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Coles saw third-quarter revenue rise 3.4 per cent year over year to $10.03 billion, mainly attributed to higher supermarket sales.

“We have delivered another solid sales result across our supermarkets this quarter reflecting strong execution of our trade plans and our continued focus on delivering great value and great quality alongside improved availability,” said Coles Group CEO Leah Wecker.

“We have also seen a meaningful increase in customers interacting with our digital platforms and loyalty programs which is allowing us to engage on a more personalised basis with these customers.”

Supermarket sales revenue increased 5.1 per cent to $9.07 billion while liquor sales fell 1.9 per cent to $786 million. Other sales revenue stood at $182 million.

Meanwhile, e-commerce sales grew 34.9 per cent to $856 million.

During the quarter, Coles refurbished 11 stores, opened two and closed one, ending the period with 851 supermarkets.

Australians are buying more home-brand products and saving on alcoholic drinks amid ongoing cost-of-living pressures, the country’s second-biggest supermarket chain has revealed.

Coles’ total sales revenue rose 3.4 per cent to $10 billion for the third quarter of the 2024 financial year, driven by 5.1 per cent growth in supermarkets, a 34.9 per cent lift in online sales and an 8.8 per cent rise in private label brands. However, liquor revenue slid by 1.9 per cent.

“We know one of the key things that customers do when they’re trying to manage their budget is that they will look to trade into more affordable brands,” Coles chief executive Leah Weckert said on Tuesday.

Revenue growth for home brands (which was 8.8 per cent for the quarter) had outpaced overall supermarket growth for a while now, she said, as the company expanded its offerings, which now include Coles Finest products and a value range, Coles Simply.

“We’re really seeing customers go at both ends of the spectrum to look for value,” she said.

Coles-owned brands, which also includes Nature’s Kitchen, Wellness Road, Urban Coffee Culture, Daley St Coffee and more, make up about a third of the supermarket’s total sales.

Weckert said customers were starting to shift from the lower end of its private label brands to more premium own-brand options, which she said was a result of people choosing to replicate a dining-out experience at home.

As customers shop around to get a better deal on their groceries, Coles is looking to compete more closely with German discount supermarket chain Aldi and aims to narrow the price gap in categories such as kitchen and home cleaning as well as pet food, which are being sold by non-supermarket retailers including Bunnings, Amazon and Chemist Warehouse.

“We know at the moment that there are a lot of customers that are trying out Aldi, and being in a strong position on products that they would compare across the retailers is really important,” Weckert told investors and analysts.

Australians are continuing to cut back on liquor purchases by swapping champagne for prosecco or sparkling wine and choosing more affordable brands of red and white wine. At the same time, many appear to be moving back to beer, which had been experiencing a long-term decline, as it tends to cost less per serve, and gravitating towards canned or ready-to-drink products instead of spirits.

Inflation at Coles has eased from 6.2 per cent this time last year to 2.2 per cent, or from 6.4 per cent to 1.9 per cent excluding tobacco. Prices of fresh produce are falling, particularly apples, avocados and lamb, while bakery prices remain elevated amid higher wheat prices.

“We’ll continue to see some moderation in inflation overall, but I don’t think in the short term we’re moving into an overall deflationary position,” Weckert said.

Coles’ share price closed 0.3 per cent lower on Tuesday, with Jarden analysts describing the company’s figures as “a good result” and “a touch ahead of consensus”.

MST Marquee senior analyst Craig Woolford pointed to its decline in liquor sales as “very poor”.

“We expect Coles has lost market share in the quarter and may have done so because it reduced its level of price discounting and exited non-profitable bulk sales,” he wrote in a note to clients.

Coles and Woolworths face accusations of price gouging and have been under significant pressure to lower prices as Australians struggle with cost-of-living pressures across several fronts.

Weckert and her Woolworths counterpart Brad Banducci fronted a Senate inquiry into supermarket prices on April 16, where the pair were grilled on profits, and their relationship with suppliers.

The Senate committee has said it intends to call multinationals to front the inquiry. Weckert declined to comment on whether companies such as Nestle and Coca-Cola should be called to front the inquiry, but said these global giants owned “must-have products” in several categories.

“We definitely have experienced [multinational suppliers withholding stock] over time,” she said. “There can be quite robust conversations that occur between both parties, but these are really must-have brands for us in store, and we work as hard as we can to have a partnership approach.”

Coles chief executive Leah Weckert says keeping supermarket shelf prices down will require the cooperation of suppliers to ensure customers, who are shopping around more than ever, get a good grocery deal.

