The Coles delusion
The AFR published commentary on Coles, pondering on its positioning to "take on Woolworths and Aldi". We think that this narrative doesn't recognise some of the fundamental characteristics of the supermarket segment in Australia. Coles cannot compete with Aldi, unless it opens a new line of business (they used to have it, called Bi-Lo), which operates on a very low-cost basis. As it is, Coles must recognise that Aldi will continue to expand until it fills in its niche in Australia. Fighting this tide amounts to mere delay tactics and lost gross profit in the meantime.