VBE1005 Case Study On Introduction To Marketing

The Current Performance plus Key Ratios

Supermarket and grocery stores are growing substantially over the years and mainly the growth is linked with low cost labeling of ALDI products, which has changed the overall performance indicators of whole sector. ALDI Limited is German retail chain of grocery stores which has entered into Australian market and has altered the overall structure of the market. Based on this changing face of industry, Coles has entered into price war with Woolworth which has further lowered the overall prices in the supermarket and grocery stores. The average decline in prices was across the two largest retailers of Australian super market and grocery stores sector, such that overall price of grocery basket has declined by 5.1% (IBISWorld, 2018).  The lowering prices have created the price intense environment within market, however it has not affected the level of demand for the products. It is based on the notion that products of supermarket and grocery stores are of indispensable nature, whose demand is less influenced by the change in prices. 

The analysis of current performance situation of Supermarket and Grocery Stores have indicated that overall growth has remained $103.4 billion in the years 2018-2019 (IBISWorld, 2018). The industry also has substantial cost structure and of which wages are reported to be $ 10.9 billion. 

Source: IBISWORLD.com.au

However, regardless of the cost of operations, the overall profitability of the market has also been remarkable, which was $ 4.2 billion in the following year (IBISWorld, 2018). The positive figures of profitability are clearly showing that current performance of market is good and thus it can be maintained that Coles is also earning substantial sums in its business. 

In addition to this, the analysis of current situation of supermarkets also highlights that although declining prices have had limited effect on demand of products which have staple nature. Yet, the overall margin of profit has declined over the year. Another reason which has been liked with falling margins of profit is linked with the fact that initially supermarkets have competed over the differentiated nature of products, however this trend has changed over time and price war of Coles with Woolworth has caused fall in prices, which has lowered margins of profit for whole industry. Instead of the price competition and lowering margins of sector, Coles have managed to retain its existing market shares, however the situation had substantially influenced the smaller players operating in the industry who are struggling over the retention of their market position and market shares. 

Followed by this, the IBIS report has also provided details on growth patterns of industry and has indicated that stability patterns are witnessed in the current growth levels within industry. On the other hand, instead of war of pricing, lowering margins and competition over market shares, the annual growth rate has been witnessed in Supermarket and Grocery Stores industry. The growth is also expected over the coming years, as overall growth of $ 1.2 billion is expected over the next five years (IBISWorld, 2018). These figures are highlighting that current situation of market can be considered as stable, otherwise it would not have shown expected growth in future.