Billion dollar war over ham erupts
IT'S beginning to feel a lot like Christmas. And as our waistlines expand so do our grocery budgets.
For the grocery industry it's a potential profits bonanza with billions of dollars at stake.
But who wins the Christmas retail war could come down to a single product.
Christmas ham is at the centre of a $21 billion retail battle between Coles, Woolies, IGA and Aldi. This year, whether you value full-flavoured glazes, crunchy crackling or just the lowest price could determine which firm prospers.
Woolworths told news.com.au it has a "winning plan" to dazzle customers; over at Coles it is insisting its innovative new products are exciting shoppers.
"Christmas is extremely important for the food and grocery sector with about 40 per cent of festive spending on food," Australian Retailers Association's (ARA) Russell Zimmerman told news.com.au.
"People treat themselves at Christmas. There's lots of splurging going on."
The ARA and researchers Roy Morgan have forecast Australians will spend $51 billion in the run-up to Christmas Day, a 2.9 per cent rise on 2017. Of that, almost $21 billion will be on food and groceries, the category also seeing the most growth at 3.7 per cent.
DECEMBER HUGE FOR SUPERMARKETS
Woolworths head of fresh food Paul Harker said December was huge.
"It's the biggest month of the year … because Christmas is such a big food event."
He said Woolies' preparations for Christmas 2018 began even before the tree came down in 2017.
He said the store has identified several essentials for the Christmas consumer.
"Customers want to be inspired, to help with a bit of wow factor, to make shopping convenient and to balance their budget on key staples," he said.
Looking at the sales figures for the big two, the three month period that includes December is consistently the biggest. Of the $37 billion shoppers pumped through Woolies' registers in 2017, $9.7 billion of that was in the three months to the end of December - that's at least $71 million more than the next biggest quarter.
Over at Coles, Christmas 2017 was even more important. $9.1 billion of its annual sales were in the Christmas quarter, $271 million more than any other sales period.
You can't pin this all on Christmas. Halloween also occurs in the same quarter, but it is doubtful that carving pumpkins outsell Christmas puds.
Add in all the other food retailers and grocers and it's likely the pre-Christmas period could add up to at least half a billion dollars in extra spending.
WOOLIES AND COLES FESTIVE WAR
This year the big two have everything to play for.
Coles has had a lacklustre year, with growth of 1.6 per cent against Woolies' 4.3 per cent. Recently demerged for former parent Wesfarmers, Coles will be keen to demonstrate it has started independent life with a bang.
Meanwhile Woolies, will be striving to keep its crown after last year an influential retail analyst said the firm had "won" the Christmas supermarket skirmish.
HAM IT UP
Key to who comes out on top will be persuading customers it has the best offer on ham, said Mr Zimmerman.
"Ham is expensive in the scheme of things and you can easily spend $100 on one."
Woolworths' figures show it's the most popular festive dish, with 71 per cent of us tucking into one on Christmas Day.
And where you buy your ham from is where you're also likely to buy your festive fruit and veg.
Coles reckons it has a Christmas winner up its sleeve. In what it bills as an "Australian supermarket first" it's offering a ham topped with crispy crackling. It comes in at a cool $20 per kg, double the price of a standard leg ham.
"Ham is a really important seller for Christmas trade in Australia; it's the showpiece," said Coles' own brand head Mark Field.
He told news.com.au the crackling ham had been in development for more than a year and was a classic example of what customers loved - iconic products with a twist.
"You need to understand what customers want and where they will give you permission to innovate.
"When you look at food trends, crackling-related products are becoming extremely popular. Celebrity chefs have come out with recipes and it's almost a competition among families about who can do the best crackling."
Was Woolies' worried about Coles' creation? Not a jot, said an unfazed Mr Harker who insisted his hams were more than suitable for crackling.
"What people are looking for with their ham is having that flavour profile in glazes, so we have already glazed hams or customers can score and glaze the ham themselves (with ready-made glazes) so they feel part of the process."
Aldi may have a smaller range but the German retail behemoth is still keen to get in on the Christmas act. It pointed to a range of 100 per cent Australian pork hams and said its aim was to offer "better value" than competitors.
"We recently dropped the price of our Australian leg ham to $6.99/kg to make it the best-value ham compared to other supermarkets," a spokeswoman said. Although IGA is also advertising ham at that price.
But the big battle is between Coles and Woolies.
This week Craig Woolford, an analyst with Citibank, said Christmas 2018 should be "good" for retailers.
"Christmas can be more than one-third of a retailer's profits. Even supermarkets earn twice the average monthly profit in December.
"We expect to see Woolworths outperform over Coles, Aldi and Independents over the key Christmas period," he said, forecasting Woolies' growth in the quarter would be 3.4 per cent against Coles' 2.6 per cent.
Last January, investment bank UBS gave Christmas retail bragging rights to Woolworths. The bank surveyed suppliers on a range of categories and found Coles' wanting, reported Fairfax.
UBS retail analyst Ben Gilbert said suppliers were "clear in their view that Woolworths won Christmas".
But Coles' Mr Field questioned the analysis.
"It depends how you define who 'wins' Christmas. We want to delight as many customers as possible (and) if you look at our innovation with our crackling ham and sausage roll wreath, hopefully that really lands with the consumer."
Of course, Coles has another trick up its sleeve - a festive extension to its Little Shop toys that the chain said was instrumental in its huge 5.8 per cent sales growth in the September quarter.
Woolworths' Mr Harker said shoppers at Christmas were more concerned with top-notch fresh food, an easy shop and having everything in one place, than plastic toys.
He said the firm had a "winning plan" in place to ensure the supply chain was efficient and suppliers were all on board.
"If we win this Christmas, it will be because customers have decided that based on where they choose to shop.
"For many, Christmas is the main event and they want to impress their guests with an awesome feast."
And depending where you choose to buy your ham could be key to the big supermarkets' shareholders having an awesome new year.