Ms Weckert, who was hauled before a Senate inquiry earlier in April along with outgoing Woolworths boss Brad Banducci, said suppliers and Coles would need to help fund discounts to lift sales volumes, which remains in positive territory.

“What we are having a lot of conversations with suppliers about at the moment is how we stimulate volume, and so to be able to do that effectively, it usually takes investment from both sides,” she told The Australian Financial Review after delivering third-quarter sales growth in the supermarket business of 5.1 per cent.

Ms Weckert said that with average Australians shopping at two or three supermarkets to get their groceries each month, it is critical to remain competitive.

Group third-quarter sales rose 3.4 per cent to exceed $10 billion, but liquor sales fell as shoppers elected to cut back their non-discretionary spending.

Shelf price inflation fell to 2.2 per cent in the third quarter from 3 per cent in the second quarter, due to moderating increases in packaged goods and deflation in fresh produce like avocados and apples, meats and bakery items.

Supermarkets revenue reached $9.1 billion, advancing 5.1 per cent, or 4.2 per cent on a comparable sales basis. There was upbeat commentary on the margin front, with theft moderating after the roll-out of loss technology – smart gates and new bottom-of-trolley detection of bulky items – across hundreds of Coles stores.

Coles’ Ocado pick-and-pack customer fulfilment centre in NSW is on track to open this quarter.

Ms Weckert said she expected to see more softness in packaged goods over the next few quarters. Talks with suppliers are “leading to more conversations around promotional activity,” she said.

“In areas like health and home, it is very competitive in the market between all the different players that are playing in that space at the moment and I think that is definitely leading most players to be very sharp on pricing.”

By July, short of another weather event, price inflation should fall further, especially fresh vegetables and fruit, she added.

Jarden analyst Ben Gilbert said the results were strong, suggesting ongoing market share gains. He flagged new opportunities in sectors such as pets were positive, but the key question now would be the gap versus larger rival Woolworths, which presents its third-quarter sales on Thursday.

In liquor, Ms Weckert said 30 per cent of shoppers were cutting back in purchases across its Liquorland, First Choice Liquor Market and Vintage Cellars shops. Early fourth quarter sales have been broadly in line with the March quarter, when sales fell 1.9 per cent to $786 million. Same-store sales fell 3.1 per cent.

“We’re seeing people trading into low-cost alternatives, so, for example, out of champagne into things like prosecco or Australian sparkling,” she said. “People are moving back into beer because this tends to be a category where there are cheaper alternatives.”

Big international brands in the spirits category are suffering with sales dropping away and shoppers looking to cheaper ready-to-drink options.

Ms Weckert does not believe Coles is losing market share to rivals like Endeavour’s Dan Murphy’s, saying Coles is moving away from less profitable bulk liquor sales.

Ms Weckert warned that Coles was facing higher cost of doing business across labour, rents, insurance and interest costs, and therefore keeping volumes up was important.

Supermarket CEOs have been in the political firing line over their pricing to beef up profits, market power and the treatment of suppliers. The Greens-led Senate inquiry is due to release its final report on May 7.

Food and beverage company Chobani has named Scott Hadley as MD of Australia and New Zealand.

Prior to the new role, Hadley served as CEO of TasFoods and held senior roles at Asahi Beverages, Fosters Group, GlaxoSmithKline, and Cadbury Schweppes.

“As we thought about the leader we needed, it’s clear Scott is the natural choice to lead the team in this next phase of our journey. He is proven and inspirational,” said Chobani founder and CEO Hamdi Ulukaya.

“He shares our passion for innovation, positively impacting humanity, and he believes deeply that food can and should be a force for good. We are thrilled to welcome Scott into the Chobani family.”

Hadley will report to Chobani president and COO Kevin Burns.

Beverage giant Lion Australia has restructured its leadership team, with James Brindley returning to lead the business alongside Anubha Sahasrabuddhe. David Smith, MD of Lion Australia for the past two years, will step down.

Lion Group CEO Sam Fischer thanked Smith for his contributions, and leading the company’s turnaround with a strong strategy and successfully integrating Fermentum into the business.

“David has been part of these conversations and contributed to the proposed changes, but after careful consideration, he has decided to leave Lion,” he continued. 

“The results can be seen in marketplace performance and customer feedback – and he leaves us well set up to continue to build momentum and perform into the future.”

In an internal announcement, Fischer outlined the changes to Sahasruddhe’s role and Brindley’s return to the business.

Sahasrabuddhe, who previously led the growth team, will now lead Lion Australia’s sales and marketing portfolios as chief growth and commercial officer in addition to her existing responsibilities.

