Coles MD plans overhaul of convenience offering

Managing Director of Coles, Steven Cain, has hinted at plans to introduce a new convenience strategy for the supermarket which would include smaller-format stores, meal kits and express deliveries.

In an interview with The Australian Financial Review, Cain said that he was “fascinated” by the popularity of meal kits, which allow customers to make a meal from scratch using ingredients and recipes delivered to their door.

“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,” Cain said, admitted that Coles is “probably not maximising the sales opportunity” that exists here.

“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.”

In May this year, Nielsen’s research into meal kits in Australia revealed that more than 64 per cent of HelloFresh and Marley Spoon primary shoppers are less than 45 years old. Their customers are high spenders with a high repurchase rate. They are less likely to shop in-store and heavily focused on fresh-produce.

The research suggested that retailers could use meal kits as a way to increase basket sizes, as shoppers revealed they are willing to pay more for convenience.

Earlier this year, Woolworths launched their own meal kit range in the form of the ‘Ready-to-Create-Bag’ and Coles launched ‘combo boxes’ containing a mixture of fruits and vegetables, to save shoppers’ time choosing healthy ingredients.

Marley Spoon reported a 140 per cent lift in revenue in Australia for the first six months to June, but an alternative offering from Coles could upset the apple cart.

Cain plans to review Coles’ strategy when he returns from a two-week investor roadshow to sell Coles’ $20 billion demerger from Wesfarmers.

“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,” Cain said to the AFR.

“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.”

“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.”

Coles currently offers a click and collect service and is working with Airtasker to trial express deliveries. However Cain is eager to be more responsive to changing shopping habits with an improved online offering.

“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.

He plans to explore other partners that could help automate and improve the 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.”

The AFR reports that the supermarket giant is also testing small-format local store concepts and “fuel-less” Coles Express convenience stores.

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