How good are our supermarkets? 1


Carolyn Holbrook writes in The Age [17 July 2007]

IT’s just after 6pm and the dinner guests are arriving at 7.30. Everything is as it should be; the bathroom has been scrubbed and the house is looking schmiko, the kids are fed and pyjama-ed, the husband has ironed his shirt and shaved his shadow, and the sav blanc is chilling in the fridge. Carolyn Sutherland, is putting the finishing touches to her Christine Manfield lamb curry. She’s stirring and adding and tasting, when suddenly something she hadn’t noticed on the ingredient list catches her eye: ‘TAMARIND PASTE’… it’s time to panic.

So there I am, wondering how on earth I’m going to find tamarind paste at 6 o’clock on a Saturday night in Blackburn South,’ she says. The Coles supermarket on Burwood Highway seems like a long shot, but it’s the shot. ‘I felt like hugging the supermarket manager when I saw tamarind paste there among the oyster sauce and prawn crackers… So when people bag supermarkets, I always think “they’re not that bad”

Australian supermarkets might be feeling a bit vexed just about now. On the back of a recent report by Melbourne-based international research group GAPbuster, they’ve been copping a pasting in the press. Our supers have been canned for poor product range and freshness, unfriendly service and long queues, in comparison to their British counterparts.

This wave of negative publicity seems to echo the prevailing zeitgeist that supermarkets are profit-obsessed, anti-social villains in the order of banks and fast-food companies. Damnation indeed. Yet even as we pillory supermarkets, it seems that we take their existence, their convenience and their low prices, for granted.
Epicure has resolved to take a closer look at our supermarkets; to put them under the metaphorical microscope. How good or bad are Australian supermarkets? Are they adapting to better serve a population that is increasingly discerning about what it eats, and what are they doing in response to big issues like climate change?

Supermarkets are a relatively recent invention. Going back sixty years, almost everybody bought their groceries from an independently owned general store. The customer stood at the counter with her basket and her list, as the aproned grocer walked back and forth to his shelves, retrieving this and weighing out that. Gradually, it began to dawn on grocers that if they slashed labour costs by making customers serve themselves, they could under-cut their competitors on price, and thereby draw more business.

By the mid to late 1950s, everyone was getting in on the act, and self-service grocery stores had become commonplace. Enterprising businesses, such as variety goods merchandisers Coles and Woolworths, saw that supermarkets were the way of the future. Â In the mid-50s, both chains began buying up grocery stores by the fistful in New South Wales and Victoria. Coles opened its first, free-standing supermarket in North Balwyn in 1960. Flanked by its indispensable allies, the motor car and the refrigerator, the supermarket was about to enter its golden age.

Today, annual turnover in the highly competitive grocery sector, which includes fresh produce, deli, meat, bakery, dry groceries and general merchandise, is worth around $80 billion. Nationally, Coles and Woolworths/Safeway soak up about 75% of the grocery market, with independents and small chains taking the remainder. Coles has been losing market share in recent years, and (along with other Coles Group assets such as Target, Kmart and Officeworks) is currently for sale the highest bidder… if you’ve a spare $20 billion or so….

In the jargon of food retailing, the Australian supermarket business is overwhelmingly ‘price-sensitive’; that is, there is intense competition to be seen to be offering customers low prices and value for money. Coles and Safeway sell their products on slim margins of between 3% and 7%, and depend for their profit on high turn-over and low operating costs.

While the supermarket giants monopolise the middle ground with their ‘price-sensitive’ pitch, a sprinkling of stores like Leo’s Fine Foods in Heidelberg and Kew, and Piedmont’s in North Fitzroy service a more discerning market. David Jones’ Foodchain venture tried to grab this market late last century and failed dismally. Australia is crying out for a supermarket chain to cater to the upper-to-middle market’, according to Stephen Ogden-Barnes, program director at the Australian Centre for Retail Studies at Monash University

The United Kingdom provides an obvious point of comparison to Australia. Admittedly the UK is a much bigger market, but customers are presented with a great deal more choice. The spectrum begins with the likes of ASDA and moves up through mid-range stores such as Safeway, Tesco and Sainsbury; ending with the prime middle-to-upper market choice, Waitrose. ‘Waitrose is not super-exclusive’, says Stephen Ogden-Barnes. ‘It caters for the more discerning top 30% or so of the population. And that’s clearly what’s missing in Australia.

