Coles seeks sales edge with Australia’s first ‘grocerant’

Sue Mitchell

Oct 2, 2019

AFR

Coles has opened Australia’s first ‘grocerant’ – a food hall in a supermarket – after establishing partnerships with independent food retailers to augment its in-house convenience foods range.

Coles customers will be able to dine on sandwiches, salads or hot food bowls from cult Melbourne-based food chain EARL Canteen or snack on freshly made sushi and Japanese-inspired sliders from national chain Sushi Sushi while picking up their groceries.

“It means for breakfast, lunch and dinner we have all the bases covered,” chief executive Steven Cain said on Wednesday after unveiling the first “grocerant” – a combination of the words grocery and restaurant – at the retailer’s newly refurbished flagship store at Tooronga in Melbourne.

Mr Cain is aiming to accelerate Coles’ same-store sales growth, which has lagged that of Woolworths for 10 of the last 11 quarters, by tapping demand from time-poor consumers willing to pay more for convenience.

Mr Cain believes the convenience strategy will enable Coles to generate an additional $1 billion in sales over the next five years, mostly by taking sales from other players in the convenience food market.

The Tooronga 200 sq m food hall marks a significant step up from stores such as Pagewood in Sydney’s Eastgardens, which was refurbished earlier this year to incorporate almost 500 convenience food options such as deconstructed smashed avocado with toast, ready-made meals, curries, soups, ready-to-roast vegetables and stir-fry kits.

Coles is on track to introduce the expanded convenience range into 100 supermarkets before Christmas and plans to incorporate elements of the offer in about 200 stores over the next one to two years.

Convenience foods rollout

Mr Cain says elements of the new food hall concept will be incorporated into the 20 new stores Coles plans to open each year and the 50-odd stores due to be refurbished annually.

“We’ll need to evaluate each of the new concepts like we did at Pagewood,” he said.

“In terms of what we have done in [Tooronga] we’ll let it trade though Christmas and see how each of the concepts fares.

“But the good thing is because we’re rolling out 20 new stores a year and more than 50 renewals a year it gives you a platform to slot this in and as things become successful we’ll roll it into future and renewal stores.”

The former Asda and Metcash executive believes customers will feel comfortable eating breakfast, lunch or dinner in a supermarket as long as the food is good and the ambience is right.

The ‘grocerant’ concept takes a leaf out of the playbooks of US and UK retailers such as Waitrose and Eataly, which enable customers to dine in while they shop for groceries.

Coles has its own commissary kitchen, which makes ready-made and semi-prepared meals that consumers can eat on the go or take home.

Rather than attempting to prepare made-to-order foods such as sandwiches, Coles decided to partner with independent food retailers.

“If we think there’s customer demand for a product it’s often best to work with a black belt than doing it yourself,” Mr Cain said.

“It’s a bit like the technology partnership with Ocado and Witron – if you think someone is so far advanced you’re best partnering with them than reinventing the wheel,” he said.

“Things like sushi and all-day dining options are quite challenging operationally and that’s why we’ve teamed up to make sure the combination of what we’re doing, which is more on the ready meals side, and what they’re doing, which is food to order, comes together seamlessly in-store.”

Coles plans to collaborate with other independent food retailers as it rolls out the  ‘grocerant’ concept across Australia.

“There are a lot of people who do want to work with us, it’s finding the right concept and the right commercial terms,” Mr Cain said.

Coles shares have risen 34 per cent this year, reaching a high of $15.55 this week, underpinned by demand from investors hungry for dividends.