Woolworths Trolley TrendsUnderstanding changes to household expenditure over the past 25 years and today’s customer

Meet the modern Aussie household. It is different to anything you have seen, experienced or been part of previously in Australia. It is being shaped by powerful global, technological and behavioural forces. And in line with these morphing familial forces, there is an increasing appetite for a different engagement with food and with supermarkets.

The modern household can be a single or a couple or a family or it can be a family that is extended with stay-at-home kids or indeed it might be an elderly couple. This is different to the largely homogenous family of the mid to late 20th century. But it’s more than the form of the household that has changed. The household is busier and more demanding of time effi ciencies. It is also feeling the pinch - facing more fi nancial pressure.

The Australian household is global in its composition: out with Anglo primacy; in with an eclectic fusion of Anglo, Mediterranean and Asian infl uences. And is that an Arabic or is that a Persian infl uence that is now ascendant in our biggest cities?

We demand food to be packed for one, for two and for more. We demand fresh food be today fresh and we demand an array of culinary options displayed from all parts of the globe. In fact, we Australians of the 21st century are just a little proud of our cosmopolitan approach when it comes to food. It’s the way we welcome migrant newbies, through our palate. It’s almost as if we’re saying “welcome to Australia. What have you got to eat?” And our embrace of pasta and cappuccino and bok choy and dukkah says it all. The Australian palate has come a long way and has developed a taste for high adventure. And what better place to tempt those adventurous tastes than in the supermarket.

Some people love supermarket shopping to such an extent that they’re in and out of the store several times every week. That’s not a supermarket; that’s an extension of the kitchen. And with fl uid lives being led at a fast and furious pace that is exactly what is required; a big, convenient, exotic, kitchen extension within easy reach of the family home. That’s the kind of food shopping that the modern Australian household really wants.

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FOREWORD

Bernard SaltKPMG PARTNER AND SOCIAL RESEARCHER

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At Woolies, our obsession with our customers is at the heart of everything we do. From bringing new products to our shelves that refl ect the changing palate of the nation, to offering more ways for customers to save every day, we are determined to offer the best range, price and service of any Australian supermarket.

There is no question that Australia has changed substantially in the past 25 years – nowhere is this more apparent than in the way we eat. Clearly, the fi rst step to cultural integration in Australia is through the taste buds, and today our multicultural community is strongly refl ected in what we put in our shopping trolleys.

This report is a look at Australia through the shopping habits of Woolworths’ customers with context provided by an analysis of the ABS’s Household Expenditure Surveys, Census and Reserve Bank of Australia.

Food shopping is a reality for almost every Australian and offers a unique way of tracking the changes in their lives. With more than 19 million customers shopping at a Woolworths store every week, the trends that we see at the checkout provide a clear indicator of who we are as a nation.

While shopping for food and drink is a necessity that accounts for the second largest portion of most household budgets, the items that we choose to purchase once they arrive in store are very much discretionary. Our job is to

have our fi nger on the pulse to ensure we are giving our customers what they want and need.

We understand the fi nancial pressures Australians face – 72% of our customers are concerned about increases in their cost of living. Our customers are managing their household budgets more closely than ever before.

As a result, demand for more savings everyday has become the single most important factor in where customers choose to shop, ranked higher than shopping experience or inspiration. Customers still want to choose from a wide range of high quality foods, but they want it at the lowest price.

This report provides a unique insight into how our community and spending habits have changed over the last quarter of a century – and shaped the way we shop and eat. Woolworths is proud to have been a part of this journey alongside our customers.

FOREWORD

Tjeerd JegenMANAGING DIRECTOR OF WOOLWORTHS SUPERMARKETS

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TROLLEY TRENDS

AUSTRALIA IS A VASTLY DIFFERENT NATION TODAY TO WHAT IT WAS 25 YEARS AGO. THE LAST 25 YEARS HAVE BEEN EXTRAORDINARILY TRANSFORMATIONAL, BRINGING FAR GREATER CHANGE THAN THE PRECEDING 25 YEARS.

Much like the contents of our shopping trolleys, there has been a profound shift in the way we live our lives.

Cultural diversity is at an all time high as we embrace a cosmopolitan community and a global approach to everything from food to recreation to communication.

Australia has always prided itself on being a land of opportunity and our society is a true refl ection of this.

Today Australians are more educated, less traditional in their outlook, harder working and are less likely to have exclusive Anglo-Australian heritage.

In the same way that English breakfast tea gave way to continental coffee in the late 1970s and ‘meat and three veg’ was replaced by spaghetti Bolognese in the 1980s, the way we choose to live, shop and eat illustrates the changing face of Australia.

