Coles Group Ltd. · ASX:COL
Coles — Investor Day (June 2021)
80 slides from Coles's investor day presentation, Jun 17, 2021
Slide 1: Coles Group - 2021 Investor Strategy Day Presentation
ASX Release 17 June 2021 The Manager Company Announcements Office Australian Securities Exchange Dear Manager, Coles Group - 2021 Investor Strategy Day Presentation Please find attached the presentation that will be given today, Thursday 17 June 2021, at the Coles Group 2021 Investor Strategy Day. T
Slide 2: Winning in our Second Century
Winning in our Second Century Coles, Collingwood 1914 Investor Strategy Day June 2021 Coles Local, Fitzroy 2021
Slide 3: Disclaimer
Disclaimer This presentation contains summary information about Coles Group Limited (ACN 004 089 936) and its controlled entities (together, ‘Coles’ or ‘the Group’) and Coles’ activities as at the date of this presentation. It is information given in summary form only and does not purport to be comp
Slide 4: Agenda
Agenda Topic Time Presenter 1 Introduction 9:10am – 9:25am Steven Cain 2 Inspire Customers 9:25am – 10:05am Lisa Ronson, Greg Davis, Ben Hassing Break 10:05am – 10:15am George Saoud, Matt Swindells, Roger Sniezek, Thinus 3 Smarter Selling 10:15am – 10:45am Keeve 4 Win Together 10:45am – 11:10am Thin
Slide 5: Growing long-term shareholder value by becoming the most trusted retailer in Australia
Growing long-term shareholder value by becoming the most trusted retailer in Australia • Rich heritage dating back to 1914, a proud and deeply Australian business, successfully demerged from Wesfarmers in November 2018, creating an independent ASX20 company • Delivered significant strategic and fina
Slide 6: Overview of Coles Group
Overview of Coles Group ~120k 2,476 Stores $37bn 5.9% FY20 Group sales Supermarkets eCommerce engaged team 831 Supermarkets revenue sales penetration1 members 924 Liquor $1.8bn 4.2% +9,000 since demerger 721 Express FY20 Group EBIT Liquor eCommerce sales penetration1 Two YoY 120% 3.5% $139m worth of
Slide 7: We are tracking well against most key strategic metrics
We are tracking well against most key strategic metrics KPIs FY191 Current2 Status Reduced safety TRIFR3 27.4 19.2 (30% improvement) ⚫ Increased team member engagement4 61% 65% (+4ppts) ⚫ Improved customer satisfaction5 88% 90% (+2ppts) ⚫ COVID-19 related local shopping impacted Sales growth at leas
Slide 8: Strong market position & growth across Coles Group since demerger
Strong market position & growth across Coles Group since demerger 2-year headline Market share1 sales growth3 27% 11% 18% 19% 23%2 16% Supermarkets and Liquor 2-year EBIT growth3 exceeds 20%, a strong result relative to global peers Notes: (1) Market share data for 1H21, sourced from ABS releases an
Slide 9: Demerger investment thesis, November 2018
Demerger investment thesis, November 2018 #1 Operates in resilient and growing markets #2 Market leading position in an evolving competitive landscape #3 Established, non-replicable national store network #4 Making life easier for customers strategy #5 Strong cash generation, attractive dividend pay
Slide 10: Strategy refreshed in June 2019 to deliver long-term shareholder value
Strategy refreshed in June 2019 to deliver long-term shareholder value Our vision. ‘Become the most trusted retailer in Australia and grow long-term shareholder value.’ Our strategic differentiators ✓ Win in online food and drinks with an optimised store and supply chain network ✓ Be a great value O
Slide 11: Group EBIT progress since strategy refresh
Group EBIT progress since strategy refresh FY16-18 FY19-21 FY09-16 Industry reset Refreshed strategy, Investment in management, stores and brand reducing retail increased investment, driving strong revenue and earnings growth profit pool Smarter Selling, COVID-19 ~114% EBIT ~26% EBIT ~15% EBIT growt
Slide 12: Strong progress on strategy execution
Strong progress on strategy execution Inspire Customers Smarter Selling Win Together • Increased customer NPS1 by 6ppt • On track to deliver cumulative • Embedded a safety culture, benefits in excess of $550m by leading to lower TRIFR4 • Recognised as the fastest growing FY21 • Launched Coles Group
Slide 13: COVID-19 impacted customer behaviour with signs of normalisation
COVID-19 impacted customer behaviour with signs of normalisation Acceleration of Shift to in-home Reduced visits in Preference to Reduced online and digital consumption favour of larger shop locally immigration and engagement baskets international travel Online penetration Working from home Customer
Slide 14: COVID-19 impacts short-term population growth; but recovery expected
