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2 About this Industry 2 Industry Definition 2 Main Activities 2 Similar Industries 2 Additional Resources 3 Industry at a Glance 4 Industry Performance 4 Executive Summary 4 Key External Drivers 5 Current Performance 7 Industry Outlook 10 Industry Life Cycle 12 Products and Markets 12 Supply Chain 12 Products and Services 14 Demand Determinants 15 Major Markets 16 International Trade 17 Business Locations 19 Competitive Landscape 19 Market Share Concentration 19 Key Success Factors 19 Cost Structure Benchmarks 21 Basis of Competition 21 Barriers to Entry 22 Industry Globalization 23 Major Companies 23 Woolworths Group Limited 24 Wesfarmers Limited 25 ALDI Stores Supermarkets Pty Ltd 26 Metcash Limited 27 Australian United Retailers Limited 27 Costco Wholesale Australia Pty Ltd 28 Operating Conditions 28 Capital Intensity 29 Technology and Systems 30 Revenue Volatility 30 Regulation and Policy 31 Industry Assistance 32 Key Statistics 32 Industry Data 32 Annual Change 32 Key Ratios 33 Jargon & Glossary IBISWorld Industry Report G4111 Supermarkets and Grocery Stores in Australia October 2018 Tom Youl Fresh faces: The imminent entry of AmazonFresh will boost already fierce industry competition www.ibisworld.com.au | (03) 9655 3881 |
[email protected] This report was provided to University of Western Australia (UWA) by IBISWorld on 27 August 2019 in accordance with their licence agreement with IBISWorld WWW.IBISWORLD.COM.AU Supermarkets and Grocery Stores in Australia October 2018 2 Supermarkets and grocery stores retail a range of groceries and food products, including fruit and vegetables, bread, cigarettes, canned goods, toiletries, dairy goods, delicatessen items and cleaning goods. Specialist retailers, niche retailers and convenience stores are excluded from the industry. The primary activities of this industry are Operating supermarkets Operating grocery stores Industry Definition Main Activities Similar Industries Additional Resources The major products and services in this industry are Beverages Bread and bakery products Dry and packaged foods Fresh fruit and vegetables Meat products Milk and other dairy products Tobacco products Toiletries, health products and general merchandise About this Industry G4121 Fresh Meat, Fish and Poultry Retailing in Australia Operators in this industry specialise in retailing fresh meat, fish and poultry goods. G4122 Fruit and Vegetable Retailing in Australia Businesses in this industry primarily sell fruit and vegetable produce. G4123 Liquor Retailing in Australia Firms in this industry primarily sell liquor goods. G4129 Bread and Cake Retailing in Australia Companies in this industry primarily retail bread and cake goods. G4279a Tobacconists and Specialised Grocery Retailing in Australia Establishments in this industry retail tobacco along with other specialised grocery items such as confectionery and small goods. G4112 Convenience Stores in Australia Stores in this industry have a narrower product range than supermarkets, but a wider range than milk bars. For additional information on this industry www.ausfoodnews.com.au Australian Food News www.mga.asn.au MGA Independent Retailers www.retailbiz.com.au Retail Biz Provided to: University of Western Australia (UWA) | 27 August 2019 WWW.IBISWORLD.COM.AU Supermarkets and Grocery Stores in Australia October 2018 3 Market Share Woolworths Group Limited 37.5% Wesfarmers Limited 29.6% ALDI Stores Supermarkets Pty Ltd 9.9% Metcash Limited 7.3% Key External Drivers Real household disposable income Population Consumer sentiment index Demand from cafes, restaurants and takeaway food services Key Statistics Snapshot Industry at a Glance Supermarkets and Grocery Stores in 2018-19 Revenue $103.4bn Profit $4.2bn Wages $10.9bn Businesses 1,966 Annual Growth 19–24 2.0% Annual Growth 14–19 2.1% Industry Structure Life Cycle Stage Mature Revenue Volatility Low Capital Intensity Medium Industry Assistance Low Concentration Level High Regulation Level Medium Technology Change Medium Barriers to Entry High Industry Globalization Low Competition Level High FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32 % c ha ng e 4 -1 0 1 2 3 2513 15 17 19 21 23Year Real household disposable income SOURCE: WWW.IBISWORLD.COM.AU % c ha ng e 8 -4 -2 0 2 4 6 2511 13 15 17 19 21 23Year Revenue Employment Revenue vs. employment growth Establishments 31.5 % NSW 2.6 % TAS 30.4 % VIC 1.6 % ACT 1.4 % NT 18.3 % QLD 8.3 % WA 5.9 % SA SOURCE: WWW.IBISWORLD.COM.AU p. 23 p. 4 SOURCE: WWW.IBISWORLD.COM.AU Provided to: University of Western Australia (UWA) | 27 August 2019 WWW.IBISWORLD.COM.AU Supermarkets and Grocery Stores in Australia October 2018 4 Key External Drivers Real household disposable income Trends in real household disposable income affect the industry’s performance. During periods of low or falling disposable income, consumers are more likely to focus on household necessities and do without luxury products, such as gourmet foods and deli items. However, a Executive Summary The Supermarkets and Grocery Stores industry is one of the most fiercely competitive industries in Australia. The rapid expansion of ALDI over the past five years has significantly altered the industry’s operating landscape, with the popularity of its low-cost private-label products underpinning strong growth. The rise of ALDI has forced the two established industry giants, Woolworths and Coles, to