Coles shares flat as Choice report says competitor Aldi cheapest

Choice was commissioned by the Government for the report.

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Coles Group Ltd (ASX: COL) shares are in focus after a report from consumer advocacy group Choice was released overnight.

Whilst not market sensitive in any way, the report analysed grocery prices at several supermarkets and supermarket chains, including competitors Woolworths Group (ASX: WOW) and Aldi Stores.

Choice was commissioned to do so by the Australian Government, amid rising inflation and cost of living pressures.

Coles shares are currently trading at $17.25 as I write, down less than 1%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is slightly in the red.

Choice goes shopping

The report on grocery pricing from Choice found that Australians could be around 25% better off on groceries by shopping at Aldi compared to Coles and Woolworths.

Choice's findings are based on the findings from undercover shoppers it sent to 81 supermarkets across Australia. These included Coles, Woolworths, Aldi, and some IGA stores. These shoppers recorded prices for a standardised basket of goods to determine which supermarket offered the best value.

Findings showed the average basket, consisting of 14 items at Aldi costs $51.51, while the same basket costs $69.33 at Coles and $68.58 at Woolworths.

This indicates just a 75-cent difference between Coles and Woolworths but a significant saving at Aldi, it says.

Ashley de Silva, CEO of Choice, stated, "Aldi is the best value when it comes to groceries across the nation", according to The Australian Broadcasting Corporation.

The report also highlights that Aldi's prices were more consistent across different locations, whereas prices at Coles and Woolworths showed more variation.

Choice also pointed out regional price differences, noting that areas without Aldi stores, such as Tasmania and the Northern Territory, faced higher grocery prices. Additionally, even in states like Western Australia, where Aldi is present, people pay about $1 more for the same basket of goods.

De Silva added:

One of the things that we saw is that Aldi's prices across the stores that we visited were reasonably consistent, you get a bit more variation in Coles and Woolworths.

Impact on Coles shares

The supermarket giant acknowledged the report today, but said further analysis may be needed. "We welcome Choice's contribution, however, it is unclear whether like-for-like products are being compared", a company spokesperson said, per The ABC.

Bell Potter analysts are also constructive on Coles shares. According to my colleague James, the broker rated Coles a buy with a $19 per share price target.

Foolish takeaway

Coles shares are in focus amid the ongoing competition in the Australian supermarket sector. The Choice report brings certain advantages and disadvantages into the spotlight.

This could challenge Coles to show investors its value proposition. Time will tell. In the last 12 months, Coles' share price has gone down over 7%, despite a 7% gain this year.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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