Woolies goes local

Shoppers will likely see more locally produced and gourmet items, if one of our biggest supermarket chains gets its way.

Supermarket giant Woolworths Limited (ASX: WOW) is looking for small-to-medium sized food suppliers to source local produce, as it seeks to tap into the popularity of buying local.

Related: New battlefront in supermarket wars

According to a report in The Australian, Woolworths is willing to work with suppliers that could supply as few as three stores in the local region.

“People are more and more focused on their own area – WA grown, Queensland or Tassie rather than just Australian”, said Tjeerd Jegen, managing director of Woolworths’ Australian supermarkets division.

He added that people are also more interested in gourmet items, because of the popularity of all the cooking shows, so people want to buy more locally. Woolworths has appointed a buying team in each state to find unique local products to add to the range, with no minimum on how many stores could be supplied.

For the first time, suppliers will also be able to supply product directly to the stores in which the products will be sold, bypassing Woolworths’ centralised distribution system.

The move comes as Coles escalates the price war with Woolies, by rolling out $1 milk and cheap bread to its Coles Express convenience stores, and cutting the prices of more than 100 grocery items. Coles – owned by Wesfarmers Limited (ASX: WES), is trying to woo shoppers back to its private label items, as well as take market share from both Woolies and Metcash Limited (ASX: MTS) supplied IGA stores.

Foolish takeaway

Mr Jegen said that pricing for the locally sourced produce would be in-line with the supplier’s other distribution channels, and there won’t be any price negotiation for Woolies to get more profit out of these lines. Sounds like good news for local producers and consumers to me.

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Motley Fool writer/analyst Mike King   owns shares in Woolworths.  The Motley Fool ’s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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