Coles boss Steven Cain eyes meal kits and express deliveries

Sue Mitchell
October 24 2018
AFRS

New Coles managing director Steven Cain will review the retailer’s strategy when he returns from an investor roadshow.

Coles managing director Steven Cain plans to take on meal kit companies Marley Spoon and HelloFresh as part of a new convenience strategy that also includes small-format stores and express deliveries.

In a wide ranging interview before embarking on a two-week investor roadshow to sell Coles’ $20 billion demerger from Wesfarmers, Mr Cain said he was “fascinated” by the growth in meal kits, which are becoming increasingly mainstream as time-poor consumers opt for pre-prepared and pre-portioned ingredients they can cook quickly at home.

“I always ask people what they’re eating and it’s amazing – even people we know, many of them are dabbling with these various brands, whether its Lite ‘n’ Easy or Marley Spoon,” Mr Cain told The Australian Financial Review.

“It’s interesting that Coles has a $1 billion home shopping business now and we have 600 vans running around the country – we’ll be the people who will take the groceries up the stairs for you … and we’ll be passing a guy with a brown bag (meal kit) coming back down the stairs.

“It’s one of those things where we’re probably not maximising the sales opportunity that might exist in that market.”

Coles’ push into the meal kit market comes after Woolworths launched a range of meal kits in new format stores this year. Its foray into this market could dent sales growth at Marley Spoon, which listed in July and reported 140 per cent revenue growth in Australia in the June half as active customers doubled to 36,000.

Mr Cain will review Coles’ strategy when he returns from the investor roadshow, looking in particular at how to turbocharge its $1 billion online food and grocery business, which is growing by about 30 per cent a year and just breaking even.

“I know the team has done some work already so I need to sit down again when we get back and do a full review of what we think the best approach to that market might be,” he said.

“It’s a way of growing your sales but it’s also a way of defending your business, because certainly if you don’t do it someone else will.”

Speed key in changing market

Mr Cain will also look at how Coles can better respond to the latest trend in the $100 billion food and grocery market – extreme convenience – while turning its online operation into a profitable business.

“We have as a business moved from a weekly grocery shop many moons ago to people shopping more often for the meal that night,” he said, “and then there’s the younger generation who are increasingly using things like Uber Eats – it’s instant gratification, bring me my meal in half an hour, please.

“The market around the world, and increasingly here, is heading towards how fast you can get product to people.”

Under its “anywhere, anytime” strategy, Coles is already offering a wider range of pre-prepared and semi-prepared convenience foods, such as roast pork, pizzas and salads, with more products on the way, and is testing concepts for small-format Coles Local supermarkets and fuel-less Coles Express convenience stores.

Coles is also offering click and collect services in most of its 800-odd supermarkets and has opened two dark stores, where products for online orders are picked and packed, complementing deliveries from about 100 supermarkets. The retailer is working with Airtasker to trial express deliveries.

But Mr Cain, who took the helm from John Durkan last month, believes Coles needs to do more to respond to changes in shopping habits and to improve the efficiency of its online business by introducing more automation as volumes grow.

“We’ll have a look at which parts of the strategy are working and which ones we may need to pivot on … which are the ones we think we’ll get the highest return and we should accelerate,” he said.

“What we’ll be doing in home shopping is looking at what other partners we could have to help automate and make more efficient that home shopping process.

“The market is moving towards instant gratification and obviously we have to meet consumer needs but we also have to make money on the way.”