“Anubha will continue to report to me and will remain a valued member of the group leadership team,” he continued.  

“Lion Australia’s sales director, Kerry Appathurai, and marketing director, Rachel Ellerm, will report to Anubha while continuing to remain core members of the Lion Australia leadership team.”

Meanwhile, Brindley will be stepping back into the role of MD and will be directly accountable for the group’s supply chain and the company’s functions for government & external relations, finance and people & culture.

Simon Edgar, the new GM of Lion’s craft spirits business, Four Corners, will also report to Brindley from the end of the third quarter of this year.

“James will play a key role with customers, supporting our marketplace success, and, along with Anubha, will be jointly accountable for overall Lion Australia business performance,” Fischer added. 

The changes will be effective immediately, with Smith agreeing to remain available to ensure a smooth handover.

Bubs Australia’s fiscal third-quarter gross revenue rose 25.9 per cent year over year to $19.9 million, largely driven by a growing demand for its goat’s milk infant formula in the US.

“The strong growth is primarily being driven by our USA operations where gross revenue was 82.8 per cent or $5.8m higher than the same period last year,” said Bubs CEO and MD Reg Weine.

“We continue to see strong demand for our products and brands in the USA, with scan sales for the quarter averaging approximately US$750,000 per week, a new quarterly record.”

The company also said that it has simplified and refreshed its US product portfolio to improve its shelf appeal and highlight its clean label credentials.

For the fourth quarter, the company said it is on track to exceed the forecasted revenue of $100 million with an underlying gross margin of 40 per cent.

Aldi bagged the Supermarket of the Year 2023 title from the Roy Morgan’s Customer Satisfaction Awards – for the seventh time and the fourth consecutive year.

The supermarket chain boasted an average 95.7 per cent customer satisfaction score.

“This the fourth consecutive year that we’ve received the award, and at a time when shoppers are continuously seeking better value, we have never been more aware of the need to continue to deliver on our promise to offer Aussies the highest quality products at the lowest possible prices,” Aldi Australia director Simon Padovani-Ginies said.

Aldi claims to have delivered $3.4 billion in savings to local consumers in 2023.

“Aldi’s business model is about saving people money. We aim to cut out unnecessary costs and pass these savings onto customers.”

Global multinational food giants such as Nestle, Coca-Cola, Mars and PepsiCo are facing a push to front the Senate inquiry into supermarket prices, after being accused of playing hardball with Australian retailers and driving up prices at the checkout.

The Australian Retailers Association chief executive Paul Zahra called on large multinational suppliers to appear at the inquiry, arguing these businesses often had parent companies several times larger than Coles or Woolworths and would set prices on household brands that often left local retailers no option but to accept price increases.

“Multinationals play hardball, and it comes down to power. It’s not specific to food … in a multinational pricing negotiation, the retailer has very little to no movement on price,” he said.

Zahra urged the Senate inquiry to examine the transparency of the supply chain on pricing, as well as ethical sourcing and conduct.

“It’s got to go beyond the retailer input. You’ve got to include the full supply chain from the very beginning of the product being sourced, right through to its transportation, to then being sold in store,” Zahra said.

Globally headquartered companies such as Unilever, Procter & Gamble, Mondelez International or Kraft Heinz are not obliged to publicly reveal their Australian profit or revenue.

However, IBISWorld data estimates Nestle’s Australian net profit at $2.6 billion with a 5 per cent profit margin; PepsiCo’s profits at $2 billion with a 2.4 per cent margin; Mars Wrigley at $1.8 billion with an 8.3 per cent profit margin; and Unilever at $1.1 billion with a 3.5 per cent profit margin.

Overseas, Kraft Heinz’ net margin is 8.9 per cent, PepsiCo’s is 10.3 per cent and Unilever’s is 13.8 per cent.

In Woolworths’ submission to Dr Craig Emerson’s review of the food and grocery code of conduct, the supermarket stated large multinational suppliers sell “must-have brands” that accounted for more than 60 per cent of all sales in 2023.

The biggest 100 suppliers accounted for more than 80 per cent of all price increases.

In categories such as pet needs, two major suppliers represent more than 50 per cent of sales; in snacks, the top three suppliers account for 62 per cent of sales in that category.

“Large suppliers are often robust cost price negotiators and may, in some cases, withhold the supply of products as part of the negotiation,” Woolworths said in its submission.

“In many cases, we are obliged to accept these cost price increases or face an inability to supply our customers with well-known brands.”

