“Hard to compete”: Is Coles’ move into smashed avo on toast bad news for cafes?


You may have heard the news. Coles has decided to start selling avocado on toast as part of a new convenience play that will see many of its supermarkets start inching in on cafe classics.

Granola, feta, bacon, smoked salmon — you name it. There’s a smorgasbord of nods to Australian brunch culture in the 75 new products the supermarket will be adding to its menu.

At $4.50 a pop, the freshly prepared breakfast items are a natural evolution for the grocery giant, as it and major competitor Woolworths increasingly leverage demand for on-the-go convenience, particularly in metro areas.

For independent cafes and convenience stores, however, the development is decidedly more ominous.

After all, in recent years, independent butchers and fruit and veg retailers have been reeling in the face of aggressive competition from the big supermarkets.

Heavy investment in fresh food at Coles, Woolworths and Aldi has coincided with a sizable shift in market share at the expense of independents, according to Roy Morgan data.

The major supermarkets have seen an opportunity in fresh food in recent years as consumer interests have trended away from cold grocery aisles, but convenience has also been identified as a roaring opportunity.

Whether it’s barista-made coffee, fresh sushi or in-store baked bread, Coles and Woolworths are cashing in on 21st-century Australian life.

“Our customers are increasingly seeking to reclaim their time, but with minimum compromise on freshness, quality and flavour,” a Coles spokesperson said of the smashed avo plans on Tuesday.

“Coles research has found that 33 per cent of customers don’t know at 5pm what they’ll be having for dinner that night, and around 50 per cent say they don’t have time to cook from scratch — so we are developing more fresh, innovative products including food-to-go and meal solutions.

Smashed avo on toast has become somewhat of a catching term for a surge in brunch culture among millennials, who are fans of occasion-based casual dining.

It’s been a blessing for independent cafes, and while Coles’ latest move is unlikely to empty out a busy business on a Sunday anytime soon, they’re becoming a compelling choice for commuters on Monday or Tuesday morning.

William Xia, owner of Sourdough Cafe in Sydney, tells SmartCompany Coles’ pricing is “very competitive”.

“It will be tough for many cafes … you’ll see a lot of small businesses go away,” Xia says of the growing supermarket incursion into casual dining.

Xia sells smashed avo on toast for $4.50 but says his pricing is at the lower end of the industry, where volume is required to make up for razor thin margins.

However, he has his doubts about the quality of what the big supermarkets have to offer.

“Quality is where we can win,” he says.

“Woolworths and Coles are doing coffee as well, but I’ve tried it and it’s not that good.”

Queensland University of Technology associate professor and retail expert Gary Mortimer likens the situation to what’s happened over in the UK, where the likes of Tesco and Sainsbury’s have come to increasingly dominate the convenience space.

“We’re seeing our supermarkets evolving and it’s happening in different ways,” Mortimer tells SmartCompany.

“It’s very hard to compete against a supermarket,” he says.

“A move into that grab-and-go, ready-to-eat category will have an impact not just on cafes but also other fast-service restaurants.”

Coles will sell nine new convenience products, including smashed avocado on toast, from this week, but is also allocating more space to fresh convenience products and will expand further by the end of 2019.

But that’s only part of the broader strategy, with an eye on smaller format supermarkets and localised product ranges also an area of focus for both Coles and Woolworths.

Independent supermarkets are also jumping on the train. Mount Evelyn IGA owner Tony Ingpen says supermarkets recognise stores need to match how their surrounding catchments live.

“If you are by a busy suburban train station [or] gym customers want food prepared, heated or microwaved, or already heated from us,” he tells SmartCompany.

Retail expert Pippa Kulmar says independent cafes still have an edge, particularly on service, quality and experience, but concedes the big supermarkets will likely have an advantage on price and speed.

“If quality is equal and it’s cheaper I think the only thing that would stop people is their relationship with a cafe,” she tells SmartCompany.

“If you’re super savvy you’ll just buy an avocado and some bread.

“But we normally pick the easiest option and if they’re making it more convenient and quicker than a cafe, [Coles] will potentially profit.”

Coles selling smashed avocado on toast isn’t the only interesting result of Australia’s convenience kick either.

Cinema giant Hoyts has been delivering popcorn and choc tops through UberEats since last December, in case consumers want to have a traditional movie experience at home.

This story was updated at 1:01PM AEST May 14.

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