In less than 30 years, we have seen a major shift in our ethnic demographic structure, with the number of Australian residents that were born in Australia or England down seven percentage points to 78% from 1986 to 2011.

Little surprise to note, when rice and noodles are now key staples in our shopping trolleys, that there has been a signifi cant increase of Australian residents born in China and India.

Our ageing population is at an all time high, with the proportion of Australians aged 65 years and over increasing by three percentage points to a total of 14%. There is a decrease in the number of people identifying with a religion by 10 percentage points.

As a nation we are smarter – or at least more highly educated – with the proportion of university qualifi ed Australians having almost quadrupled since 1986, from 6% to more than 21%.

Our family units are smaller and more likely to have both partners working to accommodate the rising costs of living and economic uncertainties that are key concerns for many Australian families.

The new cosmopolitan AUSTRALIA

“Australia’s cosmopolitan society has evolved in response to our changing demographics, with a fusion palate that is equally comfortable with chops and chips, as with green chicken curry and basmati rice.’’

Source: KPMG Demographics, based on data from the Australian Bureau of Statistics, Census of Population and Housing, 1986 and 2011

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TROLLEY TRENDS

Compared to 1984, the appetite for debt in Australia has signifi cantly increased, although moves have been made to reduce this debt since the global fi nancial crisis.

The proportion of dwellings with a mortgage has fl uctuated over the past 25 years, reaching a low in 1996 of 26% and a high of 36% in 2011. Conversely there has been a signifi cant decline in the proportion of Aussies that own their home outright. Higher income households are most likely to have credit card debt.

However, it’s Gen X that has emerged as today’s Generation Debt. Hardly surprising when you consider that Australians passing through the 35-44 lifestage are passing through the Decade of Stress.

The Decade of Stress comes about for several reasons. It is in this decade that children arrive, that women often leave the workforce, even if temporarily, and there are increased household fi nance pressures. It is in this decade that careers sometimes peak or don’t pan out as expected or hoped.

In the Decade of Stress there is a metabolism shift in both men and women which delivers cumulative weight gain. This period is, to many, the signal of the end of youth and beginning of middle age. It’s not unexpected therefore, that the peak age at which most people get a divorce in Australia is slap-bang in the middle of the Decade of Stress.

According to data from the Reserve Bank of Australia, households headed by a person aged between 35-44 years are the most likely to carry debt – credit cards, personal loans, and loans for homes and investment properties.

More than half of all households headed by a Gen X have a home loan and one third have credit card debt. In dollar terms, households headed by a Gen X and who carry debt have a median debt of $161,000.

Why are they feeling the pinch?

Gen X are likely to be impacted by the 15% increase over the past 10 years in the number of dependent 15-24 year olds that are studying full-time and living in the family home.

That may explain why households headed by a Gen X spend more on food and non-alcoholic beverages than the average Australian household, together with the fact that these households typically have a higher than average number of persons per household.

Compared to other generations, the median value of debt decreases to $135,000 for 45-54 year olds and down again to $73,000 for 55-64 year olds.

IN THE WAKE OF THE GLOBAL FINANCIAL CRISIS, AUSTRALIANS HAVE TIGHTENED THEIR PURSE STRINGS AND ARE INCREASINGLY LOOKING FOR VALUE IN THEIR SPENDING.

The average Australian household earns two and a half times more than it did in 1984 – and this statistic is mirrored by goods and services expenditure patterns.

Housing costs (rent or mortgage payments) now occupy the largest share of our wallets at 18%, and saw the single largest increase in Aussie household expenditure since 1984, up 380%.

Households are allocating three percentage points less of their overall budget to food and non-alcoholic drink compared to 25 years ago. However this category still accounts for our second largest share of wallet (down from fi rst place in 1984).

Meanwhile, we have placed increased importance – and budget – on lifestyle factors such as holidays, pets, technology,

recreational and educational activities, with expenditure on recreation overall now making up 13% of overall household expenditure.

As a share of wallet, medical care and household service expenditure have both risen since 1984. Clothing, tobacco, household furnishing and equipment are all down at least one percentage point and spending on fuel and utilities has remained stable.

The generation gap has never been wider when it comes to how we spend our money.

While Gen Y dedicate the largest share of their budget to housing, and Gen X spend relatively evenly across most categories, it is the Baby Boomers who seem to be making the most of life, topping the list when it comes to money spent on food and non-alcoholic beverages, recreation and items such as luxury cars and premium alcohol.

