AFGC grocery report shows lower growth

The Australian Food and Grocery Council and financial services company UBS have released a report detailing changes in the Australian grocery market that have led to structurally lower growth.

The survey of Australian suppliers shows that the Australian market is experiencing structural change due to the increased threat of discount retailers, leading to lower sales and profit growth and falling returns.

In the past six years, retailers’ profits have grown by six per cent, while suppliers’ profits have been flat.

The report predicted that the 2016 financial year would see industry profit fall for the first time in more than a decade. Suppliers say they are cutting back on trade spend, looking to gain a larger share of the profit pie and focusing on NPD for the next couple of years.

The report outlined the expectation that the increased pressure of a lower profit environment would produce clear winners and losers in the industry.

Coles is expected to outperform its rivals over the next year, followed by the discounters. On balance, Woolworths’ position is expected to decline further, while suppliers are less pessimistic about Metcash’s chances than in the previous year.

The market is expected to grow by three to four per cent in 2016. Woolworths is expected to lose market share to all players in the industry.

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