COVID-19 impacts short-term population growth; but recovery expected National population growth1, % year-ended at 30-Jun COVID-19 impacts 1.8% 1.7% 1.7% 1.6% 1.5% 1.6% 1.5% 1.5% 1.4% 1.4% 1.3% 1.3% 0.8% 0.2% 0.1% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21F FY22F FY23F FY24F Notes: (
Slide 15: Coles market share recovering as COVID-19 induced local shopping unwinds
Coles market share recovering as COVID-19 induced local shopping unwinds Coles’ Supermarkets market share, % COVID-19 impacts • Coles’ refreshed Key Refreshed strategy COVID- National Victoria Local shopping strategy was gaining starting to gain 19 pantry events traction stocking lockdown lockdown b
Slide 16: The Australian grocery market remains highly attractive
The Australian grocery market remains highly attractive Australian grocery market growth, % • Market growth over the last 20 years despite significant Dot com GFC COVID crash -19 economic disruptions 6.6% 4.5% • Significant growth opportunities exist requiring greater capital investment – this has b
Slide 17: Coles' strategy is more relevant than ever
Coles’ strategy is more relevant than ever Our vision. ‘Become the most trusted retailer in Australia and grow long-term shareholder value.’ Updated since last strategy refresh Inspire • Customer obsessed Customers • Tailored offer with trusted and targeted value • Own Brand powerhouse • Destination
Slide 18: Driving our strategy with investment acceleration in three key areas
Driving our strategy with investment acceleration in three key areas i ii iii Customer exploring the Coles digital catalogue Cheese nook at Coles Moonee Ponds, VIC Recently opened Coles Local at York Street, NSW Invest in omnichannel experience, Invest in tailoring our range with Invest in Coles Loc
Slide 19: Experienced & diverse Executive Leadership Team
Experienced & diverse Executive Leadership Team Steven Leah Greg Matt Darren Ben Daniella Cain Weckert Davis Swindells Blackhurst Hassing Pereira Chief Executive Chief Financial Chief Executive Chief Operations Chief Executive Chief Executive Company Secretary Officer Officer Commercial & Express Of
Slide 20: Inspire Customers
Inspire Customers Lisa Ronson – Chief Marketing Officer Greg Davis – Chief Executive Commercial & Express Ben Hassing – Chief Executive eCommerce Strategic elements • Customer obsessed • Tailored offer with trusted and targeted value • Own Brand powerhouse • Destination for convenience and health •
Slide 21: Customers' preferences and behaviours are rapidly evolving
Customers’ preferences and behaviours are rapidly evolving Adoption of eCommerce Digital engagement Convenience & value Health & sustainability • Rapidly growing online • Increasing exploration of • Growing consumption of • Rising demand for healthier grocery sales digital in-store fresh and high qu
Slide 22: We are increasingly customer obsessed
We are increasingly customer obsessed We are now one of Our NPS has improved significantly Australia’s most trusted brands Future areas of focus Net Promoter Score, 12-week rolling average to end of quarter1 • Redefine value at Coles beyond price, linking it to +610bps sustainability, health and pro
Slide 23: Loyalty and data will drive customer value and additional revenue
Loyalty and data will drive customer value and additional revenue flybuys program enables us to reward our customers Increased revenue from data commercialisation flybuys is the #1 loyalty program1 in Australia, with 6.3m Data provides incremental revenue for Coles, while enabling active households
Slide 24: We continue to tailor our offer across our network
We continue to tailor our offer across our network On track to tailor 40% Customer satisfaction has improved of stores by FY23 with increasing range activity Future areas of focus Customer perception of Coles grocery range, % • Continue to invest in range +400bps across key customer growth categorie
Slide 25: Delivering trusted and targeted value remains a key priority
Delivering trusted and targeted value remains a key priority Improved effectiveness of promos & Building strength in price better communication of value and value perception Future areas of focus Competitively priced customer metric2, % • Continue progress towards EDLP and optimise promotional mix +
Slide 26: Driving trust and loyalty through our exclusive Own Brand portfolio
Driving trust and loyalty through our exclusive Own Brand portfolio OB continues to inspire customers Delivering higher customer satisfaction and drive trust through innovation and award winning products Future areas of focus Customer NPS • Continue to differentiate, innovate Coles’ OB is a $10bn+ b
