Australia / Press Releases
IBISWorld reveals state of the supermarkets and grocery industry

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by Media Team
Feb 23 2018

In anticipation for the major players’ half year results and following the latest update of its Supermarkets and Grocery Stores industry report, IBISWorld has revealed its latest Checkout Update for Q1 2018 detailing how the sizeable $102.0 billion industry, which employs over 360,000 people, is performing.

The industry is expected to grow by 2.2% in 2017-18, largely due to rising demand for premium food products, such as organic fruit and vegetables. This follows on from a 0.6% decline in real terms in 2016-17, after a period of heavy discounting by the major supermarket chains. However, intense price competition continues to define the industry.

Major Player Market Share 2017-18
Woolworths 37.2%
Coles 30.3%
ALDI 9.2%
Metcash 7.4%

Supermarket fortunes

Since the sale and closure of its underperforming hardware businesses in 2016, Woolworths has refocused on its Australian Food division. Since then, the company has cut prices to better compete with Coles and ALDI, with Woolworths’ average prices declining by 2.1% in 2016-17. This trend has carried on at the start of 2017-18, with average prices declining by 2.4% in Q1 2017-18. Woolworths is also investing heavily in its customer service, and upgrading and refurbishing old stores to further boost demand.

‘As a result of the resurgence of Woolworths’ supermarket business, the company gained market share for the first time in several years in 2016-17. This trend is expected to continue in 2017-18, with the company projected to account for 37.2% of the industry by the end of 2017-18,’ said Mr Nathan Cloutman, IBISWorld Senior Industry Analyst.

Coles’ performance in 2016-17 was one of its weakest in several years, with the company facing pressure from a more buoyant Woolworths and an expanding ALDI. These pressures have continued into 2017-18, with Coles recording sales growth of only 0.3% for Q1 2017-18. IBISWorld anticipates the company’s half-year result will be similar, with Coles facing difficulties with its UK-based Bunnings venture and its Target chain retail stores. Coles’ market share is expected reach 30.3% at the end of 2017-18.

ALDI is continuing to expand its store network in Western Australia and South Australia, while upgrading its stores along the eastern seaboard to include a larger range of fresh food items. ALDI now has over 500 stores across Australia, and its ongoing expansion is expected to earn the company 9.2% of the supermarkets and grocery stores industry by the end of 2017-18.

Individual operators that operate under the Metcash network of stores, such as IGA, are continuing to suffer as Woolworths, Coles and ALDI compete strongly on price.

‘The price war between Woolworths and Coles, and the expansion of ALDI are putting pressure on smaller retailers,’ said Mr Cloutman.

Metcash’s half year result for 2017-18 has already seen IGA supermarket sales fall by 0.8%, and Metcash’s struggles are expected to continue over the financial year. Metcash’s market share is expected to total 7.4% by the end of 2017-18.

New challenges

Although Amazon entered the Australian market in December 2017, the US ecommerce giant is yet to launch its AmazonFresh brand in Australia. However, the threat of AmazonFresh is making online sales increasingly important in the supermarkets and grocery stores industry. Revenue in the online grocery sales industry is forecast to grow at an annualised 12.4% over the next five years. However, IBISWorld found that despite growing strongly, online grocery sales are only expected to represent a small share of total grocery sales, at 3.0% in 2017-18.

Woolworths and Coles are constantly improving their online sales channels by expanding their click and collect options, and investing in consumer data analytics. In addition, Coles has recently launched a 12-month trial with Airtasker in Sydney, which allows consumers to get their groceries delivered through the Airtasker app.

Another threat for the major players is David Jones’ announcement that it will launch a standalone food store in South Yarra, Melbourne, in 2019. The company plans to invest at least $100 million over the next five years to help build a retail food business. The food stores are expected to be stocked with private-label products and offer gourmet groceries, liquor and premium convenience foods.


For more information on sectors referenced in this release, visit to access the following reports:

G4111 Supermarkets and Grocery Stores in Australia

OD5527 Online Grocery Sales in Australia

For more information, to obtain industry reports, or to speak with an analyst, please contact:

Kim Do

Strategic Media Advisor – IBISWorld Pty Ltd
Tel: (03) 9906 3641 Mobile: 0422 773 995