If you’ve noticed that the price of your usual shop seems to shift week to week for no obvious reason, you’re not imagining things. Both Coles and Woolworths are now using AI-powered pricing systems, and the implications for Australian consumers are worth understanding.

What’s actually happening

Both major supermarket chains have invested heavily in dynamic pricing technology over the past two years. Woolworths partnered with a US-based pricing analytics firm in 2024, and Coles followed with its own system shortly after.

These tools analyse massive amounts of data — competitor prices, demand patterns, seasonal availability, local demographics, even weather forecasts — to set and adjust prices in near real-time. The goal, from the supermarket’s perspective, is to optimise margins while remaining competitive.

In practical terms, this means the price of a kilogram of chicken thighs might differ between stores in the same suburb, and might change multiple times in a week.

Why this matters

Dynamic pricing isn’t new. Airlines and ride-share apps have been doing it for years. But food is different. Food is essential. When the algorithm decides that milk should cost more in a low-competition area, that’s not the same as a surge-priced Uber.

The ACCC inquiry into supermarket pricing in 2024 raised concerns about exactly this issue. The preliminary findings noted that AI-driven pricing could exacerbate food insecurity in areas with limited supermarket competition — which describes a lot of regional Australia.

There’s also the transparency question. When a human buyer sets a price, there’s at least a traceable decision. When an algorithm does it, the reasoning is opaque. Both Coles and Woolworths have been reluctant to explain exactly how their pricing models work, citing commercial sensitivity.

The “specials” game

One thing the AI systems are particularly good at is managing promotional cycles. Those weekly specials in the catalogue? They’re now optimised by algorithm. The system knows which products drive foot traffic, which products have the highest margin when they return to full price, and which promotions create the most basket spend.

This isn’t necessarily bad for consumers — you can still get good deals during promotions. But it does mean the specials are designed to maximise the supermarket’s return, not your savings. The algorithm might discount pasta sauce aggressively because it knows you’ll also buy mince, pasta, and parmesan at full price.

What the food industry thinks

I spoke with a supplier for a mid-sized Australian food brand last month. They described the experience of working with AI-driven supermarket buyers as “being negotiated against by a machine.” The pricing models now include supplier cost data, category performance metrics, and competitive benchmarking. Suppliers feel they have even less bargaining power than before.

For small producers and local food brands, this is concerning. The algorithms tend to favour products with consistent sales velocity. Niche products — that excellent small-batch relish or the single-origin olive oil — get less shelf space because the data doesn’t support them.

What you can do

This isn’t something individual consumers can opt out of. But here’s how to shop smarter in an AI-priced world:

Compare strategically. Don’t assume Woolworths is always cheaper than Coles or vice versa. Prices shift dynamically, so the cheapest option for your basket might be different this week than last.

Use the apps. Both supermarket apps show current prices. It’s tedious, but checking before you go can save real money. Third-party apps like Frugl and Half Price compare across both chains.

Shop the specials with intent. The algorithm wants you to impulse buy around the specials. Beat it by planning your meals around what’s genuinely discounted and ignoring the surrounding full-price items.

Support alternatives. Farmers markets, independent grocers, and co-ops don’t use dynamic pricing. Their prices reflect actual costs, not algorithmic optimisation.

The bigger question

The rise of AI in supermarket pricing is part of a larger trend in how technology is reshaping the food system. AI consultants in Brisbane and other firms working with the food industry report that dynamic pricing is only the beginning — predictive supply chain management and automated procurement are next. It’s not inherently evil, but it’s not neutral either. When the same companies that control most of Australia’s grocery market also control the algorithms that set the prices, the power imbalance that already existed gets wider.

We should be paying attention. And we should be asking regulators to pay attention too.