Slide 27: Establishing ourselves as a destination for convenience & health
Establishing ourselves as a destination for convenience & health Healthy living inspiration Destination for convenience Future areas of focus • Further expand and innovate in convenience to become a compelling omnichannel destination for convenience Own Brand helps deliver healthier alternatives in
Slide 28: Customers who shop online and in-store spend more with Coles
Customers who shop online and in-store spend more with Coles 2.3x Omnichannel spend vs. in-store only In-store Online Inspire Customers - Leading anytime, anywhere, anyhow shopping 26
Slide 29: eCommerce metrics continue to improve
eCommerce metrics continue to improve 2.1x 4.2x improvement improvement in in NPS Perfect Order Rate +110bps +203bps growth in growth in omnichannel eCommerce customers penetration of total sales Notes: All metrics are year-on-year increase for 3Q21 Inspire Customers - Leading anytime, anywhere, any
Slide 30: We continue to invest in Click & Collect...
We continue to invest in Click & Collect… Click&Collect Click&Collect Rapid Converting >300 service desks stores to drive up 90-minute order to pick up service Inspire Customers - Leading anytime, anywhere, anyhow shopping 28
Slide 31: ...and expand our home delivery service
…and expand our home delivery service Same day home delivery Regional delivery network expansion Will be available in over 400 stores Will increase regional delivery capacity and reach Inspire Customers - Leading anytime, anywhere, anyhow shopping 29
Slide 32: Increasing omnichannel loyalty with Coles Plus and flypay
Increasing omnichannel loyalty with Coles Plus and flypay Coles Plus flypay Membership benefits will flybuys’ customers can continue to expand now redeem points online Inspire Customers - Leading anytime, anywhere, anyhow shopping 30
Slide 33: Unifying digital channels to enable Coles' omnichannel strategy
Unifying digital channels to enable Coles’ omnichannel strategy Unified website Shoppable app Omnichannel experience Merge content with Leverage growing use of Frictionless digital in-store commerce mobile devices experience Inspire Customers - Leading anytime, anywhere, anyhow shopping 31
Slide 34: Our Ocado partnership enables a step-change in eCommerce
Our Ocado partnership enables a step-change in eCommerce • Doubling the online product range with new-to-Coles premium and local range Expanded Range • Complete Coles product offering, including extended Liquor range • Quickly change overall range through test/learn approach • World-class perfect or
Slide 35: Ocado experience with other retailers has been encouraging
Ocado experience with other retailers has been encouraging In the first six months post-launch In first three months post-launch In first month post-launch 87 Net ‘Our partnership with promoter score Ocado has been second-to-none. Together through 98.6% collaboration, we have on time delivery score
Slide 36: Anytime, Anywhere, Anyhow: summary
Anytime, Anywhere, Anyhow: summary ✓ Strong omnichannel positioning ✓ Positive leading indicators ✓ Growing customer offerings ✓ Leveraging industry-leading partnerships Inspire Customers - Leading anytime, anywhere, anyhow shopping 34
Slide 37: Inspire Customers: summary
Inspire Customers: summary • Use loyalty data and advanced analytics to provide more personalised customer experiences • Continue to invest in range, both in-store and online, to provide a tailored offer across the network • Provide trusted value through everyday low prices, optimal promotional mix
Slide 38: Smarter Selling
Smarter Selling George Saoud – Chief Executive Emerging Business & Smarter Selling Matt Swindells – Chief Operations Officer Roger Sniezek – Chief Information Officer Thinus Keeve – Chief Sustainability, Property & Export Officer Strategic elements • Technology-led stores and supply chain • Strategi
Slide 39: Strong progress on Smarter Selling program to date
Strong progress on Smarter Selling program to date $1.0bn • Key purpose of Smarter Selling program is to offset cost inflationary headwinds and enable strategic re-investment back into the business FY22/231 • On track to deliver cumulative Smarter Selling benefits in excess of $550m by FY21 FY211 •
Slide 40: Smarter Selling benefits are re-invested in strategic initiatives
Smarter Selling benefits are re-invested in strategic initiatives Efficiencies achieved by transforming our operating model Enabling us to productively re-invest in the business Above Gross Profit Store CODB Admin CODB • Offsetting underlying inflation headwinds in CODB, while re-investing in: Admin
