Coles Group has posted a rather modest 1.3 per cent leap in revenue despite food inflation climbing 7.1 per cent during the September quarter.

Coles’ first quarter FY23 revenue reached $9.89 billion, with supermarket sales rising just 1.6 per cent to $8.8 billion for the 13 weeks ended September 25.

This is well below analyst predictions of a 2.7 per cent jump, and down from the previous quarter’s 3.3 per cent jump. This has seen share prices dive 2.71 per cent this morning.

Coles said first quarter food inflation climbed 7.1 per cent, following a 4.3 per cent jump in the June quarter. This hike “continued to be driven by bakery, reflecting higher wheat prices, and fresh produce, particularly in fruit such as berries and bananas,” Coles said, noting that ‘fresh inflation’ was 8.8 per cent for the quarter.

This is leading to changing shopping habits, especially between different income groups.

“It’s a tale of two cities, this growing divide,” said Coles CEO Stephen Cain.

We have done a lot more work on it, and it’s quite interesting the differences between the three main cohorts of consumer groups so if you look at mid and lower demographics, there’s some different things taking place.

“If you look at the lower demographics, what we are seeing is that they are buying less and that both in sales and volume terms are obviously the ones that are most impacted. And we did a bit of research last week, we asked 8000 customers just to see how they’re reacting to all of the changes and it was interesting that 75 per cent of them said they were now more actively managing waste in their in the household – so there’s a war on waste taking place.

“So whereas last year, everyone was locked down and didn’t have much to spend their money on other than groceries and probably panic buying a little bit … what we are seeing now is people are shopping more frequently. They are very careful about what they are buying and managing their waste. And what that means is that making meals go further.

“In some cases, they are freezing or cooking (meals) in batches, all of those types of things. So it’s quite a significant change.”

Sales in the liquor business (Liquorland, Vintage Cellars, First Choice) fell 4.3 per cent to $839 million, while Coles Express saw sales growth of 7.9 per cent to $301 million. Online supermarket sales declined by 11.5 per cent, due to the return to normal trading conditions compared to the September quarter.

It recorded three-year headline sales growth of 13.8 per cent in Supermarkets, 15.2 per cent in Liquor and 7.5 per cent in its Express convenience stores.