Share of WalletHOW AUSSIES ARE SPENDING

The X Debt

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Source: KPMG Demographics, based on data from the Australian Bureau of Statistics, Household Expenditure Survey 1984 and 2009/10

Source: KPMG Demographics, based on data from the Reserve Bank of Australia (RBA) 2013

Under considerable fi nancial pressure, Generation X has emerged as today’s Generation Debt

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TROLLEY TRENDS

WE ARE WHAT WE EAT. THIS IS MADE ABUNDANTLY CLEAR WHEN WE COMPARE THE CHANGES IN AUSTRALIAN SHOPPING HABITS OVER THE LAST 25 YEARS.

The shift to a more multicultural community is most noticeable at the supermarket checkout, where the contents of our trolleys refl ect our new cosmopolitan society. Not surprising given the fi rst step to cultural integration in Australia is through the taste buds.

In the 1980s, red meat, potatoes, fruit juice, margarine and tea dominated – today’s trolley is fi lled with fi sh, chicken, rice, fresh fruit, butter and coffee. Or, if it is tea, it is now a choice of one of 61 varieties.

The most noticeable change is that Australians are purchasing signifi cantly less red meat than 25 years ago. As a share of meat wallet spend, it is down 16 percentage points from 1984 – a dip that is largely attributed to specifi c dietary choices and affordability.

In contrast, chicken has become a staple for most Australians, rising by nine percentage points to constitute 21% of our food and non-alcoholic beverage share of wallet.

The humble potato has taken the biggest hit when it comes to popularity on the Aussie dinner plate. Our unequivocal favourite side dish in the 1980s, accounting for a 72% share of wallet

spend on ‘side dishes’, it has dropped to 39%. Pasta, noodles and rice are now the Aussie side dishes of choice, making up 61% of side dish purchases.

Fresh fruit and fresh vegetables are also a priority for today’s families, with a three percentage point rise in share of fruit and vegetable spend over the past 25 years, indicating an increasing preference towards fresh food over canned, bottled or frozen food.

Interestingly, Australians are eating out more than ever, with 31% of the dollars in our food and non-alcoholic beverage expenditure being spent on restaurants, takeaway or school lunches – up nine percentage points from 1984. The local ethnic food restaurant has emerged as an extension of the family kitchen. Too tired to cook? Then call the local Thai, Chinese, or Indian restaurant and have something delivered.

TROLLEY TRENDS

The Trolley Transformation

“The local ethnic food restaurant has emerged as an extension of the family kitchen. Too tired to cook? Then call the local Thai, Chinese or Indian restaurant and have something delivered.”

Source: KPMG Demographics, based on data from the Australian Bureau of Statistics, Household Expenditure Survey 1984 and 2009/10

TROLLEY TRENDS

Source: Woolworths Customer Insights

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TROLLEY TRENDS

GONE ARE THE DAYS OF THE BIG WEEKLY SHOP.

Today, Australians are opting for more frequent visits to the supermarket. For many busy households, it’s impossible to plan meals seven days in advance as our frugal grandmothers did. Today it’s a different story. Both partners work. Kids are coming and going. There are events and outings and things to do and last minute plans that pop up.

In such a fl uid world the family requires fl exible meal solutions. Flexible means being able to drop into the supermarket on the way to or from work, school, the gym or a visit to friends. Modern shopping hours have brought convenience and fl exibility to our lives.

But our new penchant for multiple visits to the supermarket is more than the need to adjust to ever-changing schedules. Shockingly for some, many people like visiting the supermarket.

Some people love visiting the supermarket. They see a clean, well-stocked, well-lit world of possibilities. A marketplace that brings together food from around the world. Many shoppers confess that they fi nd visiting the supermarket as a pleasant outing!

On average, Australians spend just 34% of their weekly food budget on their primary shopping day. Some people visit their local supermarket every day of the week.

Longer opening hours allow us to shop when it is convenient, with a noticeable shift in shopping activity now that supermarkets nationwide can open on Sundays (to varying degrees).

In fact, Sunday is fast becoming the new Saturday for trips to the supermarket, with 18% of Australians making Sunday their primary shopping day – up three percentage points since last year.

UNSURPRISINGLY, OUR AGE HAS A SIGNIFICANT INFLUENCE ON WHEN AND HOW WE SHOP.

Older shoppers are more likely to follow a regular routine, shopping on the same day of the week and spending the same amount each time. Younger generations make more frequent visits to the supermarket and show little allegiance to when they visit or how much they spend each time.

Habitual shoppers – those who spend at least half of their weekly budget on their primary shopping day – are most likely to be baby boomers or older, perhaps in a nod to a time when it was common to plan the week’s menu in advance.