Slide 41: Strategic sourcing delivering COGS benefit & improved engagement
Strategic sourcing delivering COGS benefit & improved engagement Driving value through strategic Improving supplier relationships and sourcing partnerships procurement processes Future areas of focus Advantage supplier survey – Net • Continue to save costs via shift to Favourable score2, # smarter,
Slide 42: Our stores are utilising technology to continue to drive efficiency
Our stores are utilising technology to continue to drive efficiency Introduced new technology & self- Bringing benefits to our customers, serve solutions in-stores team & bottom line Future areas of focus Delivering fresher produce, • Expand Smarter Forecasting to improved availability, tailored fur
Slide 43: Our supply chain continues to be transformed via technology
Our supply chain continues to be transformed via technology Major transformation and Coles Collect improved customer cost saving programs on track metrics and delivered cost savings Future areas of focus Coles Collect • Embedding a fully integrated • Delivered 35% increase in pallets transport manag
Slide 44: Witron automated DCs will create a powerful advantage
Witron automated DCs will create a powerful advantage Witron benefits • Safer working environments with improved service at a lower cost • Reduced lead time for better availability, with both sites providing full ambient range in each state Witron site in Redbank, QLD • Doubled the volume on half th
Slide 45: Coles' technology strategy supports 'Winning in our Second Century'
Coles’ technology strategy supports ‘Winning in our Second Century’ Technology Foundations Smarter Technology Technology Innovation • Cyber security • AI and Machine Learning • lab288 • Data centre, network & infrastructure • Foundational future capabilities • Innovation with partners • Enterprise t
Slide 46: Increasing investment in technology
Increasing investment in technology Group technology investment (capex & opex) • 1.9x planned investment in technology spend in FY22 vs FY18. Key programs of work: 1.9x – eCommerce customer experience – Ocado solution – Supply chain automation – Store operations optimisation – Advanced analytics ena
Slide 47: Smarter Forecasting showcases the technology strategy
Smarter Forecasting showcases the technology strategy What is Smarter Forecasting? How we have achieved it? Platform for the future • Forecasts sales by SKU, by • Built by our internal Advanced • Single version of the truth store, by day for supermarkets Analytics team • Multiple further application
Slide 48: Innovation at scale in the right format, delivering higher returns
Innovation at scale in the right format, delivering higher returns Format A Format B Format C Coles Local Innovation stores Top traders Core traders Transformational Premium, foodie Mainstream offer, Focus on Premium offer stores to trial Description offer with with selected efficiencies – focused o
Slide 49: Coles will keep growing and transforming the network
Coles will keep growing and transforming the network Coles stores network, # Coles Local Format C • Coles’ innovation process helps: New Format (A&B) Previous format − Transform the fleet including the roll-out of Coles Local − Improve customer experience; and − Improve return on capital • Transform
Slide 50: Smarter Selling: summary
Smarter Selling: summary • Progress to deliver $1bn cumulative Smarter Selling benefits by FY23, excluding COGS benefits • Transform in-store customer service and operations through an increased use of technology, data and AI • Progress automation in DCs and fulfilment centres, and expand Coles Coll
Slide 51: Win Together
Win Together Thinus Keeve – Chief Sustainability, Property & Export Officer Sally Fielke – General Manager Corporate Affairs Kris Webb – Chief People Officer David Brewster – Chief Legal & Safety Officer Strategic elements • Safer choices together • Great place to work • Together to Zero to drive ge
Slide 52: Sustainability pillars
Our ambition is to become Australia’s most sustainable supermarket Purpose Coles’ Sustainably feed all Australians to help them lead healthier, happier lives Win Together are doing and why What we Acting together now for generations ahead Sustainability pillars Major ambitions Win Together – Togethe
Slide 53: Our new sustainability icon
Our new sustainability icon The dots, as used in the art of Northern Aboriginal Australian people, reflect the notion of community with many different groups circling around a larger collective goal The cross hatching designs, as used in the art of Southern Aboriginal Australian people, represent th
