RETAIL beef price wars on an unprecedented scale are looming as the nation’s two dominant supermarket groups start positioning themselves for the Coles post-hormone growth promotant (HGP) era starting January 1.
Both Woolworths and Coles have slashed retail beef prices on many items in the past 10 days in a tit-for-tat move driven by Coles’ controversial September announcement that it plans to move into a HGP-free beef program next year.
Coles based its decision on perceived “consumer concerns about additives” and an “opportunity to improve meat quality.”
The last of the company’s HGP-treated beef will be processed before November 1.
Given an ageing period of up to 60 days on some vacuum-packed items, that would effectively clear the decks in time for the January 1 program launch.
In combination, Woolworths and Coles account for 49.8 per cent of national red meat sales at retail.
It was widely anticipated that Woolworths, the nation’s largest retailer, would at some point take decisive action to counter Coles’ push into HGP-free beef.
Woolworths fired its first broadside last week when it announced massive retail price cuts of up to 20pc on 27 popular beef lines, from grilling cuts to mince, stir fry and roasts.
The move takes Woolies’ price points on beef category lines like T-bones back below $20/kg – “levels not seen in at least four years, and possibly more,” one well-informed source said.
“These are not ‘here today, gone tomorrow’ specials, but genuine long-term price reductions,” Woolworths general manager of fresh food, Pat McEntee, said in a statement.
The company statement said after a period of relative stability, livestock prices were now rising as cattle producers across eastern Australia took advantage of the recent rain to rebuild their herds.
While that would ordinarily result in an increase in retail prices in coming months, Woolworths said it was “opting to both absorb the higher livestock cost increases and invest in lower shelf prices to maintain strong consumer demand”.
Woolworths’ own in-store customer surveys have consistently shown consumers are happy with the quality and consistency of the beef offered, but price was often the biggest source of purchase resistance.
Remarkably, within days of Woolworths slashing its prices, Coles matched or even exceeded the price adjustments, lowering 18 beef items by between seven and 20pc.
One respected analyst suggested the radical price changes – unprecedented in the history of supermarket retailing in Australia – could easily cost each company $50 to $60 million in lost revenue in the next 12 months.
He estimated Coles would need to lift overall beef sales by at least five per cent to cover the decline.
“But given the size of the price reduction, they could do it,” he said.
In parallel with its new pricing strategy, Woolworths has ramped up its promotion campaign focused on beef, which began with the recent “New York Woolies beef taste test”.
One of the big questions remains how overtly Coles promotes its non-HGP offer after January 1.
Initially, company sources indicated the process would be low-key, possibly including retail pack sticker identity only.
However, there is a growing belief that to maximise its productivity sacrifice, Coles will have to heavily promote the HGP-free message.
“It’s only a short step from the current Steggles TV ads promoting non-hormone treated chicken to a similar ad for Coles beef,” one senior industry identity said.
Meat and Livestock Australia is understood to have constructed an eight-stage approach to managing the HGP at retail issue, which will be rolled-out as needed, in phases, depen-ding on Coles’ upcoming decisions.
Should Coles gain traction among consumers early next year in terms of market share and turnover, Wool-worths could come under pressure to follow suit with its own non-HGP offer.
However, if Coles’ sales do not show a strong response at Woolies’ expense, the additional cost/productivity burden could mean the company relents on its HGP position fairly quickly.