The inquiry’s terms of references includes a mandate to examine “the role of multinational food companies in price inflation”.

No multinational companies have been called to face the inquiry so far.

Western Australian Labor senator Glenn Sterle said the inquiry committee had called “a diverse range of witnesses” to provide evidence but did not say whether this included multinational companies.

“The committee is continuing to consider further public hearings,” he told this masthead.

Tasmanian senator Tammy Tyrrell said it was the go-to for the major supermarkets to blame multinational companies. “There’s always someone bigger and badder to pass the buck too, right?” she said.

“It’s on the major supermarkets to sit before the Senate inquiry and explain to Australians why their grocery bill is going up, but the items in their trolley are going down.”

Other Senate select committee members have been contacted for comment.

Australian Food and Grocery Council chief executive Tanya Barden, who represents food manufacturers that supply to supermarkets, objected to Woolworths’ characterisation of multinationals withholding supply.

“Product is still available for sale, the retailer is just choosing not to buy it at a new price,” Barden said. “They’re not withholding supply, they’re wanting to sell it … the supply’s available for sale, it’s just the retailer’s not wanting to purchase it at that price.”

Multinationals often make lower margins in Australia than they do overseas, Barden added.

“It’s important that they are able to operate profitable businesses in Australia, otherwise manufacturing risks moving offshore.”

In 2019, Australian shoppers were unable to purchase Nestle-owned Uncle Tobys oats after Woolworths refused to pass through a 6 per cent price rise.

Customers were also unable to purchase pet food brands such as Whiskas and Pedigree from Woolworths and Coles following a similar situation with Mars Petcare.

In January, French supermarket Carrefour pulled PepsiCo products such as Lay’s chips and soft drink 7Up from shelves due to “unacceptable price increases”.

Inquiry hearings will resume on Monday when former ACCC chair Allan Fels, unions, the competition watchdog, Treasury and the Department of Agriculture are due to appear.

Coles and Woolworths chief executives Leah Weckert and Brad Banducci will appear on Tuesday.

China’s Ministry of Commerce has finally ended its tariffs on Australian wine, which had been imposed for more than three years at rates as high as 218.4 per cent.

The measures have had a catastrophic impact on Australia’s wine exports.

In 2019, Australia sold $1.24 billion worth of wine to China, surpassing France to capture a market share close to 40 per cent. But by last year, this had collapsed to less than $1 million.

Dreams to diversify to new markets in the interim mostly fizzled. Last year, US imports of Australian wine actually fell by about 20 per cent, the UK held flat, and sales to India remain trivial. A stubborn wine glut has plagued Australian producers as a result.

The removal of tariffs has stirred industry hopes for some relief. But while we’ve been away, things have changed in the Chinese wine market, and challenges lie ahead.

Since we’ve been gone

The departure of Australian wine from the Chinese market created a gap that was quickly filled by other suppliers.

France has since regained first place with a market share of 49 per cent, followed by Chile at 17 per cent.

But the size of China’s imported wine market has also more than halved over this period, falling from $3.3 billion in 2019 to $1.5 billion last year.

On re-entry, Australian wine producers are set to face stiff competition in a significantly smaller market.

A couple of factors may be on our side. One will be a return to the preferential tariff rate that was negotiated for Australian wine under the China–Australia Free Trade Agreement.

This tariff had been reduced to zero for Australian wine, in contrast to a generic tariff of 14 per cent applicable to many other foreign suppliers.

Secondly, the fact that China’s market for imported wine has shrunk doesn’t mean it will stay that way forever. Back between 2014 and 2019, wine imports to China grew by $1.25 billion, and Australian producers met nearly 70 per cent of this increase.

The hope for Australian growers is that brand loyalty among Chinese consumers and savvy marketing will be enough to restore Australia’s share of a once again growing pie.

Major Australian producers like Treasury Wine Estates have maintained sizeable staff headcounts in China, expecting the Chinese market to return to prominence in their business.

Lessons for Australia – could it happen again?

Crushing tariffs on Australian wine may be gone for now, but that doesn’t mean our producers are safe forever. Given China’s track record of using retaliatory anti-dumping measures, it would be wise for Australian exporters to stay alert, particularly if Australia’s own anti-dumping action continues to target China.

However, two key factors could encourage Beijing to maintain this decision longer term.

1. A need to maintain credibility

China has a vested interest in maintaining credibility at the World Trade Organization (WTO), because it uses the organisation to settle its own disputes.

In March, Canberra committed to implementing an adverse decision in a case brought by China involving wind towers, stainless steel sinks and railway wheels.