Younger Australians are less likely to be habitual shoppers and are more likely to spread their shopping budget over the week.

Budget-conscious shoppers are most often found buying their groceries on a Thursday. This is likely driven by the timing of weekly and fortnightly payrolls and government benefi ts.

Where we live also impacts when and how we shop.

Regional Australia is less likely to spend the same amount on each shopping trip, but it is more inclined to shop on the same day every week compared to its urban counterpart.

South Australians and West Australians are more likely to shop on the same day each week and spend 2% more of their weekly food budget on their primary shopping day than the average Australian.

People living in our nation’s most affl uent state, the ACT, are by far the least likely to shop on the same day each week and are the most unlikely group of Australians to seek out promotions.

The big weekly shop is dead

What our shopping says about us

“In such a fl uid world the family requires fl exible meal solutions… On average, Australians spend just 34% of their weekly food budget on their primary shopping day. Some people visit their local supermarket every day of the week.”

Source: Quantium research

Source: Quantium research

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“Meet the modern packed-to-the-rafters family household, where the kids stick around for longer. The household food and beverage budget expands and distorts for older households as a consequence.”

AUSTRALIAN HOUSEHOLDS ARE ON THE MOVE. NOT GEOGRAPHICALLY BUT DEMOGRAPHICALLY.

Increasing concern about fi nancial pressures and the rising cost of living has driven Australian families to look for savings in every aspect of their spending - especially when it comes to shopping for food.

Family budgets are under strain. Although food costs have become more affordable, housing, recreation, household services and medical costs have all increased their share of Australian wallets.

Young households are shrinking as the number of children in a typical family drops to one or two. But older households are expanding as teenage and young adult children increasingly remain in the family home until their mid-20s and beyond.

This extended nurturing phase has seen the number of children in households increase to reach fi ve million in 2011 (4,912,334). This spike is attributed to children over 15-24 years of age, in full time study, that are not fl ying the nest, as was the norm for previous generations.

In fact, the number of 15-24 year olds still living at home with their parents is up 15% from 900,000 in 2001 to 1 million in 2011 (1,011,589).

The modern Australian workforce requires technical and often tertiary training beyond secondary school. Teenagers cannot leave home and get a job as easily today as they could a generation ago. They are staying at home while they complete further education and training. And while remaining in the family home they are having their friends over and they are raiding the pantry and the fridge.

Meet the modern packed-to-the-rafters family household, where the kids stick around for longer.

The household food and beverage budget expands and distorts for older households as a consequence.

This may partly explain why households headed by a person aged 48-49 spend $3,548 more on food and non-alcoholic beverages each year than the average Australian household.

By contrast, Frugals, Pre-Boomers and Gen Y are on or below average when it comes to their food and beverage expenditure.

Aussie families DEMAND VALUE FOR MONEY

Source: KPMG Demographics, based on data from the Australian Bureau of Statistics, Census of Population and Housing, 1986 and 2011; Household Expenditure Survey 1984 and 2009/10

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Savvy Shoppers SEEK OUT MORE SAVINGS

The proportion of items purchased on promotion at Woolies is up 10% per annum over the past two years.

Since reducing the price of lamb, Woolies has seen volume sales increase by 19%.

Source: Quantium research

AUSTRALIANS ARE SAVVY SHOPPERS. THEY LOOK FOR LOW PRICES, EMBRACE PROMOTIONS AND SEEK OUT EVERY DAY SAVINGS TO INCREASE THE POWER OF THEIR DOLLAR.

More than a third of the items in Woolworths’ supermarket trolleys are purchased on promotion.

Australians hunting for bargains are the big winners, with one in four customers (25%) purchasing nearly half of the food and drinks in their trolley on special.

Gen X, the most likely to have an established family and the highest spend on food and non-alcoholic beverages, are unsurprisingly among the most likely to purchase on promotion.

The big surprise is the Millenial shopper (born 1991-2006), who tops the promotional shopper rankings. Their preference for promotional offers probably stems from a combination of low

income and an interest in trialling new products, which are often on promotion to attract attention in store.

West Australians are the most likely to buy goods on promotion, closely followed by South Australia and NSW.

Over the past two years, Woolworths has increasingly delivered more value to its customers as they tighten the purse strings, with the proportion of items purchased on promotion up 10% per annum.

Price has become the single most important driver of store choice for supermarket shoppers, outranking shopping experience and inspiration. Smart shoppers are clearly waiting for supermarket specials and shopping for value for money as a key priority.

The Aussie lamb roast – it was once as iconic as Vegemite or lamingtons.

