Have low farmgate prices for beef and lamb helped the bottom line at Coles?

Coles found that food price inflation had moderated in the most recent half, driven by a decrease in fresh produce costs and a decline in meat prices due to falling livestock prices.

In announcing a 1.6% increase in earnings before interest and tax (EBIT) to $1.007 billion, the supermarket chain said overall price inflation was 3%, down form 3.01% last half.

Drivers of food inflation driven primarily by dairy products on higher farm gate milk prices, while eggs were also more expensive. It also saw inflation in the bakery division where higher wheat prices and labour costs were generating upward price requests from suppliers.

Supermarkets sales revenue of $19.8 billion increased by 4.9% with sales revenue growth of 5.1%.

The supermarket delivered an EBIT margin of 5.3% on total sales.

The company called out cost of living pressure on many Australian households, and said that its “Great Value, Hands Down” campaign resulted in price drops on more than 500 products.

"We understand the cost of living pressures that many of our customers face, such as higher rent, mortgage, energy, and other household bills. That’s why we are working hard to deliver value to our customers every day,” Coles Chief Executive Officer Leah Weckert said.

“We know that price matters to our customers, especially during the festive season. With this in mind, we worked with our suppliers to offer value in December, with quality Christmas products at a great price well received by our customers.”

Shoppers are moving into cheaper brands, cheaper cuts of meat, buying more bulk and buying more frozen,” Ms Weckert told reporters. They are buying less alcohol, too.
“I think what has become more apparent to me in the last six months has really been (that) customers are willing to travel more to access value."

The company also announced it had expanded the use of methane reducing feed supplement Bovaer® with three Coles Finest Certified Carbon Neutral Beef range suppliers now including it into their feeding programs.