It’s becoming clear that customers are hurting. Multiple interest rate jumps are causing price increases across the country, from rent and mortgages to food and petrol, and have resulted in many Australians opting to cut out unnecessary spending. You may think food spending would be relatively safe from such budget slashing, but the fact that a rising number of people are turning to stealing food in order to eat shows otherwise. Fresh food prices rose 9.8 per cent in March, following a
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It’s becoming clear that customers are hurting. Multiple interest rate jumps are causing price increases across the country, from rent and mortgages to food and petrol, and have resulted in many Australians opting to cut out unnecessary spending. You may think food spending would be relatively safe from such budget slashing, but the fact that a rising number of people are turning to stealing food in order to eat shows otherwise. Fresh food prices rose 9.8 per cent in March, following a 7.7 per cent rise in February, according to UBS data reported by the AFR. Australia’s duopoly of supermarkets, Coles and Woolworths, have largely turned to price freezing to keep customers’ bills down. This involves locking in the cost of certain goods – often their own-brand products – for a period of time regardless of whether the cost of manufacturing increases. But the cost of shopping at a grocery store has become noticeably more expensive as customers are hurting for value and convenience, and other retailers are taking notice. Last week, meal delivery firm Marley Spoon announced it was freezing the price of its ‘core’ range of meal boxes for its budget brand Dinnerly, and introducing a ‘savers’ range to deliver quality food to customers as cheaply as possible. Marley Spoon Australia’s CEO and COO Rolf Weber said the promotion would last until September and is aimed at helping its customers budget their food spending. “We thought it would be useful for our customers to be able to have certainty on their food costs going forward,” Weber told Inside FMCG. Value is kingMarley Spoon’s decision is based on the results of an annual survey of its customers, which gauges their changing needs and preferences. The most recent result showed an overwhelming preference by customers for value. “The insight we took was that our customers are seeking more value, and we’re responding through a range of measures. Price freezes are one of them, and we’re quite confident that we can keep the prices [low] a bit longer than we’re actually guaranteeing for now,” Weber said. Weber noted that the business has been cutting costs within its operations for some time, as well as working with its suppliers to find savings. Now, it’s in a position to keep prices stable, and should costs in the back-end rise in the next six months, it has “various levers and measures” available to create a buffer so that its operations aren’t compromised.Beyond freezing prices, Weber also noted the launch of Dinnerly’s Savers boxes, which were designed to average out at $1.50 per portion, with the aim of delivering a permanent low-priced option. Another measure created to provide more value is the ‘feed a crowd’ initiative, where customers can choose to increase the portion size of their recipes. Looking toward the remainder of the year, Weber noted that the brand’s priority across 2023 will be about increasing choices for Marley Spoon and Dinnerly’s customers.“We want our customers to get what they need for their specific circumstances, and the circumstances are different for everyone,” Weber said. “Over the course of the year, we’re going to launch more customisation options for customers: it could be swapping out a healthier meal, [creating] a faster-to-make one, or adding extras.”Super(market) salesWhile Marley Spoon hopes to provide an alternative to the weekly grocery shop, Coles and Woolworths have been able to turn their customers’ difficulties into increased supermarket sales and profit margins.Coles increased its sales 4.6 per cent over the course of its first half to $18.85 billion, driven by an extension of its own price-freeze promotions, while NPAT hit $643 million – a 17.1 per cent jump over the same period of FY22. Likewise, Woolworths’ total Australian supermarket sales for the first half rose 2.5 per cent to $24.3 billion, while group NPAT hit $907 million: a 14 per cent increase year-over-year. Woolies’ CEO Brad Banducci warned that things were likely to get more expensive over the remainder of the financial year, and said Woolworths would continue to deliver value for money to its customers. Meanwhile, Coles’ outgoing CEO Steven Cain expects inflation to moderate in the coming months, and for product availability to improve.
