Coles to cut up to 600 head office jobs in Melbourne

Sue Mitchell
September 2, 2014
The Age
Supermarket chain Coles plans to cut between 500 and 600 jobs from its head office in Melbourne as part of a renewed efficiency drive aimed at freeing up funds to reinvest in reducing food and liquor prices.
The job cuts are expected to be announced in Melbourne on Wednesday by new Coles managing director, John Durkan.
Coles was not immediately available to comment on the job losses, which represent almost 20 per cent of the 3000-strong workforce at Coles’ Tooronga headquarters.
However, Mr Durkan told investors last month that, faced with continued cost pressures, Coles needed to simplify and reduce its cost of doing business.
“To enable further investment in value in fresh food, we will continue to drive productivity and efficiency through our business and we have significant opportunity to do so through simplifying our business,” he said.
It is understood that most of the jobs cuts are in back office functions including payments, accounts and IT rather than in customer-facing services.
Coles is believed to be planning to outsource its IT department – sending some functions offshore – emulating suppliers and competitors such as Pacific Brands.
Sources said the job losses would deliver significant cost savings, some of which would be invested back into reducing grocery prices.
Coles has already cut costs in supply chain, logistics and stores, closing about 20 distribution centres over the last five years and optimising transport.
“The low hanging fruit has been picked – now they are looking at other areas,” one source said.
Mr Durkan has also flagged an end-to-end supply chain restructure, from suppliers to stores, and a new workforce management system which will simplify rostering and ensure Coles has the right levels of store staff at the right times.
Coles’ food and liquor margins rose from 4.9 per cent to 5.3 per cent in 2014 but remain well under those at rival Woolworths, where food and liquor margins rose from 7.6 per cent to a record 7.9 per cent in 2014.
Mr Durkan says Coles has improved over the past six years but still lags global retailers in measures such as sales per metre of floor space, freshness, supply chain efficiency and the cost of doing business.
“We can move the dial quite considerably and on some of those things we can be world leaders,” he said in a speech to investors in May.
Mr Durkan, who took the helm in July from Ian McLeod, also plans to further improve Coles’ fresh food offer, boost store service with a new point of sale system and add more ­financial services products.