Coles boss craves more as turnaround gathers momentum

Posted by Daniel Palmer on 7th May 2009

Ian McLeod, the Managing Director of Coles, is craving faster progress but has maintained that the supermarket chain is on track in their five-year turnaround.

“I always would like to be progressing faster, but I think you have to recognise that this is a very significant turnaround which will take time, so on the basis of where we would expect to be at this stage in the turnaround, we’re on track and we’re making encouraging progress, but we’re at the start of what’s going to be a very long journey,” he told Business Spectator.

“One thing is that in Coles, there is a solid bedrock of people and there is high potential. There are a number of people in Coles that have been part of the Coles organisation when it was successful and effectively, through no fault of their own, they’ve seen the company degenerate and lose its way and as a result of that there are a number of different aspects of the organisation that need to be changed and the team that have been put in place at a senior level have a high level of skill and experience and are very motivated and determined to see that change through.”

Mr McLeod, who last year admitted that some stores “horrified” him when he first arrived in Australia, suggested that the changes required were not dissimilar to those in his previous jobs at Asda in the UK and Wal-Mart in Germany. “…There is nothing that I’ve come across in Coles that I haven’t come across before. I may not have come across them all at the same time before, but I’ve always come across them,” he added in the Business Spectator interview.

On-shelf availability has been a key focus for the company in the early stages of the turnaround, with changes in supply chain management now heading towards completion. Mr McLeod attributed some of the growth in sales over the course of the year-to-date to greater shelf availability and said they were expecting further improvement by optimising the potential of a more efficient network – which now has almost half the number of national distribution centres as they did upon Wesfarmers’ takeover.

Private label

Mr McLeod reinforced the notion that private label had gained traction in the past year as consumers become more prudent, and anticipates demand to be maintained even as economic concerns ease.

“…The (private label) range is an important part of our product mix and what we’re seeing is improvements in its performance,” he advised. “(And) I think if … we are focused on making sure that the quality of the products deliver for the customer, then if they have enjoyed eating those products and believe they deliver good quality for them … regardless of the economic circumstances, they will continue to buy them.”

An extension of their focus on value beyond private label is the recently launched “Feed your family for under $10”, an advertising campaign similar to the very successful “Feed your family for a fiver” boast by Sainsbury’s in the UK last year. The move has already begun “resonating with the consumer”, according to Mr McLeod.

Sales growth

The company lags main rival Woolworths on key measures, but sales growth in the first three quarters has provided optimism that growth in the gulf between the two has begun moderating. First quarter like-for-like sales grew 1.3%, before rising 3.8% in the second quarter and surpassing the rate of inflation for the first time this financial year with a 6% lift in the third quarter. However, upon announcing the third quarter results last month, Mr McLeod warned that growth is likely to stagnate at some point during the turnaround of a business that had been “neglected” for many years.