Coles to become aggressive player in the convenience store sector

Posted by AFN Staff Writers on 8th August 2016

The push into the convenience store sector by Australian supermarkets continues with Coles launching a new convenience brand ready to take on the likes of 7-Eleven and local milk bars.

According to The Australian, “Big Yum at Little Coles” is already established in three city locations across Melbourne selling takeaway coffees at 80 cents, 20 cents cheaper than 7-Eleven’s popular $1 coffees.

The Big Yum stores will also sell frozen drinks, similar to the popular ‘Slurpees’ sold at 7-Eleven stores, along with healthy food pre-pared meal solutions for busy working consumers looking for a read-made-meal.

The push by Wesfarmers-owned Coles into the convenience sector comes almost a year after major convenience chain, 7-Eleven, made headlines for widespread employee underpayment by some franchise owners.

Since the underpayment issues were brought to light, 7-Eleven has been focused on investigating and managing the situation, ensuring all underpayment claims are looked into.

Australian supermarkets previously entered the convenience sector through petrol stations

Coles, along with Woolworths, have long had a foot in the door of the Australian convenience store industry, largely through petrol stations.

In 2003, Coles opened ‘Coles Express’ stores after the then Coles Myer spent AUD $93 million to purchase the retail businesses operated by Shell Australia.

The move came at a time when Woolworths was already moving into petrol through BP and offering customers fuel discounts if they shopped at Woolworths supermarkets.

Today there are nearly 650 Coles Express stores across Australia with the shops evolving over the years to sells grocery items, such as Coles private label milk, at the same prices as consumers can purchase in Coles supermarkets.

Woolworths convenience push through ‘Metro’ stores

Whilst Coles attempts to take a larger slice of the convenience pie, Woolworths had been trying to increase its share since the first half of its 2016 financial year.

At the beginning of its 2016 financial year, Woolworths launched its ‘Metro’ branded stores in inner-city locations across Australia, offering a new take on convenience stores with plenty of healthy snacks, espresso coffee, healthy grab-and-go lunches and a select number of grocery items, including some fresh produce.

However, despite only opening the stores recently, Woolworths said it had five underperforming Metro stores and would be closing four of them, this announcement was made in late July 2016 to the Australian Securities Exchange (ASX).

More news about the future direction of Woolworths convenience store investments is expected when the company publishes its 2016 financial year profits on 25 August 2016.

Australia’s convenience store industry – key statistics

According to IBISWorld’s latest report into the Australian convenience store sector, dated March 2016, the industry is worth AUD $4 billion annually.

The sector currently consists of 8, 156 businesses and employs over 22, 000 people. The industry’s annual growth has however been falling at 2 per cent annually since 2011.