Published on 12/02/2016 by Punchmedia

DJs to Sell Groceries as Industry Revenue Grows

David Jones has announced plans to revolutionise food shopping in Australia with an upmarket alternative to the weekly grind up and down the aisles. Woolworths Holdings group chief Ian Moir said shoppers would get their first taste of the new-look food business in 2016 and that it would transform grocery shopping in Australia. "People aren't getting a good enough experience from food shopping in Australia," Mr Moir said. "There's no equivalent to (UK upmarket food retailer) Waitrose and yet there is a consumer base that would respond to that." The food operation is expected to grow into one of David Jones' most profitable divisions but Mr Moir said it was important to get the groundwork right and nurture relationships with local suppliers. The announcement comes as Australia’s supermarkets and groceries industry is projected to post annualised growth of 3.8% over the five years through 2015-16 – including forecast growth of 2.5% in 2015-16, to reach $88.1 billion.

Competition Controversy

The latest price war between the two industry giants has resulted in prices being slashed across a range of everyday goods, including milk, bread, meat, fruit and vegetables. Concerns have been raised that the price war will harm agricultural industries and force farmers off the land.

Product Preferences

Trends in private-label merchandise have played a pivotal role in the industry’s performance over the past five years. Historically, consumers shunned private-label merchandise due to its questionable quality, limited range and bland packaging. Changing consumer shopping trends and the increasing popularity of private-label goods in ALDI stores have led Coles and Woolworths to improve their range of private-label merchandise.

Wholesale Bypass

Growth in private-label products has contributed to increasing instances of wholesale bypass. Supermarkets have entered into contracts with food manufacturers to produce private-label goods for them. This has encouraged supermarkets to make direct purchase agreements for branded products as well, which has reduced the need for wholesalers.

Store Operations

Strong industry competition has resulted in almost stable enterprise numbers over the past five years. Potential players are likely hesitant to enter the industry, due to the dominance of Coles and Woolworths. The most recent major player to enter the industry was Costco, opening its first Australian store in Melbourne in August 2009. Costco operates like a wholesaler, with customers purchasing products in bulk in a warehouse-style set-up.

Industry Employment

Total industry employment is forecast to grow at an annualised 1.5% over the five years through 2015-16, outperforming the projected growth in store numbers. This is due to the shift towards larger stores, particularly by Coles and Woolworths. Larger stores cater to the needs of a wider range of consumers, making them attractive to a greater portion of the market. This trend towards larger stores has increased the need for staff, particularly shelf stackers.

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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