Slide 54: Committed to reduce environmental impact through 'Together to Zero'
Committed to reduce environmental impact through ‘Together to Zero’ Coles Group signed an agreement with Lal Lal Wind Farms for the A concrete slab carpark made partly from recycled soft plastics at Coles has donated the equivalent of more than 58 million meals to purchase of large-scale generation
Slide 55: Better Together through diversity and stakeholder engagement
Better Together through diversity and stakeholder engagement • Celebrating diversity and • Fostering key community • Offering quality, safe and trusted • Providing Australian-grown inclusion partnerships: feeding products sourced ethically, produce as a first priority • Coles recognised as Gold Aust
Slide 56: Our strategy to be 'A Team that is Better Together'
Our strategy to be ‘A Team that is Better Together’ We’re all different. And at Coles, we know that’s a good thing. Just as we have for over a century, we’re making Coles somewhere everyone feels like they belong. So that we can all live healthier and happier lives. Foster an open and Achieve a gend
Slide 57: We are making progress on 'Great place to work'
We are making progress on ‘Great place to work’ Delivered on our key strategic pillars Future areas of focus Our values. • Year-on-year progress to grow team member engagement Invest in learning, development and team Customer obsession Passion and pace Responsibility Health and happiness • Launched
Slide 58: We continue to make 'Safer choices together'
We continue to make ‘Safer choices together’ Delivered numerous safety initiatives Resulting in significantly lower TRIFR Future areas of focus 39.0 • Smarter safety through data, technology and innovative 34.4 engineering controls Refreshed safety capabilities for our team members 27.4 • Creating a
Slide 59: Win Together: summary
Win Together: summary • Develop a pathway through to Zero waste, Zero emissions and Zero hunger • Support Australian communities, producers and diversity of team members • Foster a culture of belonging to make Coles a ‘Great place to work’ • Cultivate a safety culture across Coles, inspire and help
Slide 60: Liquor strategy update
Liquor strategy update Darren Blackhurst – Chief Executive Liquor New B&W Liquorland at Merrifield, VIC Liquor strategy update 58
Slide 61: Elevated Liquor retail market, with evolving customer preferences
Elevated Liquor retail market, with evolving customer preferences Overall market elevated, online accelerating Importance of local, craft & boutique • Liquor retail market was impacted by panic buying, • Increased demand for local, premium, on-trend lockdowns and the closure of on-premise throughout
Slide 62: Liquor strategy launched in August 2020 is driving our long-term plan
Liquor strategy launched in August 2020 is driving our long-term plan “To help (adult) Australians lead happier and healthier lives, Our Purpose by drinking in a responsible and sustainable way” Our Vision “Be a simpler, more accessible and locally relevant drinks specialist” Smarter Selling Inspire
Slide 63: Our 6 key priorities are progressing
Our 6 key priorities are progressing Simplify the operating model Differentiate our offer & Build capability serve our customers better Decluttering and reducing cost Creating locally relevant ranges Investing in team, systems and online Be more relevant, Engage safely, responsibly Refocus the busin
Slide 64: Three distinct banners, relevant to customers' evolving needs
Three distinct banners, relevant to customers’ evolving needs… The local, convenient specialist The warehouse The spirit of an independent Shop anytime, anywhere, anyhow …available online and through Coles Liquor strategy update 62
Slide 65: Express strategy update
Express strategy update Michael Courtney – Executive General Manager Express Coles Express site at Keilor Park, VIC Express strategy update 63
Slide 66: Improved our underlying convenience proposition
Improved our underlying convenience proposition Key priorities Achievements so far Improve convenience store profitability • Offset fuel headwinds, presented through COVID-19, with 1 top-line delivery and robust cost management • Better partnering with our supply partners Leverage Coles Group capabi
Slide 67: Maintained fuel market share and outperformed in shop sales
