Coles or Woolworths: which ASX grocery giant is the best buy?

Should you invest in Coles Group Ltd (ASX: COL) or Woolworths Group Ltd (ASX: WOW) on the ASX?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the questions you might ask yourself when putting together your portfolio is whether you should invest in Coles Group Ltd (ASX: COL) or Woolworths Group Ltd (ASX: WOW) shares.

I'm a pretty low-risk observer with my eyes firmly on the long-term—I'm a happy camper if my choices grow between 6 and 12% each year in the current climate. With that in mind, I might suggest having a bet each way.

Here's a closer look at how shares in both grocery giants are performing, and how they're both using creative, in-store promotions to drive growth. 

Coles

It's worth noting that we've got less than a year's worth of data on Coles in its new configuration, post-spinning off from Wesfarmers Ltd (ASX: WES). The new shares debuted on the ASX at $12.49 in November last year, and yesterday were trading for around $13.21. It's not exactly earth-shattering growth, but the Coles share price is generally heading in the right direction. I'm optimistic that this will continue to chug upwards at a leisurely pace, with a couple of highlights in mind.

I'd be very surprised if we didn't get another incarnation this year of the wildly successful 'Little Shop' promotion in Coles supermarkets, which was a collectable campaign that featured 30 iconic household brands shrunk down into a mini collectable for customers to collect and swap. The 'Fresh Stikeez' promotion—a campaign involving 24 collectable plastic fruit and vegetable figurines—was equally successful.

There have been no announcements on either strategy, but I have great faith in whatever their promotions team come up with after batting those two out of the park—even if the next big thing is just going back to basics and finding the best ways to sell the nation's groceries, without the hoopla.

Woolworths

I'm more confident that Woolworths will meet my personal investment objectives with the current one-year return at +9.85%. There's also a dividend yield of 2.94%, fully franked.

Woolworths also runs a string of promotions throughout the year including 'Earn and Learn', which sees shoppers get a sticker for every $10 spent in store. These stickers are then handed over to local schools to be exchanged for school equipment, both sporting and otherwise.

While the aim is to drive grocery sales for Woolworths, I like the community aspect of this one. School budgets are tight, so you'll often find them reaching out to their local communities and directing them to the nearest Woolies. A new stash of sporting equipment that gets the kids outside can only be a positive and makes this parent and potential investor happy on both counts.

Foolish takeaway

Over recent times, we've watched Coles and Woolies in a perpetual struggle to dominate the other, which has ebbed and flowed in both directions. So before you invest in shares in either (or both), read widely—there's more to the grocery game than just marketing and promotions.

Like my Foolish colleague Tristan Harrison said last week "I think it's important to always keep learning with investing. There's no magical approach and over time you will hopefully find what works best for you."

In the end, I'd like to see both stocks in my portfolio over the long term. Like two great athletes born of the same generation, their competitive natures drive each other to improve, to find an edge and discover the next big thing.

Motley Fool contributor JWoodward has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Silhouettes of nine people climbing a steep mountain to the top at sunset, and helping each other along the way.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors enjoyed an exceptional rebound this Tuesday.

Read more »

Share Market News

Why Calix, Collins Foods, Myer, and Patriot Battery Metals shares are charging higher

The S&P/ASX 200 Index (ASX: XJO) is back on form and charging higher on Tuesday. In afternoon trade, the benchmark index…

Read more »

Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.
Opinions

Are Fortescue shares a contrarian buy after falling 20% in a month?

Are investors putting too much weight on the jitters of the market or is the Fortescue fall fair?

Read more »

A young woman wearing a blue and white striped t-shirt blows air from her cheeks and looks up and to the side in a sign of disappointment after the ASX shares she owns went down today
Share Fallers

Why DroneShield, Paladin Energy, Red 5, and Synlait shares are falling

These shares are having a tough time on Tuesday. But why?

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
Bank Shares

Nine-year highs: NAB share price glides to highest level since 2015!

The bank has notched up another inflection point today.

Read more »

ANZ ASX 200 banks capital return Group of investors madly grabbing for cash on city street.
Healthcare Shares

ResMed shares rebounding as investors rush to buy the dip

ResMed is rising as ASX investors buy the dip following yesterday's 13% share price dive.

Read more »

A woman screams and holds her hands up in frustration.
Share Market News

Why is short interest in Sayona Mining shares growing?

Why won't short sellers leave this lithium miner alone?

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank representing bank dividends and in particular the CBA dividend
Bank Shares

CBA shares hit another new high! Too late to buy?

At today's new record price, CBA's market capitalisation is just $1 billion short of the ASX 200's most valuable stock,…

Read more »