cut prices and expand their private-label product ranges in response. Smaller supermarket chains, such as FoodWorks, have struggled to compete in an increasingly price-intense industry. Industry profit margins have fallen over the past five years as players have reduced prices and accepted lower margins to stay competitive. However, the industry has still grown over the period, with revenue expected to rise at an annualised 2.1% over the five years through 2018-19, to $103.4 billion. Industry revenue is anticipated to remain stable in the current year. The challenging retail environment has put pressure on the industry’s largest operators over the past five years. Woolworths initially struggled to compete on price against ALDI and Coles, with the company losing market share over the two years through 2015- 16. However, Woolworths heavily invested in lowering grocery prices after the sale of underperforming businesses not included in the industry, and the company has improved its performance since then. Woolworths’ refocus on its Australian Food division has put pressure on Coles, slowing its revenue growth over the past five years. ALDI’s expansion into South Australia and Western Australia in 2016 has helped it to seize additional market share over the past five years. Industry competition is anticipated to remain fierce over the next five years. Coles and Woolworths will likely further expand their private-label product ranges to remain competitive, as discount operators continue to influence consumer pricing perceptions over the next five years. In addition, online grocery sales are anticipated to grow in importance over the period, with the major players expected to expand their online sales offerings in response to the projected arrival of AmazonFresh. Industry revenue is forecast to grow at an annualised 2.0% over the five years through 2023-24, to $114.4 billion. Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage % c ha ng e 1.9 1.3 1.4 1.5 1.6 1.7 1.8 2412 14 16 18 20 22Year Population SOURCE: WWW.IBISWORLD.COM.AU % c ha ng e 4 -1 0 1 2 3 2513 15 17 19 21 23Year Real household disposable income Provided to: University of Western Australia (UWA) | 27 August 2019 WWW.IBISWORLD.COM.AU Supermarkets and Grocery Stores in Australia October 2018 5 Industry Performance Current Performance The rapid growth of ALDI has significantly altered the Supermarkets and Grocery Stores industry’s operating landscape over the past five years. The price war between the industry’s two largest companies, Woolworths and Coles, has been exacerbated by the rise of ALDI, causing grocery prices fall over the period across the whole industry. Despite lower prices, the staple nature of many of the industry’s products has supported strong demand for supermarkets and grocery stores. Industry revenue is expected to rise at an annualised 2.1% over the five years through 2018-19, to $103.4 billion. Revenue is anticipated to remain stable in the current year. As supermarkets have slashed prices to remain competitive, industry profit margins have fallen over the period. This focus on pricing has gone against trends in overseas supermarkets, which have primarily competed through product differentiation. However, the decision of both Woolworths and Coles to focus on retaining market share has meant that margins have suffered as a result. Key External Drivers continued greater range of private-label products, which are often cheaper than branded merchandise, has enabled consumers to enjoy gourmet and discretionary items without paying significantly more. Real household disposable income is expected to rise in 2018-19, providing the industry with an opportunity for growth. Population Population growth affects the number and location of supermarkets and grocery stores. In particular, the age distribution of the population influences the type of products stocked. Furthermore, population growth typically increases the demand for new housing. New residential developments increase the amount of consumer traffic at existing supermarket locations and can create demand for new stores. Australia’s population is expected to increase in 2018-19, expanding the potential pool of supermarket and grocery store customers and supporting industry growth. Consumer sentiment index The consumer sentiment index measures households’ perceptions about their personal finances and the general economy. When consumer sentiment decreases, consumers are less likely to purchase higher priced gourmet groceries and premium products. Conversely, industry revenue generally receives a boost when consumer sentiment increases, as consumers typically purchase higher priced goods more often. The consumer sentiment index is expected to rise and remain positive in 2018-19. Demand from cafes, restaurants and takeaway food services Cafes, restaurants and takeaway food providers compete with supermarkets and grocery stores for consumer income. The number of Australians eating out has increased over the past five years, and households now spend a greater percentage of their income on meals outside the home. Demand from cafes, restaurants and takeaway food services is expected to rise in 2018-19, posing a threat to the industry’s performance. Provided to: University of Western Australia (UWA) | 27 August 2019 WWW.IBISWORLD.COM.AU Supermarkets and Grocery Stores in Australia October 2018 6 Industry Performance Industry landscape ALDI’s business