Coles Group Limited (ASX: COL), a supermarket company headquartered in Melbourne, Australia is accelerating its convenience strategy by revamping 100 supermarkets in six months to add more ready-to-eat food and semi-prepared meals. The company will bring 75 new products to its existing product range for ready-to-eat meals.
In an attempt to boost sales to the shoppers demanding more convenience, the company is planning to modify around 200 Coles stores to a new premium and convenience format and around 200 low-volume supermarkets to a value format to be unveiled next month.
Coles’ Managing Director, Steven Cain views the convenience business as an opportunity to raise its sales over the next five years. From growing its baskets to growing its transactions, the company believes that it can work better with the convenience customers.
Referring to a report showing that 50 percent of the shoppers do not have time to cook and one-third of the shoppers do not what they would be eating for dinner until 5 pm, Mr Cain sees a broad scope in the expansion of food-for-now and food-for-later offerings.
Coles will soon begin the sale of deconstructed smashed avocado and toast apart from other items like roast beef with parsnip mash, hot lamb shanks and pork roasts.
Coles tested its convenience format at its Eastgardens store in Sydney for around six months period. The sales grew more than 10 percent at the store with a growing demand for ready-to-eat food. The Eastgardens store was expanded to fit nineteen fridges and chillers dedicated to convenience foods.
Following its rival Woolworths Group Ltd’s (ASX: WOW) move of rolling out Metro convenience stores, the company plans to meet the growing demand of time-poor consumers who are ready to pay more for convenience. Woolworths recently opened a smaller convenience store in Rozelle, Sydney and is now having around 36 Metro convenience stores across the country concentrated in inner-city and suburban locations.
At the end of January, Coles partnered with Uber Eats to provide ready-to-eat and ready-to-heat meals to time-poor consumers. The plan was to deliver the orders to homes or workplaces in less than 30 minutes at 5 dollars delivery fee. This was also a step towards scaling up the company’s convenience strategy.
Recently, Coles announced its quarterly results for Q3 FY 2019. The company recorded a 46th successive quarter of comparable sales growth. The sales revenue of the supermarket rose to $7,272 million by 3.2 per cent in the 3rd quarter in comparison to the previous corresponding period (pcp).
Market analysts do not see Coles idea as a differentiated one and questions Coles Eastgardens format’s competence with Woolworths' new formats. The analysts think Coles’ focus on price is unsustainable if its costs are more than Woolworths' and Aldi's.
However, Mr Cain is optimistic about the success of his new idea and expects the company’s sales to grow better than what the company has been doing over the last few years.
By the end of the trading session on ASX, the stock of the company was at a price of A$12.770 (as on 13 May 2019), up by 0.551%.
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