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Hardware giant Bunnings has replaced Woolworths as Australia’s most trusted brand, reclaiming the title after a three-and-a-half year hiatus.

Both the major supermarkets have lost ground with consumers, amid alleged price gouging claims by politicians. The Greens-chaired supermarket pricing inquiry started this week in Hobart.

The Wesfarmers-owned chain dethroned the supermarket from the top spot, while Coles fell from 3rd to 5th place in the rankings, according to the 2023 Roy Morgan Risk Monitor survey. Aldi was third and Kmart came in fourth.

Bunnings has strong goodwill and reputational strength backed by dramatically more trust than distrust, Roy Morgan chief executive Michele Levine said.

“Australians’ distrust in companies has grown in the last year, with reasons including corporate greed, poor customer service, unaffordable prices, dishonesty, unethical practices, and poor privacy practices,” she said.

“Bunnings has managed to buck the trend against an economic environment where trust has eroded.”

Ms Levine added that Bunnings has harnessed key trust attributes including great customer service, communicating what it stands for, being active in the community, solving customers’ problems and product knowledge.

The Roy Morgan Risk Monitor canvasses about 2000 Australians every month on 1000 brands across 26 industries.

Other brands scoring high were Apple, Myer and Toyota. Ms Levine said trust in banks has deteriorated due to successive interest rate rises and cost-of-living concerns.

The most distrusted list last year was topped by telco company Optus. Facebook-parent Meta, Qantas, private health insurer Medibank and media giant News Corp ranked high for distrust, as did TikTok, social media platform X and Telstra.

Qantas is the nation’s third-most distrusted brand and showing signs of recovery despite deep distrust with respondents.

A separate survey published in January by Brand Finance Australia ranked Qantas No. 41 by brand strength, in the consultancy’s annual survey of Australia’s strongest and most valuable business icons.

Major supermarket chains Coles and Woolworths have come under fire from consumer advocacy group Choice for their complex pricing methodologies that lack transparency and accountability.

According to a recent survey conducted by Choice, nearly 83 per cent of respondents found it difficult to determine if they were getting a genuine discount or value for money from the supermarkets’ ‘specials’ or promotions.

With Coles and Woolworths controlling an estimated 65 per cent of the food and grocery market in the country, Choice remarked that the lack of competition means consumers are “at their mercy” and have little choice but to spend their money on these two chains.

In a submission to the government’s inquiry into supermarket pricing, Choice argued that both supermarkets routinely manipulate prices to the detriment of consumers.

“The kind of behaviour from the major supermarkets is unacceptable and harmful in a cost-of-living crisis,” said Bea Sherwood, senior policy and campaigns adviser for Choice. 

“People are sick of feeling tricked by specials that aren’t specials and feeling pushed into membership programs and multi-buy deals where they buy more than they need.”

Pricing trickery

Choice said supermarkets often engage in various “pricing trickery”, boosting their profits amid a cost-of-living crisis.

In late 2023, the group lodged a complaint with the Australian Competition and Consumer Commission (ACCC) about Coles’ “locked prices” promotion. The supermarket apologised and refunded customers for mistakenly increasing prices on several products.

However, Choice stated that this was just one of many tactics used by supermarkets. While claiming to support consumers during a cost-of-living crisis, they did the opposite. Essential food items got more expensive across the board; pack sizes shrunk while prices increased.

“You look down an aisle with tickets of different colours, which are so confusing,” a consumer told Choice. “All I want to know is if the price is acceptably discounted. The original prices shown on discount tickets are so small you often have to examine the ticket with a magnifying glass.”

Another example the group shared was the “Was/Now'” pricing. It’s when supermarkets drop the price from an artificial high point and call the new price a sale even if the products were already available at lower prices.

Products on “special” that cost the same as before the promotion is yet another example.

“We have seen lots of ‘special’ prices stuck over regular prices, which are the same. There’s nothing special about the new price,” another consumer told Choice.

Step in and step up

As consumers continue to feel the pinch, Choice calls on the government to step in and force supermarkets to make their grocery pricing clear and fair. Some of its recommendations to level the playing field for shoppers include:

• Compelling major supermarkets to publish historical pricing information allows consumers to track price changes.
• A ban on misleading promotional tactics.
• Strengthening and enforcing unit pricing requirements so consumers know what they’re getting for their money.
• Mandatory standards for clear and consistent pricing information.
• Requiring supermarkets to disclose a product’s price or size change prominently.

“Choice is calling on the government to step in and force supermarkets to make their grocery pricing clear and fair,” added Sherwood. “Consumers deserve fair and transparent pricing to be sure they’re getting a good deal when they do their shopping.”

Coles has asked some of its suppliers to cut their prices to reflect cooling inflation, with those savings likely to fund a discounting blitz just as the supermarkets face political and community heat over food and grocery prices.

