BUDGET-constrained consumers shifting from eating out to more home consumption and entertaining are one of the drivers of strong third quarter sales growth for the nation’s dominant supermarket retailers, Woolworths and Coles.

With higher interest rates, elevated fuel prices and global uncertainty since January, more domestic consumers are adopting defensive postures, and entertaining more at home rather than dining out.

Woolworths on Thursday reported third quarter (period ended 29 March) Australian food sales at $13.828 billion, up 5.9pc on the same time last year, with Food Retail segment sales up 7.3pc.

Fresh food category sales grew 8pc, including double-digit growth in fresh meat, as well as strong growth in the ‘Everyday Chilled’ category as customer demand for high-protein foods like yoghurts and red meat continues to increase.

Biggest competitor Coles on Friday recorded 5.7pc retail growth year-on-year (excluding tobacco) in its third quarter, reaching $9.781b.

In fact the current push for protein-heavy diets was put forward by analysts as another reason for the strong third quarter sales performance, as well as measures taken by both retailers to win back retail market share lost last year to big-box wholesale retailers like CostCo, and ALDI.

Coles’ supermarkets price inflation moderated to 0.8pc last quarter, reflecting deflation in fresh produce with abundant supply across a number of key fruit and vegetable categories. However this was partially offset by inflation in red meat, the company told shareholders on Friday.

“Consistent with prior periods, the full impact of the increased beef and lamb livestock cost of goods was partially absorbed as part of our investment in value for customers,” shareholders were told.

Coles Group CEO, Leah Weckert, said in recent weeks, the company had seen an increase in supplier cost price increase requests and higher costs within Coles’ own operations, particularly in fuel, freight and packaging.

“We are actively managing these and will mitigate impacts where possible, while balancing the needs of customers and suppliers,” she said.

Woolworths Group chief executive Amanda Bardwell said looking ahead, the conflict in the Middle East was creating greater uncertainty for supermarket customers and  suppliers, at a time when cost-of-living pressures are already acute.

“While the impact on Woolworths Group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year,” she warned.

“By maintaining a strong focus on productivity and cost discipline, I am confident we can navigate the current environment to continue to build a stronger, more resilient business while balancing the needs of all our stakeholders.”

Woolworths noted a rapid reduction in consumer confidence during the third quarter, and some operational disruptions.

Retail price freeze

Last week, Woolworths announced a three-month price freeze on 300 popular food and grocery items, effective 1 May.

The list includes everyday items like eggs, chicken items, both raw and cooked, pasta and nappies, but beef items are limited to only sausages and budget mince.

Group CEO Amanda Bardwell said the conflict in the Middle East had brought a new wave of uncertainty for consumers.

“We’re hearing that they’re worried about what it means for their household budget. While we don’t know how long these challenges will last, or what the full impact of higher costs will be on our customers’ favourite products, we know a little certainty can go a long way,” she said.

“That’s why, for the next three months, we’re freezing the shelf price on 300 staples that families rely on most. We’ll invest to absorb any extra costs that are agreed with suppliers on these products to make that happen.”

While chicken items are most common among the fresh proteins on the price freeze list, the two beef items include beef sausages 550g, pegged at $10.91/kg, and bulk pack budget mince 1.8kg at $11.94/kg. No lamb products appear at all, suggesting procurement cost and margin are factors.

“We know we need to strike the right balance for everyone who relies on Woolworths. We’re committed to doing the right thing for our customers, our team, transport partners and especially our Aussie farmers who are facing rising fuel, fertiliser and packaging costs,” Ms Bardwell said.

“We will continue to work closely, and fairly, with all our suppliers to navigate the months ahead. We want to support our suppliers where we can so they can operate sustainably as their costs rise, while we do our part to provide stability and value at the checkout for our shared customers.”