The major Aussie supermarkets have enjoyed a duopoly over the sector for years. However, Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) could be under pressure in 2020.
Why are Coles and Woolworths shares worth watching this year?
For me, the biggest factor that could impact Coles and Woolworths share this year is the increasing competition from international players.
The supermarket giants have both seen their shares surge higher in recent years thanks largely to strong earnings and huge market share.
However, Aldi has started establishing itself as a real contender in the Aussie supermarket industry. Aldi is a German supermarket chain with more than 500 locations across Australia.
The group's low-cost operating model has started to put the squeeze on both Coles and Woolworths shares in recent times.
On top of that, the Aussie supermarket chains have to compete with the entrance of Kaufland to Australia.
Kaufland is looking to open at least 20 stores in Australia and presents a whole new challenge for the incumbents. The German supermarket chain is owned by the fourth-largest retailer in the world and that brings significant firepower to its Australian mission.
Coles and Woolworths shares will be worth watching in 2020 as they try to combat the German giants in their industry.
Another factor worth considering is the ongoing bushfire crisis and its impact on the broader agricultural sector.
The current bushfire season has depleted the nation's food bowls in what is often a lucrative fruit picking season. The supply chains of Costa Group Holdings Ltd (ASX: CGC) have been hit hard by the devastating disruption.
The Aussie dairy industry is another area of concern for the Aussie supermarkets. Cole and Woolworths shares have arguably benefited from record-low farmgate milk prices, but there are question marks about long-term supply here in Australia.
Should you buy the Aussie supermarkets in 2020?
There are a number of challenges facing Coles and Woolworths shares in 2020. Despite solid performances in recent years, it could be a real make or break year for the 2 competitors and I'd be thinking carefully before buying at the moment.
