Supermarket giants Coles (ASX:COL) and Woolworths (ASX:WOW) have benefited from the coronavirus pandemic in 2020. Here’s why.
The post Here’s how much Coles (ASX:COL) and Woolworths (ASX:WOW) are benefiting from COVID-19 appeared first on Motley Fool Australia. –
It’s no secret that the ASX shares to actually benefit from the coronavirus pandemic of 2020 include the supermarket giants. I’m sure we all remember, in the first months of COVID-19, the stripped-bare shelves of our local Coles and Woolies. It was a scary and unprecedented thing to see of course, like something from the war years of days gone by.
2020: The year of home cooking
Now, a report from BusinessInsider shows us just how much these companies benefited – and are still benefiting. According to the report, which was commissioned by Coles and Woolworths’ arch-rival Aldi, 75.4% of Australians are spending more on groceries in 2020.
Perhaps surprisingly, Tasmania led the charge with an 81% increase. Tassie was followed by Western Australia and the Northern Territory at 80% apiece.
The lowest 2 states/territories were South Australia with 66% and the Australian Capital Territory with 65%.
Contrary to some popular belief, however, this spike in grocery consumption was not just driven by ‘panic buying’. The report quotes Queensland University of Technology Business School Professor Gary Mortimer, a researcher in retail marketing and consumer behaviour:
Certainly from March onwards, some of that lift was underpinned by panic buying during times of uncertainty… We saw shoppers flock to supermarkets and stock up and stockpile.
However, he added:
We’ve seen consumers what we refer to as ‘cocooning’ or staying home [and] avoiding the crowds… we still see restaurants and bistros and pubs restricted to their numbers… So even if you want to go out to your favourite restaurant or bistro, you may find it difficult to get in and hence, we’re still cooking at home.
What does this mean for Coles and Woolworths shares?
What conclusions can we draw form this report? Well, it looks as though grocers like Coles and Woolworths are sitting in a semi-permanent tailwind. And this tailwind looks likely to last until at least the coronavirus is consigned to history.
And who knows, changing trends like these have more chance of becoming permanent the longer they are forced upon us. Perhaps Australians will be permanently cooking at home more often from now on. That spending is being directly transferred from restaurants and pubs to supermarkets. And that can only be a good thing for Coles and Woolworths (and their shareholders).
However, a final caveat: the research also found that 72.5% of Aussies are looking to cut down on how much they spend on groceries so that they can stick to their budget. I guess its not all sunshine and rainbows for the ‘big 2’.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.