Woolies surprising tactic to topple Coles
THERE'S no denying it - Australians love their food.
In the past five years, products such as matcha lattes, hemp seeds, cacao and quinoa have crept into our cupboards, securing their worth as everyday staples.
Customers are trying to keep their waistlines in check and, in doing so, are splashing out an additional $87 per week just so they can eat more healthily.
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According to research from Nielsen, about 71 per cent of consumers in the Asia Pacific region are changing their diets to lose weight. Of that number, 25 to 40 per cent are willing to pay a premium for foods that are free from artificial colours, flavours and gluten, low in fat and salt, and higher in protein and fibre.
Choosi's new Modern Food Trends report, released in September, showed that households spend on average about $377 per month on groceries, about $89 eating out and $21 ordering home delivery.
But with about three in four Australians (77 per cent) believing they need to spend extra on more expensive food choices in order to maintain a healthier diet, it's no wonder Coles and Woolworths have turned their attention to Kombucha and kale.
This week, Woolworths announced the expansion of its Macro 'Organic' and 'wholefood' range, pumping up its stock to 350 products.
The retail giant bought the organic food chain in 2009, in a bid to fast-track its expansion into the high-margin gourmet grocery sector.
At the time, the deal resulted in the Macro Organic brand rolling out across Thomas Dux stores and Woolworths supermarket networks with a range of about 100 products.
But while the gourmet up-market alternative (Thomas Dux) died a slow death, with all stores closing down by 2017 and rebranded as Woolworths Metro, the Macro products within the supermarket continued to soar.
According to Fairfax, Woolworths acquired Macro Wholefoods for about $16 million, but by 2015 the sales were worth about $600 million a year.
Woolworths boss Claire Peters said the supermarket was increasingly discounting its health products, including the Macro brand, which she said was introduced "very much on the back" of customers asking the supermarket to help them make affordable health choices.
"Being able to afford a range of products at prices with an experience when they enter our stores is absolutely the focus for Woolworths," she said. "Our customers told us a year ago that we weren't good enough at some of that, so now this year and next year we want to excel."
Kate Walker, brand manager for Macro in Woolworths, told news.com.au the health food sector had become a competitive market between supermarkets - and a platform for bringing new customers through the door.
"This is 100 per cent a competitive sector," she explained. "We are seeing other supermarkets aggressively bringing out more [wholefood-style] products as well.
"When we bought Macro nearly 10 years ago and put it on the shelves in Woolies … it was a bit unloved because the need wasn't there like it is now.
"The last few years health has become more and more important, and what we have found is customers want to be healthy but they don't know how to be healthy or they find it too hard or too expensive or it doesn't taste good.
"There has been a barrier [between health foods and customers], so what we had to do is work out how to make Macro more accessible - from having the right range, to having lunch box friendly snacks and foods high in protein or fibre."
While Coles and Woolworths control 80 per cent of the grocery market, the gear-change towards health food was spurred by customers shopping elsewhere to find wholefoods and organic products at gourmet grocers such as About Life, Harris Farm and Whole Foods.
Customer's behaviour towards the category has pushed Coles and Woolworths to create destinations within their store. From serving Macro brand lattes at selected supermarket cafes, to increasing shelf space and expanding the number of products in their ranges.
"The Macro range has grown 5 per cent year on year," Mrs Walker said, adding that a further 23 products would be released in October - bringing the Macro range up to 373 items.
"This change has been about broadening the [Macro] range so customers can do everything in the one shop and they don't have to shop around.
"Some customers had to come to Woolies or any of our competitors, then they would have to go to the health food shop but they don't need to do that now.
"This market is getting more competitive, but we are trying to stay at the forefront of that [by] going to the US and coming back with loads of ideas."
According to Nielsen Homescan, packaged health foods grew by 8.2 per cent in supermarkets to $665 million in 2015 alone - a figure that's only continued to grow.
Fusing Nielsen data with nutritional information from The George Institute, shows the positive affect the Health Star Rating is having on brands in particular categories. In the spreads category, sales for products with a 5 Health Star Rating grew by 42 per cent in the past 12 months and increased by more than 300 per cent in the past four years.
Retailers' private label health food brands grew by 18.1 per cent and now account for 15.5 per cent of sales in the category. About 52 per cent of health food shoppers purchased a retailer brand in the past year.
In a statement provided to news.com.au, Coles Health Foods category manager Samuel Griffin said its range (Coles Organic, Coles Simply Less and Coles Simply Gluten Free) had experienced a significant increase in demand for products in the last 12 months.
"Health foods is one of the fastest growing areas across the supermarket aisles as there is strong customer demand for healthier meal options, healthier snacks and organic products," he said.
"That's why we introduced more than 250 new or improved health food products earlier this year to help our customers have access to a diverse and compelling range that doesn't break the bank.
"We are a market leader in health foods as we aim to be a destination for the latest trends in the area. This includes offering our customers newest superfoods like hemp seeds, delicious seaweed snacks and Coles Brown Rice Pasta with Chia."
Nielsen said more than two thirds of Australian households bought health food products last year, underlying the opportunity for suppliers and retailers alike.
Dr Louise Grimmer, a lecturer in marketing and retail researcher from the University of Tasmania, said consumers often engaged in behaviour that was termed in psychology as "moral self-licensing" to justify or "trade off" unhealthy eating habits.
"Buying healthy products and organic products, makes us feel good about ourselves," Dr Grimmer said. "There is a bit of 'novelty' around this trend at the moment.
"Because the whole area of health and wellbeing is currently very 'fashionable', consumers are very willing to spend more money on products that are marketed as health foods or as organic.
"Research shows that many customers will often purchase products that are labelled 'organic' and don't seek further information about the claims made by manufacturers regarding the organic. Given that organic product manufacturers are able to charge much more for organic products, there needs to be much more work done by government and the food industry to be more transparent about what actually makes a product 'organic'.
"I think it is like all food trends - it is cyclical. There was a similar trends in the 1980s and then it faded and is not back in full swing, fuelled by the huge popularity of health and fitness influencers on social media."
Dr Grimmer agreed with Mrs Walker, saying consumers are seeing supermarkets 'ramp up' sections such as bakery, meat and fish, deli and now health food, to discourage their customers from buying these products from specialist retailers.
"Many of these products are private label or store-owned products. These types of products offer increased margins, reduced distribution and marketing costs for retailers and they can increase shopper loyalty for particular products. The Macro range from Woolworths is a prime example."