Mike Rear, an IT manager for a local homelessness charity, moved to Melbourne from London with his wife and three young sons early in 2006. Back in London, Mike and wife Sarah generally shopped at Sainsbury, simply because it was within easy reach of their home in East Dulwich. ‘Generally we stuck to one store but if you wanted something special like meat that came with details of where it was farmed, or chocolate mousse made with real Belgian chocolate and organic cream, then a trip to Waitrose was in order’, says Rear.

While the transition to Melbourne is generally working well, Mike Rear admits to missing the UK’s more sophisticated supermarket culture: It’s a choice thing really, not so much in the fresh food areas, but more in the sheer volume of choice, like ethnic foods and condiments from a wide range are sold in almost every store regardless of location. And in general, I would say UK stores are bigger and better laid out with wider aisles and they’re also cleaner!

There might be an unfilled niche at the upper reaches of the Australian grocery market, but since the arrival of an innovative German company a few years ago, there’s been plenty of jostling down the other end of the scale.

Stephen Ogden-Barnes describes the arrival of Aldi in Australia as ‘a slap in the face for the bigger guys’. The first Aldi store opened in Sydney in January 2001, and already the German chain has wrestled 5% of the Australian grocery market. There are 150 or so stores in New South Wales, the Australian Capital Territory, Queensland and Victoria….and counting.

Louise Price is a regular shopper at the Aldi store adjacent to Moorabbin Airport. The aptly named Japanese language teacher and mother of three primary school children, estimates that she saves at least $50 a week in groceries by shopping at Aldi: ‘I get tinned tomatoes for 49c and pasta for 49c. You pay only $2.29 for beautiful multigrain bread and milk is about 50c cheaper than the plain label supermarket milk. We go through ten litres a week and six loaves of bread, so the savings really add up.

Price raves about the quality of Aldi products too. ‘Occasionally you might find a tray of mouldy strawberries, but generally their stock is always fresh and they’re so busy, they are always replacing it. I get meat, fish, yoghurt, cheese and everything I need, and it’s all great quality.

For Melburnians reared on a diet of Safeway and Coles, Aldi is decidedly different, if not downright odd. The lights are low and there is no elevator music to steer your trolley to. The shelves, often no more than boxes piled upon boxes, are about chest-high, affording you a view from one end of the store to the other. Most incredibly, there are only four or five aisles, because Aldi stocks around 5000 products, compared to the 25,000 or so you find at the average supermarket.

Louise Price considers the lack of choice to be part of Aldi’s appeal. It takes a bit of getting used to, but once you have established a basic Aldi weekly shopping list, you can just whiz in and do it without any distractions, or wandering up and down all those supermarket aisles going insane looking for something. I genuinely think people are realising that too much choice is very annoying, and time consuming, and they end up buying too much rubbish they don’t need.

Almost everything that Aldi sells is its own house brand. Christened with quirky names like Colway (tomato sauce), Promised Earth (wine) and Viking (fish fingers), the products are stylishly packaged. Aldi has established relationships with local producers, rather than relying on imported goods, so 80% of its products are Australian-sourced.

While the quick-fire success of Aldi has likely caught Coles and Safeway off-guard, it has also proved a valuable point for them. ‘Aldi has shown you can operate a viable supermarket without the well-known brands’, says Stephen Ogden-Barnes. Coles and Safeway are presently unleashing house brands by the bucketful and it seems we haven’t seen the half of it yet. In comparable international sectors, private brands comprise about 30% of the market; in Australia, they are only at 15%-18%

Aldi has not caused this surge in private brands’, says Stephen Ogden-Barnes, ‘but it has drawn it into sharper relief. Coles and Safeway are simply at the tail-end of a trend that began in the United States eight to ten years ago.’ Supermarkets have plenty of good reasons for wanting to sell more privately branded goods; prime among them is the capacity for higher profit margins. They also benefit from tighter control over production, distribution and shelf display.

