Supermarket price war looms with beef and lamb leading the way

Coles has just dropped the price on more than 300 products ranging from fresh meat to cheese in stores nationwide.

It comes on top of price drops of 30 per cent on more than two dozen lamb products last November, which was met by Woolworths as part of its 400-plus item campaign.

At $16 a kilogram, it will be the cheapest Coles lamb loin chops have been in four years and lamb cutlets have also had another $5/kg wiped off the price tag.

In the beef section, Coles have taken more than 20pc off the price of popular cuts like rump, stock fillet and porterhouse steak and sizzle steak is down to just $11 for 400 grams.

Avocados, rockmelons and watermelon are 40pc cheaper and cauliflower is now 20pc cheaper in Coles than it was this time last year.

It's a two-week deal leading into Australia Day.

Woolworths have met that by extending its price drop offer on lamb, which includes 20pc off all standard lamb cuts, until the end of this month. It is now selling lamb leg roasts at $8/kg, forequarter chops at $12.50/kg and lamb leg steaks 540g packs for $11.

A Woolworths spokesperson made the point its campaign, which includes almost 30pc off its 600g sausage range to $5 a pack - the lowest price since 2019 - runs out until February 27.

Marketing analysts also say it's likely consumers will see an ongoing tit-for-tat between the two major supermarkets, especially on fresh food, given the attention on what they are charging at the checkout in the wake of the federal government's statutory review of the Food and Grocery Code of Conduct.

Among other things, that review is looking at whether the code should be mandatory.

The latest Consumer Price Index data released from the Australian Bureau of Statistics shows food price inflation across the board is moderating.

For red meat, price inflation has now reduced to 1pc.

Rabobank's senior food retail analyst Michael Harvey said the November 2023 data showed prices for food and non-alcoholic beverages had risen 4.6pc annually but was down on the 5.3pc rate of annual inflation posted the previous month and well below the peak of annual food price inflation of 9.6pc last year.

Mr Harvey said red meat and fresh produce saw annual inflation of less than 1pc, which would be welcome news for Australian consumers as they were important categories in household budgets.

He said margins in the food supply chain were improving downstream for food companies on the back of weaker agricultural commodity prices and easing food processing and distribution costs.

"With this, we are seeing a sharpened focus from food and beverage companies to tailor products to a value-conscious consumer. This will be a key theme through 2024 as cost-of-living pressures continue to influence purchasing behaviour," he said.

The discrepancy between high supermarket prices and bottoming-out livestock prices at saleyards was a major bone of contention in the beef and sheep meat industries throughout last year.

The federal government has vowed to "look at every option" to ensure supermarkets pass on lower meat, fruit and vegetable prices to their customers; and its code of conduct review is the first step.

This week, former Labor minister and Hawke government economic adviser Craig Emerson was appointed to lead the review.

Agriculture Minister Murray Watt, however, has been very forward in saying supermarkets don't have to wait for an outcome to the review to "do the right thing."

Nationals leader David Littleproud has been calling for the Australian Consumer and Competition Commission to launch its own inquiry into supermarket pricing, saying it would have more teeth.

Both supermarkets have pointed to supply partnerships with farmers as dictating their beef and lamb prices, rather than what was happening at the saleyard.

Woolworths said those supply agreements allowed for "fair livestock prices that reflect the high quality of the lamb, welfare standards and market dynamics" and only a small portion of its lamb comes from saleyards.

Coles suppliers for more than 25 years, Victorian beef and lamb producers Brian and Chris Kyle say the longstanding partnership has been one of consistency that has allowed their family-owned business to continue to evolve.

"Supplying to Coles for the better part of two decades has been an invaluable part of our story and the demand for quality meat is as strong as I can remember, with lamb in particular surging in popularity over the last few years," they said.