What Chinese grocery chain Freshippo learned from Coles and Woolworths

Executives from Alibaba’s high-tech grocery chain Freshippo recently travelled to Australia to engage with the local FMCG community, as part of a new strategy centred on importing more international goods to the China market. Founded in 2015, Freshippo operates more than 300 supermarkets across 27 cities in Mainland China. The trip was an opportunity for the business to gain a deeper understanding of Australia’s supermarket duopoly, Coles and Woolworths, as well as establish ties with more than 40 Australian FMCG brands.Australian-madeFreshippo’s head of global sourcing April Huang told Inside FMCG that Australian and New Zealand-made goods are famous for their quality materials, and advanced production processes, driven by strong regulations around quality control. They also appear to be cheaper than similar goods in China.“After conducting a basic exchange rate calculation and factoring in international shipping costs, the prices of various products – including health care products, milk powder, skin care products, wool products, and others – appear to be more economical when purchased internationally rather than domestically,” Huang said.“This is the main reason why Australian products are now popular among consumers.”Freshippo already sells Coles’ own-brand ice cream through its e-commerce site.According to Huang, the quality of Australian products, as well as the stable supply, makes the country a strong potential long-term partner for imports. During the trip, Freshippo identified brands that align with its vision, and it intends to explore potential partnerships to enhance its own product offerings.Own-brand a key opportunityBesides forming ties with suppliers, Freshippo’s leadership team also toured some of Coles’ and Woolworths’ most productive stores in terms of sales in order to gain insights into the way Australians shop.Key insights included the ‘systematic construction’ of Coles’ and Woolworths’ private-label strategies, as well as their focus on offering products for people with allergies, Huang noted.Coles’ and Woolworths’ private-label products form the backbone of their low price offers to customers, while at the same time, delivering higher margins to the business. With the trading down of customers across the country due to rising cost-of-living pressures, the private-label range in both businesses is growing.Coles recently noted that its own-brand sales revenue had grown 11.4 per cent in the third quarter, reaching $2.9 billion for the period, while Woolworths’ own-brand sales concurrently grew 9.1 per cent, as “customers traded into affordable own-brand alternatives”. Similarly, Metcash’s IGA, which recently announced its full-year earnings, saw own-brand sales jump 20 per cent in FY23.  International tensions are easingFollowing some years of political pressure and cold international relations, the relationship between Australia and China has begun recovering, Alibaba’s group GM for Australia and New Zealand, Pier Smulders, recently explained. According to Food and Drink Business, Smulders noted that Alibaba is looking to take advantage of the opportunities that arise out of the easing tension, and use it as a springboard to bring more Australian brands to Chinese customers.“There will be opportunities that come out of that reopening,” Smulders said.“That may mean that companies that weren’t in certain markets before may be able to get some market share that wasn’t there before. And there are new ways to reach customers through digital needs. Adversity, as we know in business, almost always leads to opportunity.”