Croydon resident Marj Stewart is one customer who isn’t happy about the proliferation of house brands, and she says she knows plenty of people who feel the same way. ‘I recently bought a packet of Savings brand frozen beans from Coles because I’ve had them before and they’ve been okay, they come from New Zealand. We had them for dinner that night and they were dreadful, dry and stringy; the worst beans I’ve ever had. I had a look at the packet and they were made in China.’ Stewart was furious. ‘I took them back the next day and said “what are we doing buying beans from China?” The girl on the refunds desk didn’t say a thing; she just gave me my money back.

These days Marj Stewart buys the majority of her groceries from IGA in Mooroolbark. The prices are good, the quality of the fruit and vegetables is high and the service is friendly. ‘The girls are more likely to have a conversation with you at the checkout. At the big supermarkets, you’re just a number.

There is evidence that Marj Stewart is part of a broader movement back towards independent grocers. Sales figures suggest that stores like Foodworks and IGA are picking up some of the market share lost by Coles in recent times. ‘The independents might not have the biggest range, but they can have the range’, says Stephen Ogden-Barnes. ‘And even though they probably can’t beat Coles and Safeway on price, they beat them on proximity, service and community feel.’ The Ritchies group of supermarkets seems to have struck gold with its Community Benefit Card. The company donates 1% of customers’ grocery bills to their nominated sporting club, school, kindergarten, hospital or favourite charity.

Author, academic historian and actor, Alice Garner, likes to feel connected to her local community when she’s collecting the groceries. Several times a week, Garner bypasses the local Safeway on Racecourse Road to spend her ‘hard-earned’ at Foodworks in Flemington. ‘I just don’t like the physical environment at Safeway, the bright lights, the long queues and the lack of continuity; there’s never the same person on the register. Plus they always seem to have all the kids’ stuff down low where they can reach it. I never take the kids there.’

Alice Garner’s local Foodworks (known in her family simply as ‘the little supermarket’) is a neat, beautifully laid out store, which caters for its ethnically diverse local community with specialist African and Asian ingredients. ‘I get no pleasure from thinking of going to the big supermarket, but I quite enjoy going to the little supermarket’, says Garner. ‘It’s run by a family who seem to work very long hours. They’re very friendly and they always say hello to the kids.

There is also plenty of anecdotal evidence that strip shopping is alive and well in Melbourne. In Centre Road, Bentleigh for instance, several greengrocers, butchers and bakeries, as well as a Russian delicatessen, Glick’s Cakes and Bagels and a market complex called ‘Fresh’, all thrive within a stone’s throw of Coles and Safeway. Bilal Al Kantar owns the Bentleigh Fresh Fruit Centre, which buzzes with customers picking over bounteous displays of beautifully fresh fruit and vegetables. ‘We’re doing very well’, he says. ‘People come here because our stuff is fresher and cheaper than the supermarkets. We are always making sure our fruit and vegetables are fresh. In those big companies, people don’t care as much about what they do.

There is no doubt that the supermarkets have greatly improved their fresh food offerings in recent years. Woolworths/Safeway spokeswoman, Fiona Breen, says company research has shown that customers are becoming more curious and experimental about what they buy. In partnership with our suppliers, particularly in the Fresh areas, [we’re] responding to this growing interest and demand through expansion of our range and varieties. For example, stores now stock up to 18 varieties of tomatoes; twenty years ago, when we became ‘The Fresh Food People’, there were only two varieties available.

The healthy competition between supermarkets and independent bakers, greengrocers and butchers is driven by customers who are increasingly knowledgeable and demanding. Customer power is also driving another trend that supermarkets are eager to hitch a ride on; organics. Despite all the attention organic food attracts, it still only comprises 0.25% of total food consumption in Australia. (In the UK, the figure is ten times as high)
Ex-Londoner Mike Rear was struck by the prohibitive price and dodgy quality of much organic produce when he arrived in Australia. ‘In UK supermarkets, organic produce is displayed alongside conventional stuff. It’s much more widely available, not only in fresh produce but also things like tea, coffee, pasta, bread, flour, crackers and even things like jam and herbs. And while you pay a bit more, it’s still affordable.

