Australian supermarkets aim to lure the health-conscious(69469)

COLES and Woolworths set out to lure health-conscious and time-poor shoppers

It is a strategy that has seen them expand the amount of store space allocated to meat, dairy, bakery, fruit and vegetables by two-thirds.

Woolworths this month unveiled its new supermarket format, one that devotes about 33 per cent of floor space to fresh categories, up from about 20 per cent six years ago.

Coles, which is undergoing a wholesale revamp after its takeover by West Australian conglomerate Wesfarmers in 2007, is doing likewise.

Macquarie Bank analyst Greg Dring estimates fresh food accounts for 30 per cent of floor space in new and refurbished Coles supermarkets, up from about 18 per cent before the takeover.

James Stewart, partner with corporate advisers Ferrier Hodgson, says Australian supermarkets are following the lead of British supermarket giant Tesco and US retailer Wholefoods.

"It's driven by the increase in demand for fresh, quality products but also a change in lifestyle - a lot of the fresh food offering overseas is what might be termed convenience fresh food, such as ready-to-eat salads, pastas and soups," he says.

Greg Foran, head of Woolworths' supermarket division, says time-poor shoppers want to do all their shopping at once, rather than visiting a number of specialty stores in addition to buying groceries at the supermarket.

"Supermarkets have really responded to consumer demand for convenient one-stop shopping and this has meant expanding beyond mainly dry groceries and into categories such as produce, deli, bakery, meat and health and beauty," he says.

Store layouts have also been rearranged to bring the meat, bakery, produce and dairy sections closer together, creating a food-market atmosphere as well as allowing shoppers to quickly restock on dinner ingredients in the middle of the week.

More space has also been given to express-lane checkouts, reflecting a trend to more frequent shopping - on average about 2.4 times a week, according to Woolies - rather than one big weekly shop.

Meanwhile, the grocery section is being increasingly taken over by private-label or home-brand products that now account for 23 per cent of all grocery sales, according to figures from market research company Nielsen, up from less than 10 per cent in 2004.

Part of the growth in fresh food sales can be attributed to the foodie factor: the growing fashion for shoppers to throw dinner parties at home to show off their culinary prowess.

Coles has sought to capitalise on the trend through its sponsorship of the hugely popular MasterChef and My Kitchen Rules cooking programs, while Woolies runs regular what's-fresh television ads highlighting seasonal produce.

Silvestro Morabito, chief of wholesaler Metcash's IGA>D distribution arm, says the independently-owned IGA supermarkets that his company supplies are also getting in on the act by dedicating more space to food products suitable for entertaining at home.

"There's been a major shift into greater fresh food ranges and a significant increase in the perishable and frozen food range as the convenience and lifestyle entertainment products such as frozen meals, dips and specialty cheeses grow," he says.

Of course it's not all done for the consumer's benefit: Macquarie puts Coles, Woolies and Metcash's combined share of the packaged grocery sector at 62 per cent and packaged liquor at 71 per cent, highlighting the potential for growth in the fresh food market, where their combined stake is just 49 per cent.

Dring says fruit and vegetables are the biggest prize in the fresh-food sector, with the Australian market worth $8.7bn a year.

But greengrocers, butchers and fishmongers can rest assured their livelihood isn't going to be stolen overnight, with Macquarie research showing more than 60 per cent of shoppers still believe they can buy better quality food at specialty stores.

Shopping with her three-year-old daughter Siena at Woolworths in the Brisbane suburb of Ashgrove, Carlijn de Rijke says she only buys about a quarter of her fresh food at the supermarket, with the rest coming from local food markets.

"I get my coffee and all the rest at Woolies, but I like to support local farmers, and they're fresher," she says. "Woolworths is still very good quality or I wouldn't buy anything from there at all, but if you're buying from somebody who picks their own strawberries grown an hour out of Brisbane, you can't get any better."

Coles reports that its fruit and vegetable sales are up by more than 10 per cent over the past financial year, although Macquarie says the increase could have been as much as 20 per cent.

John Durkan, Coles merchandise director, says the expansion in fresh food ranges reflects the increased ability of retailers to quickly deliver a broad range of produce.

"We would sell eight to 10 varieties of apple and six to eight varieties of tomato, as well as things we wouldn't have sold in days gone by, like durian fruit," Durkan says.

"There's definitely a trend to healthier foods as people have become more aware of obesity, but there's also a much-improved ability of supermarkets to provide fresh food, increased with improved logistics and infrastructure. Around the world there are better food growers who are able to supply.

"About 96 per cent of all our produce comes from Australia, and we're able to truck stuff several thousand kilometres to our stores in a relatively short time to keep it fresh; 20 years ago there wasn't the road infrastructure to do that."

Technological improvements have also played a part, he says, with more compact bakery equipment allowing fresh bread to be produced within stores to satisfy customer demand.

"They want fresh bread every day, they won't accept yesterday's," he says.

This fastidious attitude has also underscored demand for organic produce and labels that specify food origins, he says.

When Coles began labelling its beef as "made in Queensland" in July, the customer response was immediately positive, he says.

"Organic is still relatively small, but there's definitely a move to provenance labelling.

"Customers want to know where their meat came from and how it's been treated along the supply chain."

One thing that hasn't changed, however, is the location of the milk: still at the back of the store, so customers are forced to walk past aisles of other goodies to get their full-cream, skim or lite.

At least that's one theory.

IGA>D's Morabito says the placement is designed to make it easier to restock the fridges regularly: the task is facilitated by making them more easily accessible from the storage space at the rear of the shop.

Durkan denies that retailers try to manipulate customers into buying unneeded items, describing the oft-cited complaint of confectionery being placed in the same aisle as household necessities as an "urban myth" that would risk annoying parents if it were true. "It's the worst thing you could do for a consumer, you'll lose the customer straight away," he says.

Australian supermarkets aim to lure the health-conscious

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