Unfortunately, over the last decade, lamb consumption in Australia dropped by more than 25%. The traditional Sunday lamb roast or mid week lamb chops and gravy were things of the past. For many families, lamb had become a ‘special occasion’ food at best.

In August 2012, Woolworths slashed the price of the top ten most popular cuts of lamb by up to 30%, in a move that offered customers deep discounts on an often-expensive family favourite.

Volume sales of lamb have increased by 19% since the price was reduced, which equates to a whopping extra 6 million kilograms of lamb hitting Aussie dinner tables this year.

FALLING IN LOVE WITH LAMB ALL OVER AGAIN

Source: Woolworths Customer Insights

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Research METHODOLOGY

In August 2013, Woolworths commissioned multi-layered research to discover consumer sentiment among Australians.

The research included analysis of statistics from the Australian Bureau of Statistics’ Household Expenditure Surveys and Censuses of Population and Housing, the Reserve Bank of Australia along with analysis of Woolworths Everyday Rewards members’ shopping habits, trends and spending.

For this unique research piece, we consulted with Australia’s leading social researcher, Bernard Salt KPMG who reviewed the results of the Household Expenditure Survey (HES) to understand changes to household expenditure over the past 25 years.

Analysis of the spending behaviour of Everyday Rewards members, conducted by Quantium and reviewed by Managing Director of Woolworths Supermarkets, Tjeerd Jegen, assessed the habits of 9500 members over a 24-month period ending 31 July 2013.

About the Australian Bureau of Statistics – Household Expenditure Survey

The Australian Bureau of Statistics (ABS) conducts a Household Expenditure Survey (HES) approximately every six years. The HES collects detailed information on the expenditure, income, assets, liabilities and household characteristics of households resident in private dwellings throughout Australia.

This report focuses on the 1984 and 2009/10 HES, both of which had a sample size of approximately 10,000 households. Responses are weighted by geographies to ensure fi ndings are representative of Australia at the national, state and sub-state level. The 1984 HES relates to the calendar year, whereas the 2009/10 HES relates to the fi nancial year. Figures in this report do not take into account infl ation.

‘Share of wallet’ analysis as referred to throughout this report is a way of showing how goods and services expenditure has changed over time by establishing the relationship between expenditure on different broad expenditure categories, as a proportion of total goods and services expenditure. For instance, in 1984, 6% of all goods and services expenditure was spent on clothing and footwear. In 2009/10, this had fallen to 4%. Australians are therefore spending a smaller ‘share of wallet’ on clothing and footwear.

Alignment of age cohorts and generations to HES data:

The age ranges of the three generations below have been adopted in reference to HES data in this report in order to match the age ranges from both the 1984 and 2009/10 HES:

• Baby Boomers defi ned as the 25-34 HES age range in 1984 & the 55-65 HES age range in 2009/10

• Gen X defi ned as the 35-44 HES age range in 2009/10

• Gen Y defi ned as the 25-34 age range in 2009/10

Other generations referred to in this report include:

• Frugals: born between 1916 and 1931

• Pre-boomer: born between 1931 and 1946

• Millenial: born between 1991 and 2006

About the RBA DATA

The distribution of debt data referred to in this report is sourced from the Reserve Bank of Australia and has been extracted from the HILDA (Household, Income and Labour Dynamics in Australia) survey. The survey is based on approximately 7000 households, where the household characteristics such as age, education and labour force status are based on the household reference person (chosen from household members as the person with the highest income, highest salary, labour force status, age and respondent number). Households are only recorded as having debt of a particular type if they had a positive balance in debt. A household is considered to have debt if any household member has that type of debt. For instance where the household reference person is 55 years, if there is a person in their twenties present (such as an adult child) then their debt would be included as a type of household debt.

About the Quantium research

The Woolworths Trolley Trends report was compiled by Quantium research based on sampled data from the Everyday Rewards program over two years to 31 July 2013. The Everyday Rewards program collects information on the purchasing behaviour of about 7 million Australians. As Australia’s leading data-driven strategy business, Quantium provides innovative insights on market performance and customer engagement for Woolworths as well as many of Australia’s other large organisations.

Media CONTACTS

For more information about Woolworths Trolley Trends please contact:

Woolworths Press Offi cePh - 02 8885 1033Email - media@woolworths .com.au

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Published by Woolworths Limited August 2013

©Woolworths Limited 2013

Care is taken to ensure the accuracy of the information contained in this publication.

Please contact Woolworths Limited if you have any concerns.

For more information on the Woolworths Trolley Trends Report or Woolworths Supermarkets go to

www.woolworths.com.au