to changing consumer shopping behaviour, but also the need to reduce operating costs in stores and to right-size stores for specific markets and trade catchments. Woolworths is taking the same approach and, arguably, has had the jump on Coles with its revamped Woolworths Metro store concept, which was launched five years ago. The changes in store formats are driving supply-chain changes, utilising new technology, including robot packers and different product handling and packaging, especially for fresh foods that are the lure for greater frequency of shopping trips. Typically, the smaller-format stores carry less than one-third of the products sold in a full-range supermarket, and the aim of both the major chains is to tailor ranges to local market preferences. Metcash is budgeting to spend around $165 million over the next five years in its food and grocery division to ensure it remains competitive against Woolworths, Coles and the international chains. That investment may not prove to be enough to defend its traditional patch in the grocery market against the aggressions of Woolworths and Coles.