Suppliers have told The Australian they have been asked to prepare for price reduction requests of as much as 14 per cent – especially in the non-food area – on some products.

Coles has pointed to the improving inflationary outlook, especially in key cost pressure points such as freight, shipping and raw materials, to justify unwinding years of price hikes.

Winning price cuts from suppliers will allow Coles to pass on some of the savings to shoppers – and potentially pocket some for the benefit of its 440,000 shareholders – and comes as Coles and Woolworths face public inquiries over prices and market power.

Some suppliers have been contacted about a new Down, Down campaign that will see a fresh round of price cuts. These are currently designed as 13-week campaigns for autumn, winter and spring, and will see prices squeezed across a range of food and grocery categories.

Suppliers have been asked to help fund the reductions by taking price cuts themselves.

The supermarket shelf-price falls are ­between 5 and 20 per cent.

The supermarket giants face an uncertain year with a raft of high-profile political probes and inquiries piling pressure on the retail ­behemoths to explain elevated ­prices and earnings amid accusations of profit gouging.

The political heat around Woolworths and Coles ratcheted up late last year.

A Greens-led Senate inquiry into supermarkets was announced, followed by an inquiry by the competition regulator and a gouging report from the ACTU. The supermarket chains responded by spruiking their discounting and promotions campaigns, and slashing prices on key food and grocery items.

Coles began a sales campaign in January centred around meat and Woolworths has also cut meat prices.

Suppliers are, however, likely to push back against the request for price cuts from Coles, citing labour and energy costs, which are still rising, even if freight and shipping is getting cheaper.

A Coles spokesman declined to comment on its communications with its suppliers and negotiations around prices, but stressed the supermarket was squarely focused on lowering prices for its shoppers.

“We are working hard to keep grocery prices affordable for ­customers, particularly as they face escalating living costs with higher mortgages and rents, and increasing expenses like energy and fuel.

“We are always looking for ways to lower the cost of groceries and invest in value through campaigns like Down, Down and thousands of weekly specials.

“Coles has kept price inflation in its supermarkets below the rate reported by the ABS for the past 16 quarters.”

For years suppliers fought for and won price rises in the face of rocketing inflation and higher input costs to manufacture groceries, such as raw materials, energy and labour.

In its submission to the ­Senate inquiry Coles reported that in the first six months of 2021 it received 1101 requests from suppliers for cost increases, equivalent to around 42 per week, and that almost doubled to 79 per week in fiscal 2022 and 73 per week in fiscal 2023, ­largely driven by inflation and increases in global commodity prices.

Any price reductions it can now win back from suppliers will involve a fresh round of negotiations but Coles will point to falls in costs – although labour bills continue to grow – to justify the move.

Many of the suppliers fought to get price rises through Covid and the recent inflation spike, but will likely play hardball and resist a reversal of that, citing a range of input costs that remain elevated.

Even if these lower shelf prices for shoppers trigger a lift in sales volumes, many suppliers believe it won’t be enough to cover the ­reduced prices they get from the ­supermarkets and the funding they need to put towards ­specials and promotions such as the Down, Down campaign run by Coles.

The challenge for Coles chief executive Leah Weckert and her board will then be dividing those savings between consumers (in the form of lower shelf prices) and its investors (through better profits and dividends).

In its submission to the Senate inquiry, Coles underlined the importance of returning profits to shareholders, but that this also needed to be balanced with providing a competitive offer to shoppers.

“Of our more than 440,000 shareholders, 88 per cent hold less than 2000 shares,” Coles said in its submission.

“They include mums, dads, families and retirees who not only shop with us, they invest in us and rely on our long-term sustainability.”

In its Senate submission, the Australian Food and Grocery Council said it supported the ­aspiration of keeping consumer prices low, but this should be shared by the supermarkets.

“It should not be suppliers who disproportionately shoulder risks and costs, but a contribution balanced between retailers and suppliers,” the AFGC said.

“Since 2021, Australia’s major supermarkets have maintained profit margins of between 5 and 6 per cent, compared to between 3 and 4 per cent for Tesco and Sainsbury’s in the more competitive British market.”

The AFGC said between 2011 and 2021, input costs for food manufacturing rose at double the rate of output prices.

Woolworths Group MD and CEO Brad Banducci is set to retire in September, coinciding with the supermarket chain’s 100th anniversary.

Banducci will retire after serving the company for 13 years, with eight and a half of those as CEO.

Woolworths has named current MD of WooliesX Amanda Bardwell as MD and CEO, effective September 1, following the release of the company’s annual financial results.

“It has been a privilege to be a member of the Woolies team and one I have never taken for granted. We have a wonderfully talented and passionate team at Woolworths Group as personified in Amanda Bardwell and I look forward to working with Amanda and our team over the next few months as we set ourselves up for the next chapter,” said Banducci.

