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Wesfarmers and Woolworths reveal their latest strategic moves

The two giants of Australian supermarket retailing made news last week when information around their latest strategic moves came to light.

First, on Wednesday Woolworths (ASX: WOW) got ‘one up’ on Coles by announcing that it would invest a further $3 million to source all deciduous canned fruit from Australia. The announcement relates to ‘own brand’ (otherwise known as home brand) canned fruit products and is a very pleasing development for around 118 fruit growers in the Goulburn Valley.

According to Woolworths’ media release, the deal reached with SPC Ardmona, owned by Coca-Cola Amatil (ASX: CCL), to move to 100% local sourcing of apples, pears, peaches and apricots could save more than 50,000 productive fruit trees that otherwise may have been destroyed. The latest deal expands on a previous $7 million commitment to source 13 lines of ‘Select” brand canned fruit from SPC Ardmona.

With Woolworths the first out of the blocks to be able to claim 100% Australian canned fruit, Coles supermarkets, owned by Wesfarmers (ASX: WES), may feel pressured into matching the 100% locally-sourced canned fruit offering too. However newspaper reports last week suggest that Coles is on a different strategic path to win over customers.

Reports in Fairfax newspapers, including The Land, revealed that Coles is believed to be “well down the track in obtaining an Authorised Deposit-taking Institution license from the Australian Prudential Regulation Authority, which will allow it to take deposits under its own name rather than in partnership with a bank.”

Foolish takeaway

Both Coles and Woolworths have already made headways into the general insurance and credit card markets. Given the tendency for both retailers to match each other on most offerings, a move into banking would dramatically expand their financial services offering.

The global financial crisis led to a number of competitors in the retail banking sector retreating and once again leaving Australian consumers beholder to the four major banks. Given the enormous profits generated within the banking sector there is obviously potential for competitors to capture a share of the banking profit pie. Shareholders in Wesfarmers will no doubt be hoping management can succeed in doing just that.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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