Coles takes express route to healthier meals

ELI GREENBLAT
August 8, 2016
The Australian
Supermarket giant Coles is piloting a new convenience store format at three sites in Melbourne under a new brand Big Yum at Little Coles to capture a greater slice of the $5 billion convenience and prepared meals sectors.
The format will include a wider range of healthier meals and snacks as well as grocery and household items.
And in a challenge to the dominance of 7-Eleven and its popular $1 takeaway coffee, which this year is tipped to hit 40 million cups sold, Coles will undercut the offer with its own freshly ground coffee priced at 80c.
Coles’ pitch in the convenience store space comes as traditional players, such as family-owned milk bars, corner stores and franchise shops, face shrinking earnings driven by falling consumer sentiment and competition from small-format grocery stores, supermarkets and fuel retailers.
Industry research group IBISWorld says industry revenue was expected to fall by an annualised 2 per cent over the five years through 2015-16, with strong competition from external retailers — such as the big supermarket chains Coles and Woolworths — constricting profitability for smaller players.
Coles has now upped its game with the Big Yum at Little Coles concept that will also seek to bring down prices to supermarket levels, with many shoppers long put off by higher traditional convenience store prices.
As part of the consumer shift to healthier meals, the rebranded Coles Express pilot stores, in the Victorian suburbs of Kew, South Yarra and Windsor, will have an extended range of healthier meal and snack options including bananas, wraps, handmade sandwiches, sushi, salads and ready-made meals from the new Coles Brand convenience range.
The new format stores also feature a pick and mix nut station and a wider range of bakery items, including doughnuts, muffins and croissants.
The coffee option is a bid to peel away customers from 7-Eleven and its $1 coffee offer, launched five years ago, while Big Yum at Little Coles also features a “mad scientist” frozen beverages machine called the Guzzle Bomb.
It will also carry grocery, household and personal care items, with all non-food products set at Coles supermarket pricing.
“We are closely watching the performance of these proof of concept sites and will look to incorporate successful elements of the format elsewhere in the store network,’’ said Simon McDowell, director of Coles Express.
The nation’s convenience store sector is valued at $4.4 billion, with prepared meals, ranging from Jenny Craig-packaged meals to McCain Foods products, generating another $600m a year in sales.
IBISWorld analyst Lauren Magner said the sector was facing fierce competition from supermarkets such as Coles and Woolworths. “These dominant retail chains have significant economies of scale and are able to offer lower prices and a wider product range,’’ she said.
“This can constrain demand for traditional convenience store products. As demand from supermarkets and grocery stores grows and they increase their market share, this reduces industry revenue.”
Ms Magner said convenience stores were not what they used to be, underlining Coles strategy in the sector and in particular its promise of lower, everyday prices.
“Furthermore, convenience stores have introduced a range of speciality products and services including ATMs, photocopying, public transport tickets, gift cards and money transfer services, stimulating growth,” she said.