“Amanda is a proven leader, business builder and modern retailer. Most recently, under her leadership, WooliesX has gone from infancy in 2015 to a $7bn market leading business. Amanda is highly respected throughout the organisation and I know, like Brad, will live our purpose and work hard to achieve Woolworths Group’s full potential,” said Woolworths Group chair Scott Perkins.

The announcement comes as Woolworths faces pressure over its price-setting practices along with its rival Coles, and the market power of major supermarkets in Australia.

A Senate Inquiry is underway, with a report due to be released in May. In addition, the Albanese Government has launched an ACCC inquiry into supermarket prices.

In a LinkedIn post, Banducci wrote that his decision to retire is not related to the upcoming price inquiries.

“This is a decision I have been contemplating for a while especially given it is literally 8 years since my appointment and as we go into the Woolworths Centenary and the timing felt right,” he wrote. “Not because I am tired or burnt out (I am as energised by our business and our potential as I have ever been) or [a]m worried about the various upcoming price inquiries (I am looking forward to effectively representing Woolworths at these important forums) but because I think a leader should go before they need to and, more importantly, because I believe passionately in the amazing talent in our Group and it is time to pass on the baton.”

KMD Brands says it expects significantly lower sales in the fiscal first half, reflecting weak consumer sentiment.

The group forecasts sales to decline 14.5 per cent year over year to $469 million amid lower expected sales across all three brands.

The company forecasts Rip Curl and Kathmandu’s sales to fall 9.2 per cent and 21.5 per cent, respectively. It also estimates a 20 per cent decrease in Oboz’s sales.

Meanwhile, the group’s gross margin is anticipated to remain resilient at 58.8 per cent.

“Rip Curl and Oboz are recycling record sales last financial year and while revenues from the direct-to-consumer channel for these brands are showing single-digit declines, the wholesale channel has been more challenging as wholesale accounts reduce inventory holdings,” said KMD Brands CEO and MD Michael Daly.

“Kathmandu has experienced softer trading results since June 2023. A combination of weaker consumer sentiment, the warmest winter on record in Australia and the brand’s resilience on winter-weight products has resulted in a disappointing first half.”

The company is optimistic that the Rip Curl and Oboz wholesale channels will improve next year.

In addition, it is looking forward to a better performance for Kathmandu in the second half of next year as the company will launch new products, quick-to-market programmes, increased visual merchandising, more personalisation through Out There Rewards, and an expanded third-party brand strategy.

Retail Food Group swung to a net income despite lower revenue in the fiscal first half, thanks to an increase in average transaction value and the company’s acquisition of Beefy’s Pies.

RFG’s net profit stood at $5.1 million while revenue fell 1.4 per cent year over year to $61.9 million during the six months ended December 29 last year.

Earnings before interest, taxes, depreciation, and amortisation soared 121.3 per cent to $11.6 million.

The cafe, coffee, and bakery segment’s domestic network sales slid 0.1 per cent to $180.9 million while same-store network sales climbed 3.2 per cent to $168.8 million.

The quick-service restaurant segment’s domestic network sales declined 5.5 per cent to $73.9 million while same-store network sales dipped 1.3 per cent to $70.7 million.

RFG opened 70 new outlets during the first half. In addition, the company completed in December the acquisition of Beefy’s, which contributed an EBITDA of $100,000 in 19 days.

Beefy’s is set to open its first new outlet under RFG in the second half, replacing a previous high-performing closed Brumby’s outlet.

“We understand the challenges in our QSR segment and have actions in place to drive frequency and attract new customers through product innovation, investment in technology and value,” said RFG CEO Matt Marshal.

For the full year, RFG forecasts underlying revenue to grow 8 per cent to 16 per cent to between $110 million and $118 million.

Underlying EBITDA is expected to range from $28 million to $32 million, up 11 per cent to 26 per cent.

Australia’s leading recycling company Visy has unveiled a major $50 million upgrade to its glass recycling factory in Laverton, Melbourne, raising its capacity to up to 200,000 tonnes of glass each year.

The Laverton plant is crucial in Visy’s goal to manufacture new glass bottles and jars made with an average of 70 per cent recycled content. A glass container made with recycled content requires up to 30 per cent less energy than an original container.

To keep more glass in the circular economy, the plant will install 20 advanced cameras to sort glass down to three millimetres in size.

In 2021, Visy chairman Anthony Pratt committed to spending $2 billion on reducing landfills, cutting emissions, and creating manufacturing jobs for Aussies. The upgrade of the Laverton plant was part of this commitment.

“We’re actually in the landfill avoidance because recycling and remanufacturing are important weapons against climate change,” said Pratt.

