Coles chain eyes growth in produce

JANE HARPER
MAY 28, 2014
HERALD SUN
THE new head of Coles has vowed to keep loading the cannons in the supermarket price war, claiming the chain will push hard to cut prices further in the next five years.
Unveiling his growth blueprint on Wednesday, John Durkan also threw down the gauntlet to rival Woolworths over its longstanding “fresh food people” strategy, saying Coles would ramp up its own fresh offerings.
And he declared he would overhaul the group’s liquor businesses — Liquorland, First Choice and Vintage Cellars — cutting the number of products on offer and removing clutter in the stores.
Speaking at a Wesfarmers’ strategy briefing on Wednesday, Mr Durkan gave the first insights into his plan for the next phase of Coles’ turnaround.
The Coles chief operating officer, who will replace Ian McLeod as managing director on July 1, said there would be no let-up in the aggressive price war waged with Woolworths in recent years.
“Price is going to be just as important, if not more important than in the past,” Mr Durkan said.
“We don’t see the Australian consumer being any less cautious than they have been. I expect us to invest a little bit harder in lowering prices over the next five years than we have over the past five years.”
Mr Durkan flagged fresh food as the next battlefront, saying the chain would “double down” its efforts in the produce, meat and dairy sections. He said Coles could better engage shoppers, with 30 per cent of its customers not buying fresh food.
Mr Durkan said the focus on fresh food included improving the value, availability, sourcing and supply.
“We’ve got the quality in terms of our products, but customers still want us to provide them with value.” Mr Durkan said Coles’ move into financial services was helping the brand connect with consumers.
“We get a much more loyal and higher spending customer when they have a credit card or insurance with us,” he said.
“We are building that depth of relationship with our customers by doing that.”
While Coles remains a standout performer in the Wesfarmers portfolio, investors also heard from the group’s problem child, Target.
Stuart Machin, who took over as managing director of the struggling discount department store last April, said progress was being made in the chain’s turnaround.
He said the store continued to reduce excess stock and work to condition customers not to expect heavy discounts it traditionally offered.
Mr Machin said he believed Target’s brand loyalty meant it could compete with a growing band of international brands, including H&M, that are launching on the Australian market.
“It’s good competition, it gives us a run for our money and focuses the mind.
“The more I listen to our customers, it’s become clear our brand holds potential beyond that of our competitors.”
jane.harper@news.com.au