Conversely, Australia used the WTO to challenge Chinese tariffs on barley and wine. Although both cases took almost three years, they imposed pressure on China and arguably accelerated the removal of these tariffs.

In contrast, Beijing has ignored decisions against it in cases brought by the US. This does not risk Beijing’s reputation in the same way, because Washington has repeatedly done the same in cases brought by China and other WTO members.

To maintain the WTO’s effectiveness, Australia and China have a shared interest in restoring its appellate mechanism, the Appellate Body. The US has blocked the appointment of new judges to this body since 2019, paralysing its ability to uphold, modify or reverse findings of WTO panels.

2. It was always diplomacy in the first place, hardly protectionism

Some commentators have suggested that protecting Chinese producers was an important consideration behind Beijing’s decision to first impose the tariffs, and that the country’s local industry lobby groups were well-placed to campaign to keep them in place.

Yet, despite more than three years of tariffs on imported Australian wine, the proportion of domestic production in China’s total wine supply still fell – from 61 per cent in 2020 to 55 per cent in 2022.

The risk of a return to tariffs for protectionist purposes shouldn’t be overstated, as the most plausible explanation of the disruption in 2020 was always Australia’s sharply deteriorating political relationship with China.

It was not surprising that the removal of the tariffs coincided with both sides now agreeing, in the words of Chinese Foreign Minister Wang Yi when in Canberra recently, to “manage and rise above” their differences.

Australia’s relationship with China may be warming, but further development will require sustained commitments by both sides to cooperate in areas of common interest and manage disagreements constructively based on mutual respect and engagement.

It’s hard to imagine the removal of duties will see the Chinese market soon delivering the same fortunes to Australian winemakers it did prior to 2020. But it will provide some much-needed relief.

It also offers broader lessons for Australia and is another data point confirming a positive trajectory in the overall bilateral relationship.

Woolworths is launching a $US125 million ($190 million) venture capital fund with four overseas retailers, including the UK chain Tesco, despite other companies pulling back from investing in start-ups.

The fund will be called W23 Global and run out of the same Sydney office as Woolworths’ domestic venture capital fund W23, which launched in 2019 and has invested in companies including meal-kit seller Marley Spoon and telehealth start-up Eucalyptus.

Tesco, Woolworths, the Canadian retail conglomerate Empire Company, South Africa’s Shoprite Group and the European-headquartered Ahold Delhaize all have equal investments in W23.

The fund will be deployed over five years and each investment will be approved by a committee comprised of the chief executives of the five retailers. Its mandate is to invest in strategically useful companies for its supermarket backers, including in supply chains and sustainability.

Technology giant Salesforce cut its Australian venture capital fund early last year and the big four banks have had mixed success with their corporate venture capital funds.

W23 Global’s pitch is that its portfolio companies will gain access to a group of big potential customers and advisers without being beholden to one supermarket chain.

W23 Australia boss Ingrid Maes will also run the new fund as chief executive and chief investment officer, though it will legally be based in the United Kingdom.

“With five of the world’s leading grocery CEOs sitting on our investment committee and access to our broader ecosystem, our founders can test and develop their ideas quickly based on an accelerated understanding of retailers’ needs,” Ms Maes said.

W23’s spokesman declined to make her available for interview or specify the returns that the fund is targeting.

Corporate venture funds have a patchy reputation in Australian venture capital circles. Large companies that launch venture funds may eventually come into competition with the start-ups they back, or resent their decisions to work with competitors. And though corporate funds are designed to back riskier ventures than their corporate parents, sometimes public company bosses are wary of taking on the same risks as independent venture capitalists.

In an announcement on W23 Global’s launch, the fund emphasised that companies it invests in will be free to do business with any customers. And Ms Maes said W23 Global would act like other venture funds.

“We’ll be there when founders need us, but get out of the way when they don’t,” she said.

W23 Global’s founding marks a bright spot for the Australian venture capital industry, where some smaller funds have struggled to raise and larger funds are returning to the market to seek more cash.

Those dynamics were caused by the pandemic-era bubble where venture funds invested at inflated prices, denting their returns.

The chief executive of South Africa’s ShopRite, Pieter Engelbrecht, said his 3543-store chain faced trading circumstances unlike anything the other W23 backers had to deal with.

“In a country with one of the highest levels of inequality in the world … we at the Shoprite Group have to find more affordable solutions for our
customers to sustain their livelihoods, every day,” Mr Engelbrecht said. “This is the driving force behind our need to innovate faster than most retailers and is why we entered this venture with our esteemed global counterparts.”