Maintained fuel market share and outperformed in shop sales Fuel volumes are gradually recovering from COVID-19 Despite lower fuel volumes, strong shop sales have driven related impacts an increase in market share • Despite improvements, fuel volume remains below • The convenience channel has seen i
Slide 68: Addressing right strategic priorities to grow our potential
Addressing right strategic priorities to grow our potential Coles Express award winning Urban Coffee Culture offer Coles Express site in South Morang, VIC Coles Express team members participating in Movember Inspire Customers Smarter Selling Win Together • Increased tailoring to provide a • Segment
Slide 69: Coles' financial framework
Coles’ financial framework Leah Weckert - Chief Financial Officer Coles Kalgoorlie store in WA – opened May 2021 Coles’ financial framework 67
Slide 70: Coles' financial framework aligns with our vision
Coles’ financial framework aligns with our vision To deliver attractive returns with disciplined approach to capital allocation while maintaining a strong balance sheet to drive long-term shareholder value 1. Focus on achieving 2. Disciplined approach 3. Maintain strong attractive returns to capital
Slide 71: Focus on achieving attractive returns
1 Focus on achieving attractive returns Reported Group ROC (Underlying Group ROC1), % Key comments Pre-AASB16 Post-AASB16 • Management LTIs4 equally balanced between ROC and TSR 35.2% (36.6%) • Capital spend categories/projects have differing rates of return but are 32.5% 32.9% (33.5%) all expected
Slide 72: Disciplined approach to capital allocation
2 Disciplined approach to capital allocation Growth, efficiency Essential & maintenance (‘returning’) & net capex ‘Stay in business’ capex property capex Focus on strategic Excess priorities and sustainable Sustainable earnings growth cash operating Debt obligations Recycle property capital flow pos
Slide 73: Coles is a highly cash generative business
2 Coles is a highly cash generative business Cash flow realisation, % Operating cash flow (excluding interest and tax) Cash realisation Key comments EBITDA (pre-significant items) Pre-AASB16 Post-AASB16 • Strong EBITDA growth 120% • Coles has achieved cash 110% 111% 107% realisation well in excess o
Slide 74: Coles is investing for further growth and efficiencies
2 Coles is investing for further growth and efficiencies Gross operating capex1, $m Operating capex Witron and Ocado capex Key comments Demerger Average ~$940m • Historically lower capital investment prior to ~1,400 demerger Average ~$640m ~1,100 893 • Disciplined and rapid 833 deployment to capture
Slide 75: Prioritisation framework assists in allocation of capex
2 Prioritisation framework assists in allocation of capex Capital prioritisation framework Prioritise Allocate Minimise Key comments ROC • Competitive allocation of returning capital (i.e. not High 6 3 1 essential and maintenance) determined by capital prioritisation framework • Capex allocated towa
Slide 76: Coles has shifted its capex to growth and efficiency initiatives
2 Coles has shifted its capex to growth and efficiency initiatives Group capex profile, % Key comments Growth Maintenance Efficiency Network optimisation (new stores/renewals) • Shift to growth and efficiency capex with expected greater spend in FY22 • ~50 renewals and ~20 new stores FY17 FY22F expe
Slide 77: Coles has an industry leading dividend payout
2 Coles has an industry leading dividend payout Delivering strong underlying dividend growth Key comments Dividend, cents per share • Coles retains its annual Dividend payout ratio1 82.0% target dividend payout Full year dividend ratio of 80-90% Interim dividend 80.1% Special dividend2 • Dividends f
Slide 78: Maintain strong balance sheet
3 Maintain strong balance sheet Coles has significantly de-levered since demerger1… … and extended tenor and lowered cost of debt Net debt/(cash) ex-lease liabilities, $m Weighted average maturity Weighted average cost of on drawn debt, years debt, % Post-AASB16 leverage ratio2 -96bps +4.5 years Net
Slide 79: Summary of key financial updates
Summary of key financial updates • Smarter Selling benefits expected to be in excess of ~$200m in FY22 • Witron and Ocado opex expected to be up to ~$75m in FY22 and ~$160m in FY23 • Net EBIT benefits from Witron expected to commence from FY25. Sales benefits from Ocado expected from FY24 as the cus
Slide 80: Summary of today
• Delivered significant strategic and financial progress since announcing 2019 strategy • Emerged stronger from an extraordinary period through COVID-19, bushfires and floods • One of Australia’s most trusted brands and improving relationships with suppliers and farmers Summary • The Australian food