The Australian Food and Grocery Code was passed by government yesterday, and its backers were given a fillip straight away when Aldi announced it would join Woolworths in subscribing.
Launched in March, the voluntary code sets out to protect suppliers and create an effective dispute resolution process between manufacturers and retailers.
Last week, Woolworths announced its acceptance of the code. Aldi says it has “always supported the concept of a strong and sustainable Australian grocery industry for retailers and suppliers”.
The pressure is now on Coles and Metcash to subscribe to the code after Bruce Billson, the small business minister, said: “I believe it's a vastly improved code with more effective provisions and greater certainty in these important relationships”.
Metcash has said it will trial the code for one year, while Coles said it will consider its options once the code came into force.
Aldi was last week was crowned Australia’s cheapest supermarket as the fierce rivalry among all segments of FMCG retail continues to rage.
Demand for private label is largely behind the surge in Aldi’s fortunes, especially when a grocery basket at Aldi can be up to half the cost of the equivalent at Coles and Woolworths, consumer groups Choice found recently.
“Private labels such as Woolworths’ Select and Coles brand account for 21 per cent of packaged grocery sales in Australia. This will keep going north given cost of living concerns,” Choice said.
“Reputation has improved, there are more gourmet products, and many people believe the quality is as good as name brands. The downside is this can impact choice if smaller or more niche brands are squeezed.”
But it isn’t all plain sailing for Aldi with rumours growing in noise that Aldi’s fellow German budget supermarket chain Lidl is preparing to open its first store in Australia.
Lidl has been gaining ground on its competitors recently and has raced to become the world’s fourth-biggest retailer with US$128bn in annual sales.
Last week, Lidl was took Aldi’s title of Grocer of the Year for the first time in its two-decade history at the Grocer’s Gold Awards in London.
TV show A Current Affair tipped the first Lidl location to be in Melbourne, while The Australian reported that the chain had recently contacted logistics providers to help create a network of distribution centres and transport links to move merchandise around Australia.
“I think it’s going to have a big impact on price across the market,” Choice’s Tom Godfrey told The New Daily.
“They are going to be very aggressive when it comes to price, and will push quality at an affordable cost.”