Coles Group announced it will cut $1 billion from business costs by 2023, during a strategy update on 18 June. Savings were needed to offset rising costs of wages and utilities, Coles chief executive Steven Cain says.
Cain says, "The landscape is changing faster than ever and it is fair to say the next five years will be the toughest we have faced as a company and the industry has faced."
The company expects to book between $91-$131 million of one-off costs in 2019 stemming from supply chain restructuring, mainly the closure of warehouses.
In October last year Coles announced it would spend more than $700 million over five years to build two automated distribution centres to replace five existing warehouses. The two new distribution centres for room temperature grocery items will be built in Sydney and Brisbane by the Australian arm of German-based company Witron Logistik + Informatik.
Earlier this year Coles announced a partnership with Ocado to build an automated warehouse for its home delivery business, which is due to start operating in 2023. Through an exclusive services agreement, Coles will bring Ocado Group's grocery platform and automated fulfilment and home delivery solutions to the Australian market.
Currently, staff at Coles pick grocery items for home delivery from Coles supermarkets. Ocado's warehouses, in contrast, are operated by groups of small robots, which pick grocery items from vertical stacking systems and load them into customer's order boxes. Coles says it will pay Ocado to provide multi-temperature, automated, robot-driven fulfillment centres in Sydney and in Melbourne, to double its home delivery capabilities and boost online sales by $1 billion (Food & Drink Business, 28/03/2019).
Cain says there will be fewer new supermarkets while its online and convenience businesses will expand. The focus will be on "everyday low prices" rather than discounting.
Cain said if the company wasn't in profit growth by 2021 he would be "very disappointed".
In 2020, 75 supermarkets would be renovated, up from the 50 this year but using four formats to cater to different demographics and shopping needs. Cain says up to 40 per cent of floor space would be allocated to local customer needs and its online range would double to 40,000 products.
In his presentation Cain said to make more money from a fragmenting customer base you have to be flexible.
