There’s bad news for barbecue chicken lovers with both Coles and Woolworths putting up prices of the popular food item by $1.
The 12 per cent price hike from $8 to $9 by the supermarket giants was described as an ‘industry-changing event’ by Wall Street retail analyst David Errington from Bank of America Merrill Lynch, who says it will put an end to the price wars.
Coles recently tested the higher price at some regional supermarkets, which prompted their major competitor to do the same.
Coles was the first supermarket giant to increase the price of barbecue chicken from $8 to $9, followed by Woolworths
Coles recently tested the higher price at regional supermarkets before rolling out the price hike nationally
Coles then rolled out the higher price nationally and Woolworths followed suit.
‘From our estimates, at $8, no supermarket makes any profit from selling barbecue chickens and Woolworths sells around 50 million chickens annually and Coles sells just over 40 million,’ Mr Errington said in a note to clients, reported by The Australian.
‘A $1 price move is material but more importantly to us is a likely symbol that Coles and Woolworths are now looking at ways to improve profitability without compromising competitiveness.’
A Woolworths spokeswoman told Daily Mail Australia that the new price represents a $2 saving from two years ago.
At Woolworths, we understand that every dollar counts and work hard to provide a more affordable weekly shop for our customers,’ she said.
‘In 2016 we dropped the price on our hot roast chickens from $11 to a market leading price of $7.90. Earlier this month we reluctantly moved the price to $9 due to an increase in input costs, particularly feed cost, which is a key component of producing chickens for our suppliers.’
She added that Woolwórths has dropped the price on hundreds of ‘family essentials’ in recent months.
‘As we continue to keep prices low on as many everyday family essentials as possible, we are also focused on dropping the price on healthier alternatives to ensure all Australians have access to making better food choices,’ the spokeswoman said.
Expect to see less of Coles’ ‘Down Down’ advertising campaign instore
Çoles also says its new price is lower than two years ago.
‘We dropped the price of whole hot roast chickens from $11 to $8 more than two years ago and as with all of our Down Down and Every Day price drops, the intention is for these prices to stay down for a minimum of six months,’ a spokesman told Daily Mail Australia.
‘Hot roast chickens are still almost 20 per cent cheaper than they were two years ago, and this change allows us to invest in lowering prices on other products that are important to our customers. In the past 12 months, we’ve cut prices on thousands of products including sliced ham, fresh salmon and cleaning supplies and we now have more than 4000 items on every day pricing so customers can be sure they will get great value every time they shop with Coles.’
The move comes just weeks after Coles announced its long-running ‘Down, Down’ campaign was being put on the backburner.
Woolworths say it recently increased barbecue chicken prices due to a rise in input costs but has dropped the price on hundreds of products such as salads, biscuits, pastas, nappies, meats and household cleaning items
Mr Errington predicted the start of broader price rises in the grocery sector.
It follows Wesfarmers’ recently announced plans to spin off Coles as a separate ASX-listed entity.
The proposed demerger is expected to be completed in the 2019 financial year.
Mr Errington believes a stand-alone Coles would be less able to discount heavily.
‘We believe the margins in the Australian supermarket industry have fallen too aggressively in the past two years, and that all participants are likely to allow price inflation to modestly return after a lengthy period of deflation,’ Mr Errington wrote.
‘In appears to us that the industry has now rebased and is currently in a position where price increases that support higher sales, earnings and cash generation, can be reasonably expected.’