Coles slashes prices – again

Supermarket retailer Coles is slashing the price of Vegemite, Milo and Kellogg’s Corn Flakes, as it expands its “Down Down” campaign.

Wesfarmers Limited (ASX: WES) subsidiary Coles has cut the price of 600g jars of Kraft Vegemite by 99 cents to $7, a 1.25kg tin of Nestle Milo by $1.85 to $12 and a box of Kellogg’s Corn Flakes by $1.25 to $4. Those are the cheapest prices for at least two years.

Old El Paso taco products were also reduced by as much as 12%, and another 36 products were also reduced in price. Coles has how cut the prices on more than 1,400 items as part of its Down Down campaign.

Vegemite and Milo are pretty much staple items in most Australian households, with 90% of people saying a family should have Vegemite in the cupboard, while Milo is the second-ranked brand among customers.

Coles has told that the price cuts were shared with manufacturers, after previous cuts were underwritten almost exclusively by the supermarket retailer. Coles expects sales jumps of at least 10%, with merchandise director John Durkan saying, “I think the customers are going to love it.” Coles research has shown that three out of four shoppers purchase popular brands when they are discounted.

Competitor Woolworths Limited (ASX: WOW) is unlikely to take the new move lying down, suggesting shoppers at both major chains are likely to see deep discounts on popular branded products. Metcash Limited (ASX: MTS) backed IGA stores and ALDI may also be forced to cut prices.

Coles’ discount campaign will last for a minimum of six months.

Foolish takeaway

Shoppers are the likely winners, with staple products on sale, although Coles is also likely to see strong demand for the bargain products, boosting its sales. For investors, it’s a timely example that good companies rarely go on sale. After Coca-Cola Amatil’s (ASX: CCL) recent 9% fall, it may be a rare opportunity to pick up a bargain.

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