Coles falling behind Woolworths
Sue Mitchel of AFR reflected on comments from Coles’ suppliers that the business lost its way and is falling behind Woolworths. This doesn’t surprise us. Over the last few years, we pointed out that Coles’ strategy of making it more like Aldi (generics everywhere) had to backfire. You can’t be like Aldi if your cost structure is nearly twice as high and the quality of your generics is not top notch. Once Coles get close to Aldi’s store model, they will have to lose as their net returns will sink.