Coles Q3 Trading Update & Analysis

Planning your growth strategy into Australian Retail through a deeper understanding of the leading retailers financial reporting and market outlook

The latest round of financial reporting in the Australian grocery sector saw the 2 major grocery retailers in Australia, Coles Group and Woolworths, announce their Q3 trading update. Always a good indication as to the pace or momentum each retailer has entering the final quarter and a brief update vs strategic priorities or performance. In a highly competitive market this update provides an essential insight for UK Food and Drink businesses targeting Australia for strategic growth.

Through this latest concise blog  we unpick the Coles performance and the opportunities created.

The update providing valuable insights into both the headwinds and opportunities in the market and the outlook ahead to help you capitalise on the opportunity for your business either as a branded supplier or a Private Label contract manufacturer.  Crucially the two retailers have combined turnovers exceeding $90bn representing around 63% market share.

Coles top line details included: –

• Supermarket sales up 3.7% and comparable growth of 3.0%
• E-com growth 25.7% in Supermarkets ($1.1Bn) with 11.3% penetration and 18.2% growth in Liquor
• Exclusive to Coles brands performing well 138 new lines launched, 48 within the Coles Simply (Value brand)
• Liquor 3.4% although flat on comparable growth
• Exclusive to Coles revenue exceeded $3.2Bn a growth of 4.5% and the premium Coles Finest tier growing revenue by 13.7%
• Price inflation at 1.5% influenced by livestock prices and the weather impact from Cyclone Alfred, deflation noted in health & home categories and higher inflation in categories impacted by coffee or chocolate commodity pricing

A closer look into Coles Strategy and Progress

• Under the Destination for food and drink strategic focus the key callouts included summer value campaign and the liquor price match promise, Customer focused Value bays in over 800 stores to aid customer engagement, and the transformation underway with the liquor business moving to one banner.
• The Accelerated by digital focus highlighted the new ‘Due to Buy’ recommendations on the www site and app, “Deliver More” branding launched promoting the reach and convenience of the new customer fulfillment centres, and the expanded range of products available online.
• Delivered consistently for the future The closure of the manual Distribution centre and increased ramp up on the Automated centres, Enhanced availability drivers with liquor moving to Easy Ordering, and 4 new store openings completed alongside 18 renewables (combined total Supermarket & liquor)
• CEO statement included recognition for solid performance, reflection on continued investment in value and enhanced customer experience across instore and online, and supply chain performance through the automated distribution centres and customer fulfillment centres)

With Private Label playing a key part of the growth strategy, it’s important to recognise that on global scale if penetration is mid 30s there is still plenty of opportunity to increase, and each % increase represents a considerable value. For UK manufacturers seeking growth in markets like Australia, it’s essential to grasp trading updates and financial reporting. This understanding allows tailored offers to align with the market’s current narrative.

What does it mean? Is it a good time to target the Australian market for UK-based food and drink manufacturers or brand owners?

Yes, in our opinion there are 2 strategies when looking to engage the 2 largest retailers in the market that should appeal to UK based food and drink businesses targeting the Australian market. Firstly, the demand for branded innovation to inspire consumers whilst delivering a clear point of difference in a highly competitive retail landscape remains a key trading objective.  Secondly the growth in Private Label and the access needed for best-in-class contract manufacturing.

Firstly, through a deep understanding of the target category taking proven innovation from other established markets into Australia or products that have a clear USP should appeal to buyers.

Secondly is understanding the strategic growth in Private Label and the opportunity this creates for your business, as buyers target best in class contract manufacturers, proven innovation capabilities, lowest cost operators or suppliers that can deliver on the increasingly demanding responsibly sourced agenda.

There is also the hybrid combing the launch of your brand alongside Private Label supply to drive growth into the total category.

A standout opportunity that is reflective of the UK market is the strong growth the UK retailers are reporting in premium products, fueled by consumers spending more in store whilst eating out less. With Coles strategy replicating this focus on their finest range accelerating innovation in this area the demand for premium products will continue to be a priority.  The additional movement towards co-branding with premium products to increase the connectivity with consumers has the added benefit supporting longevity of supply.

The consistency of messaging regarding Private Label and its strategic importance creating demand for innovation that can support the ongoing momentum behind Private Label growth.

In summary the opportunity for innovative or exciting UK Food and Drink businesses targeting growth in the main Australian retailers continues to look attractive. To succeed it’s essential to take a strategic approach to retailer engagement understanding the competitive landscape, key marketing messages resonating with consumers and have a route to market through a robust supply chain solution

Prof. Consulting Group.

Are you looking to break into the Australian food industry? Look no further than Prof. Consulting Group! With our team of industry-leading experts and extensive range of services, we’ll help you take your business to the next level.

For more information or to discuss how Prof. Consulting Group can support your business, Contact Us Today.