Using recycled content in glass manufacturing can help lower greenhouse gas emissions, he added.

The a2 Milk Company has upped its annual sales guidance after posting solid first half revenue and earnings growth, and assuring shareholders that key infant formula market China is showing signs of stabilising.

Its ASX-traded shares rocketed to a 10-month high, advancing more than 11 per cent to $5.64 on Monday.

Revenue rose 3.7 per cent to $NZ812.1 million ($865.5 million) in the six months ended December 31 while earnings before interest, tax, depreciation and amortisation gained 5 per cent to $NZ113.2 million, generating an EBITDA margin of 13.9 per cent.

Net profit beat analyst forecasts rising 15.6 per cent to $NZ85.3 million in the half, ahead of $NZ74 million consensus.

A2 Milk boosted its total infant formula sales 1.5 per cent despite a double-digit decline in volume and value in the China – the world’s largest infant milk formula market. A record level of marketing spend at $137 million in the half helped it achieve a top-five China market position.

Sales in China and other Asia markets climbed 16.5 per cent, helping offset a 24.1 per cent fall in Australia and New Zealand because of a change in distribution strategy.

Chief executive David Bortolussi said the group was still focused on China for growth, which now represents 80 per cent of total branded sales. Although revenue guidance was upgraded, a2’s EBITDA margin is expected to be broadly in line with last year.

“We have improved our guidance for revenue going from low single digits, to the low to mid-single digits over the full year. The reason that we’ve done that is partly associated with China label performance,” he told The Australian Financial Review.

He said the transition to its new China label product has gone better than expected. Last year, a2 Milk’s manufacturing partner secured approval to sell tins made to China’s new standards, removing a major concern for investors. The market for English label formula, which is cheaper to produce, is also improving as Chinese mothers trade down.

China’s birth rate was better than expected in calendar 2023 even as the number of newborns fell 5.7 per cent to 9 million births, a record low. “We’re still of the belief that the 2024 birth rate will be higher than calendar 2023,” Mr Bortolussi said.

He said family planning had been delayed during COVID-19, and marriages were trending upwards.

Mr Bortolussi is determined to gain access to more China label registrations, which will enable a2 Milk to grow its portfolio in China. Major players in the industry have between 10 and 20 registrations while a2 Milk has one.

In Australia and South-East Asia, a2 Milk will this half launch the first new English label formula product in 10 years, called a2 Gentle Gold, aimed at the premium segment. The range is developed at its Mataura Valley Milk processing plant and a new commercial supply chain partner, Yashili NZ, a subsidiary of China’s Mengniu Dairy.

Mr Bortolussi pushed out the company’s medium-term revenue ambition of $NZ2 billion by 2026, to 2027 or later, given China – while stabilising – is taking longer to recover than he thought when the goal was set in October 2021.

Another key priority for a2 Milk is getting its Mataura Valley Milk processing plant profitable by 2026.

Synlait, a2 Milk’s manufacturing partner, suffered another poor trading update this month, but Mr Bortolussi said a2 Milk does not have any major operational concerns, nor is he aware of any pending capital need by the troubled New Zealand-based group in which it owns nearly 20 per cent.

Shoplifting is on the rise with reports of a 100 per cent increase in the theft of meat between 2022 and 2023.

Chief industry affairs officer at the Australian Retail Association, Fleur Brown, says meat theft is on the rise.

“Some of the recent data shows that 60 per cent of in-store thefts are now being conducted by one cohort of coordinated theft professionals,” she told Tom Elliott.

Operator of Morgans IGA, Neale Morgan, says theft has gotten worse since COVID.

“Theft is costing us … around one per cent … It’s not just meat and it’s been going on for years,” he said.

Treasury Wine Estates’ net profit dipped as revenue remained flat in the fiscal first half amid a decline in premium and commercial portfolio sales.

The liquor company’s net profit fell 11.4 per cent to $166.7 million while revenue stood at $1.28 billion.

Earnings before interest, tax, SGARA and material items plummeted 5.8 per cent to 289.8 million.

The Penfolds segment’s revenue increased 9.2 per cent to $448.1 million but Treasury Americas’ sales slid 4.3 per cent to $447.7 million. Treasury Premium Brands’ revenue went down 4.5 per cent to $388.5 million.

“Penfolds continue to perform and strengthen whilst Treasury Americas has made significant progress in reshaping its portfolio focus with continued growth of its luxury brands now supported by the acquisition of Daou in December,” said Tim Ford, CEO of Treasury Wine Estates.

“The premium wine category, whilst resilient, is highly competitive and we continue to innovate and invest to achieve the goal of outperforming the category and importantly attracting new customers to wine.”

Ford said the company is confident to achieve mid-high single-digit earnings for this fiscal year.