Aldi Cuts Prices in Escalating Supermarket Price War

Aldi is reducing prices on key grocery items to maintain its lead over competitors, though the aggressive strategy may squeeze profit margins. The retailer is cutting prices by about 1% - its sharpest reduction in 18 months - in response to Woolworths' $100 million push to lower home brand prices and regain market share.

Known for its focus on value, Aldi has long positioned itself as the low-cost choice in Australia's supermarket sector. Established by German retailers with a strong international presence, Aldi entered the Australian market in 2001 and has steadily expanded its store network. Now it faces greater competition from Woolworths and Coles, both of which are increasing their investment in affordable private-label products.

Recent industry data shows Woolworths' grocery prices are 8.6% higher than Aldi's and Coles' prices are 8.2% higher. This is a narrower gap compared to the long-term average of 9%, suggesting that both major chains are closing in on Aldi’s pricing advantage. In response, Aldi is lowering the cost of everyday essentials such as fresh meat, bread, cheese, oil and baby products to maintain its position.

The wider supermarket industry is under growing pressure to lower prices as consumers face cost-of-living challenges and political scrutiny intensifies. These latest price adjustments signal an ongoing strategic battle, with major retailers focusing on price perception to win customer loyalty without relying on unsustainable discounts. Woolworths is also reinvesting $400 million in savings to keep prices competitive and improve service after a year of public challenges.

Source: Australian Financial Review, Aldi, Colitco, Essfeed