Food retail sector set for subdued March quarter

Australia’s food retail sector will undergo subdued growth in the March quarter, according to the Australian Food and Grocery Council CHEP Retail Index, following stronger sales in December.

The index forecasts retail trade figures ahead of the Australian Bureau of Statistics using industry data, which indicates retail trade in December increased by a moderate 3.1% year-on-year.

The index is generated by Deloitte using CHEP Australia transaction data based on pallet movements.

Forecasted retail activity is predicted to increase to 2.1% for February year-on-year, and 2.2% for the March quarter, which is traditionally one of the slowest trading periods of the year.

According to the AFGC, 2012 will be a highly competitive and challenging year for suppliers and retailers, claiming the supply chain is being affected by changing consumer behaviour.

“Consumers are… generally spending less, shopping online or overseas, and increasingly only purchasing when products are on promotion,” the AFGC said in its report.

“Additionally, cheaper imports and the rise of the Australian dollar are putting pressure on local suppliers and retailers.”

AFGC chief executive Kate Carnell says that in a bid to remove inefficiencies and delays in the supply chain, retailers and manufacturers are focusing on planning and operational execution.

“Management of the supply chain has become particularly important in light of recent operational and sales trends,” Carnell says.

“[These include] an increase in the percentage of sales on promotion, and value-conscious customers creating downward pressure on prices generally.”

“With manufacturing and farming input costs increasing, margins have decreased, putting pressure on inventory holdings.”

Carnell says retailers and suppliers can reduce costs and ensure product supply by understanding the pressure points and putting in place alternative arrangements.

The AFGC and Efficient Consumer Response Australia run a program titled Winning in January, identifying areas in which industry can work together to improve the performance of the sector.

Over the past three years Winning in January has delivered significant improvement in shelf availability in the dairy, cereals, snacks and ice cream categories.

Performance data, highlighting key issues and responses across the sector for January, is being collected and the 2012 Winning in January report will be released in February.

The news comes after supermarket giant Coles revealed its weekly “super specials”, which involve slashing regular costs by up to 50%, will extend from five items to 12.

The move comes as shoppers cash in on the best fruit and vegetable supply in a decade.

The new Coles campaign is marked by the phrase “There’s no freshness like Coles freshness”, directly challenging Woolworths’ self-proclaimed title as “The Fresh Food People”.

Coles insists suppliers will not be disadvantaged because lower prices will generate more sales.

“By offering customers low prices on fruit and vegetables there, will be more certainty for suppliers who don’t want their crop left in a field,” a spokesperson told News.com.au.