Fiona Breen says Safeway has been working hard to build relationships with organic growers: In the past, the growth of this market was limited by insufficient or inconsistent supply. Developing solid supplier relationships enables producers to develop their businesses through surety of contracts.’ Breen says the organics industry in Australia is growing at about 20% a year, across both specialty stores and supermarkets. ‘Woolworths has around 150 [private brand] Organics lines, and we are seeing strong growth in organic spreads, milk, long life juices, pulses, legumes and fresh lines.

Coles’ spokesman Jim Cooper cites similar problems with consistency and quantity of supply for organic produce: ‘In the early days, the small scale production of much organic produce meant it was difficult for us to secure enough produce for a nationwide store network. But the increasing popularity of organic produce means production of many lines is increasing and makes more organic lines feasible for us to carry nationally.’ As the scale of organic production rises, prices should fall, as they have in the United States and the UK.

 Coles and Woolworths/Safeway are each undertaking several initiatives that will boost their green credentials, such as building ‘green’ stores, recycling more waste products and reducing energy usage. Both businesses are keeping watch over the burgeoning ‘food miles’ debate; wherein people are increasingly questioning the environmental cost of transporting groceries over vast distances. Jim Cooper from Coles points out that in the UK, where the debate is more advanced, produce is flown in from across Europe and other parts of the world. ‘The situation is a bit different in where in Coles case, for instance, about 97% of our fresh fruit and vegetables [and 85% of all groceries] are sourced locally.

Amid this flurry of green activity, the bottom line is that supermarkets are trying to look less like supermarkets and more like old-fashioned, high street grocers; less like green-eyed corporate monsters and more like friendly members of your local community. Asked about major trends shaping the future of the supermarket business, Safeway’s Fiona Breen is appealingly frank: ‘There will be an increasing focus on listening more closely to our customers and creating as much of an individual shopping experience as possible. While mass market shopping has been fantastic for providing greater convenience, range and competitive pricing, arguably it has lost some of the personal touch. We want to bring that back.

Supermarkets have their work cut out in Melbourne, where the culture of market and strip shopping culture is deeply rooted, and growing stronger. Faced with a choice between the convenience, anonymity, sameness and ever lengthening queues of the supermarket, or the colour and variety of the market, many are choosing the latter. As Stephen Ogden-Barnes puts it: ‘At the end of the day, going to the supermarket is a pretty plain day out. Buying tins of beans is never going to be fun.

Former Sainsbury shopper, Mike Rear, illustrates the problem that supermarkets face: ‘The South Melbourne Market has become a weekly ritual for us. We love being able to shop in the “market way” where you can see, smell and touch everything – a lot like the markets we went to as kids. Markets are very thin on the ground in the UK and those that are good, like Borough Market, are very expensive.

Instead of slamming the mediocrity of our supers, and lamenting the absence of an up-market player, we need to question whether we really want our supermarkets to be as good as British and American ones. If there were a Waitrose-equivalent in every second suburb, what would become of the Prahran, Preston and Dandenong Markets, or our treasured independent butchers, bakers and greengrocers?

If our supermarkets tend towards blandness, that’s a fair price to pay for Melbourne’s thriving food culture. And, as Carolyn Sutherland would say, if you can buy tamarind paste at Coles in Burwood on a Saturday night, then supermarkets can’t be all that bad can they?


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One thought on “How good are our supermarkets?

  • David Moss

    As a small business owner with a small shop selling organic and gluten free products in Perth, I can only assume that Coles are very different here. You mention them and Safeway operating on 3 to 7% margins but I can assure you that they are working on a great deal higher one here in WA. Coles and Woolworths are the big players here and closely match each others pricing, we are already cheaper on some items than Woolworths, who are almost next door to us, and with their buying power I have no doubt they are working on considerably higher margins than stated.
    Anyway just thought I would get my 2 cents worth in,

    Regards,

    David Moss
    Chicory