How Aldi is planning to disrupt Woolworths and Coles

The supermarket wars are heating up as Aldi has put into action changes with its strategy to combat recent price reductions implemented by Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

While Aldi has grown its national store count to more than 600 as of last year, the business only has 10.7% market share, according to reporting by the Australian Financial Review.

The German supermarket business recently started a delivery partnership with Doordash, opening up a new growth avenue for Aldi Australia, with this being its first online offering for shoppers to do their grocery shopping.

But, the business has more plans to tackle the major players of Coles and Woolworths.

Price cuts and range reductions

According to reporting by the Australian Financial Review, Aldi is reducing the number of branded goods that it sells in stores as well as cutting the price on hundreds of products as it looks to increase competition in the sector.

Woolworths and Coles have been cutting shelf prices following the boom in inflation sending up food prices.

Aldi is cutting the price on 300 products. The AFR quoted Aldi Australia boss Anna McGrath, who said:

We just reduced [prices of] another 300 products. We want to continue to drive those savings.

Over 90 per cent of our everyday range is our Aldi exclusive brands. That has not changed. We are the pioneers of low-cost grocery. We definitely want to focus on being an exclusive brand retailer.

The best value is when we offer the lowest prices. It is what we are good at…we can do that most successfully at our exclusive brands.

McGrath claimed that Aldi prices are 16.8% cheaper than similar items at Coles and Woolworths. Aldi is reportedly able to achieve higher profit margins on its own-brand items compared to items from other brands.

What positives can Coles and Woolworths take?

One of the advantages that the major Australian supermarkets can provide shoppers is the convenience of a larger store network and a much broader range of products. There are reportedly only 1,800 items at Aldi compared to approximately 25,000 at a typical Coles or Woolworths supermarket.

The AFR reported that one analyst – Craig Woolford from MST Marquee – said that Aldi could lose some shoppers it has gained from Woolworths and Coles in recent times if these plans lead to noticeably lower choice for consumers.

He said:

Aldi has a great reputation but if shoppers cannot get a handful of key brands they love, then they might not shop at Aldi.

Plus, e-commerce growth continues strongly at Coles and Woolworths, which is a key advantage for them because of the additional items consumers have access to. In the first quarter of FY26, Coles supermarkets grew e-commerce sales by 27.9% to $1.3 billion and Woolworths Australian supermarket e-commerce sales grew by 12.9% to $2.2 billion.

While Aldi is looking to turn up the heat, there may be enough room for all three to deliver growth.

The post How Aldi is planning to disrupt Woolworths and Coles appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Woolworths Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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