Shoppers warming to Woolies: UBS

Woolworths is benefiting from improvements in consumers’ perception of its convenience, low prices and loyalty offer, and this has translated to gains in its share of grocery, fresh and main shop visits.

That is the key takeaway from UBS’s most recent supermarket shopper scorecard, a bi-annual survey that measures shopper spend and perception of Australian supermarkets.

The survey, which was conducted with 1100 shoppers in February, echoed Roy Morgan’s research released earlier this week, which showed share gains for Woolies and losses for Coles.

According to the survey, consumer perception of Woolworths increased over across three of the five key metrics – convenience, value for money and loyalty – and dipped only slightly on low prices and sales/promo compared to June 2018.

Consumer perception of Coles and Aldi was down compared to June last year, and perception of IGA was flat.

Notably, Woolworths’ score on ‘price perception’ was higher than Coles for the first time since the survey began in 2016. This is a significant change at a time when price and convenience have returned as the top driver of where consumers shop, following loyalty’s rise in significance last year, and Woolworths has gained share as a result.

According to the survey, Woolworths gained share of grocery, fresh and main shop visits in February, compared to June 2018, largely at the expense of Coles.

Aldi’s share of grocery and fresh visits was down, despite its expanding national coverage, while it saw a rising share of main shop visits. IGA’s share of grocery, fresh and main shop visits was up slightly, while cross-shopping between Aldi and IGA fell. Coles’ share was down in all areas.

The findings come on the heels of a strong month of sales in the supermarket sector. Based on ABS figures, February retail sales increased 3.2 per cent year on year, while sales in the supermarket category grew 5.5 per cent, up from 4.6 per cent growth in January, and above the 12-month average of 4.2 per cent.

This compares to weaker growth in discretionary sales, with the electrical and furniture categories declining and hardware slowing, while fashion and department stores were up 3.5 per cent and 1.3 per cent, respectively.

Supermarkets need to move on meal kits

People continue to shop for groceries more frequently, though fewer people did so in February than six months ago.

UBS attributed this to the growth of online, meal kits and delivery, which it believes is beginning to have an impact on the frequency of shopping. According to the report, meal box subscriptions in Australia now have about 10 per cent penetration, and growing.

“We estimate the market today is a [more than] $500m market, growing at double digit rates, with growth coming almost exclusively from the traditional grocery / specialist channel,” the report stated.

Convenience was the key reason survey respondents gave for ordering meal kits, though lower cost was also a driver. Around 38 per cent of respondents said they would spend less on fresh in supermarkets due to meal kits, up from 34 per cent in June last year.

“While meal kits are growing rapidly and are a risk to incumbents, we believe supermarkets have time to act, with only [circa] 3 per cent of shoppers willing to subscribe to a meal-kit offer. We believe affordability, reach and awareness are key impediments which will improve over time,” the report stated.

UBS believes Australian supermarkets continue to remain underpenetrated in the ready-to-eat space, with penetration less than one fourth that of global developed peers.

“We believe Australian grocers will need to innovate and expand their ready-to-eat meal offerings to compete with meal kit solutions,” the report said.

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