As Aldi and Costco grow, how much of a price premium can FMCG brands afford?
Growing discount and warehouse retail competition is challenging how FMCG manufacturers think about pricing, value perception and brand premiums.
The growth of Aldi and Costco in Australia raises an important question for branded FMCG manufacturers: How much of a price premium can our brands sustain when shoppers have access to more competitive alternatives?
Recent reporting drawing on Australian Taxation Office data and company disclosures put Aldi and Costco combined Australian sales at almost $20 billion in FY2025.
That figure includes categories beyond groceries, particularly at Costco, but nonetheless highlights the scale of these alternative retail models and the competitive pressure facing both traditional supermarket operators, and FMCG suppliers where private label is offered in place of brands.
CHOICE’s supermarket price comparison, published in September 2026 (using prices collected in June), found Aldi had the cheapest basket among the four chains surveyed.
For branded FMCG manufacturers, the implication extends beyond competition between supermarkets. Shoppers’ expectations of good value may be changing, regardless of where they ultimately buy.
The reference point for value is shifting
Branded FMCG manufacturers have often benchmarked pricing primarily against direct brand competitors. If one leading brand increased its price, others might feel more confident maintaining or adjusting their relative positioning.
However, this approach becomes more difficult when shoppers increasingly compare branded products with private-label alternatives, discount retailers and different pack formats. The relevant reference price may extend well beyond competing brands on the same supermarket shelf.
This challenges manufacturers that have historically sustained premiums through brand strength, distribution and promotional activity, but creates opportunities for brands that clearly demonstrate why they are worth paying more for.
Where does a brand genuinely justify a premium?
A price premium can be commercially valuable when shoppers recognise a compelling reason to pay it.
Many consumers are willing to pay more for products that offer superior quality, trusted performance, convenience, distinctive benefits or stronger emotional relevance.
The challenge is understanding which benefits translate into genuine willingness to pay, and how much.
For FMCG suppliers, this requires more than looking beyond price comparison against competitors. It requires understanding how consumers respond to different premiums across categories, segments and consumption occasions.
A brand may comfortably sustain a premium in one category or segment but struggle when the same premium is applied to products in another, where differentiation maybe less visible, or valued.
The objective is to ensure premiums are supported by consumer-perceived value.
Which packs and price points are critical to penetration?
Price-pack architecture (PPA) is an important lever for maintaining brand accessibility.
When a preferred pack becomes too expensive, shoppers may switch to a smaller format, buy less frequently or wait for a promotion. Others may leave the brand altogether. Understanding these responses is critical.
Effective PPA helps manufacturers design meaningful choices across entry prices, consumption needs and value propositions.
Smaller packs can maintain an accessible purchase price. Larger packs may offer attractive value per unit for high-consumption households that can afford the upfront spend.
However, pack changes are not automatically incremental.
A smaller pack could protect household penetration while reducing volume per purchase. A larger value pack could attract new buyers—or encourage existing shoppers to switch from a more profitable format.
RGM teams should evaluate decisions across the portfolio, considering:
Household penetration and purchase frequency.
Units and equivalent consumption volume.
Net revenue and contribution margin.
Cannibalisation between packs.
Packaging, distribution and execution costs.
The question is which pack architecture delivers the strongest sustainable portfolio outcome.
Are promotions strengthening the value proposition?
Promotions remain an important part of FMCG commercial strategy, particularly in Australia’s major supermarket channels.
Frequent discounting, however, can create tension between short-term sales and long-term pricing effectiveness.
If shoppers increasingly wait for promotions, the discounted price can become their expected reference price. That can make regular shelf prices and profitability harder to sustain.
It also raises questions about whether promotional activity is delivering genuinely incremental demand.
A promotion that generates significant sales during the promotional week may still contribute relatively little incremental profit once cannibalisation, forward buying, post-promotion declines and retailer funding are considered.
Manufacturers should therefore assess promotional effectiveness across the full trading cycle, rather than simply measuring uplift during the promotional period.
A successful promotion helps deliver a worthwhile commercial return.
What should FMCG manufacturers do differently?
Three priorities stand out.
Reassess price positioning against the broader value market.
Include private label, discount retailers and relevant pack alternatives rather than referencing only branded competitors.
Review price-pack architecture against affordability and profitability.
Identify the entry price points that protect penetration and the premium formats whose benefits support stronger margins.
Evaluate promotional investment through incrementality and profit.
Understand which activities generate additional contribution, and those that simply shift purchasing between products or calendar weeks.
These decisions should be grounded in category dynamics and retailer-specific shopper behaviour.
The opportunity is to defend value, not price.
The growth of Aldi and Costco increases the importance of understanding where shoppers recognise and reward differentiation.
Brands that align pricing, pack architecture and promotional strategy with consumer and shopper needs will be better positioned to balance penetration, volume and profitability.
The challenge is not to sell cheaper, but to give shoppers a compelling reason to pay more.
Why Real World Marketing?
At Real World Marketing, we work with FMCG manufacturers to identify Revenue Growth Management opportunities across the RGM levers including portfolio pricing, price-pack architecture and promotional investment.
If you would like help understanding and planning for the competitive value pressures affecting your category or brand, reach out to our team.
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