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Australians’ sweet tooth trumps pie love

Fancy a lolly instead of a meat pie? You’re not alone.

Australians’ snack habits are changing, with ABC news reporting a “19 per cent jump in demand for chocolates and lollies from 2010 despite the global financial crisis cutting impulse buying” while meat pie consumption has fallen over the same period. Data comes courtesy of BIS Shrapnel’s Foodservice unit.

The death of the corner shop 

Not only are snack habits changing, but consumers are purchasing more of their snacks at petrol stations with convenience stores inside, rather than at independent, free-standing convenience stores, which now make up just 12% of the market versus 20% of the market in 2007.

No doubt also contributing to the death of the corner shop is the continued rise of Australia’s supermarket duopoly, Woolworths (ASX: WOW) and Coles, owned by Wesfarmers (ASX: WES) as well as smaller players like Metcash (ASX: MTS), operator of IGA stores. All three chains also operate convenience stores, including Woolworths mini-stores in Caltex stations, Coles Express, and IGA Xpress.

For better or for worse, the long term trend in the Australian market mirrors that which has taken place in markets like the United States, where Walmart (NYSE: WMT) and major supermarket chains have largely driven out the mom and pop corner shops of yesteryear. Classify it as regrettable but inevitable.

The takeaway for investors

With its strong brand (estimated to be worth nearly US $5 billion, according to ad agency Interbrand), incredible market share, and a highly effective distribution network, Woolworths offers a great deal to Aussie investors. It’s a stellar business with great, homegrown management to boot.

Yet with shares trading for roughly 19 times earnings, or an EV to EBITDA ratio of about 10, Woolworth shares don’t necessarily offer compelling value currently.

In fact, many investors are now looking to smaller ASX companies for growth and the prospect of quickly increasing profits. You can get two such ideas FREE now in our brand-new investment report, 2 Small Cap Superstars. Just click now, it’s free!

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

 

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