Woolworths Cuts Prices to Compete With Aldi

Woolworths is slashing grocery prices in a bid to win back market share, but the price war is sharpening scrutiny from regulators ahead of a high-stakes supermarket industry review. A new analysis shows Woolworths narrowed its price gap with Aldi to the lowest level in two years, signalling how far it’s willing to go to challenge rivals.

Right now, Australia’s supermarket giants are under growing pressure from politicians, regulators and the public to justify grocery prices. Woolworths and Coles have been accused of pricing unfairly, especially as food inflation bites. Supermarket pricing has become a defining political issue ahead of the looming federal election, with both major parties pledging to take tougher action on the sector. Behind all this sits the ACCC’s final report into supermarket behaviour, expected to shape future policies and potentially trigger legal reforms.

In March, JPMorgan tracked prices across roughly 100 private-label items and found Woolworths’ products were 7.8% more expensive than Aldi’s, down from 8.4% just a month earlier. The gap at Coles also shrank slightly, to 8.5%. Both supermarkets had previously seen price gaps spike to over 11% in mid-2023, suggesting that pricing pressure is prompting swift action. Analysts say Woolworths cut harder than Coles to recover lost sales after warehouse strikes in December and to present a more competitive stance amid the approaching ACCC report.

However, it’s not just about price tags. Perception matters too. Coles appears more confident, possibly due to better recent sales performance, while Woolworths is on a mission to reset consumer views on value. But there’s growing debate about fairness in comparing prices, as Aldi offers mostly home-brand products, while Coles and Woolworths stock more national brands, which some consumers prefer even at higher costs.

The unfolding price war is taking place against a backdrop of regulatory talks and a public hunger for reform. Consumer group Choice, which receives federal funding to track grocery pricing, found Aldi still leads on price in a limited 14-item basket. But the survey has been criticised for its small sample and for comparing unlike products. From a broader perspective, JPMorgan estimates most shoppers still pay roughly 7% to 10% more at Coles or Woolworths than at Aldi for similar private-label goods, though some consumer surveys put that gap closer to 30%.

As attention on the big players intensifies, the final word from the ACCC, due soon, could reshape the retail landscape. Whether it leads to new laws, reputational shifts or simply more careful pricing, supermarkets are adjusting and shoppers could be the long-term winners.

Source: Australian Financial Review, CHOICE, INDaily