Coles' revenue is up, but so are its shelf prices for food.
👉 Background: We know Coles for its big red stores, it’s Down Down price tags and its Coles Radio (which plays bangers like Can't Fight the Moonlight on the reg).
👉 What happened: Coles released its full year earnings to a… mixed response. Coles saw its revenue jump 2% year on year to just under $40bn. But the real story was about food inflation which spiked 4.3% in the last three months.
👉 What else: The Coles CEO explained that iceberg lettuce and meat prices were higher thanks to floods while bakery goods jumped thanks to the war in Ukraine. But luckily for Coles, its products are quite 'price inelastic'.
💡 The price elasticity of demand measures how sensitive buyers are to price changes. And this concept is hot right now with CEOs globally thanks to inflation going beserk.
💡 If a small rise in the price of Barbecue Shapes leads to a big fall in demand, then the item is considered to be elastic. But if a big rise in price doesn’t effect demand, the product is considered inelastic.
💡Price inelasticity is great for businesses because it means they can increase their prices without a risk in dropping sales. Coles' CEO reckons that around 20% of consumers are pulling back spend due to price rises... but the other 80% are still spending freely.
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