Wesfarmers Limited · ASX:WES
Wesfarmers — Corporate Update (November 2014)
50 slides from Wesfarmers's corporate update, Nov 6, 2014
Slide 1: Operational Site Tour Presentation – Coles Division
6 November 2014 The Manager Company Announcements Office Australian Securities Exchange Dear Sir, OPERATIONAL SITE TOUR PRESENTATION – COLES DIVISION Following is a presentation that is to be given today at a management briefing on the Coles division, which is scheduled to commence at 11.00am (AWST)
Slide 2: Coles Operational Site Tour
Wesfarmers Limited Coles Operational Site Tour 6 November 2014 Coles Operational Site Tour 2014 | 1
Slide 3: Agenda
Agenda 9.15am – 2.00pm Site visits & lunch 2.00pm – 2.05pm Introduction Terry Bowen Strategic overview • Leadership team • Australian market 2.05pm – 2.35pm John Durkan • Strategy for growth • Coles Express • New services & channels 2.35pm – 2.55pm Value & Fresh George Dymond 2.55pm – 3.15pm Simplic
Slide 4: Introduction
Introduction Terry Bowen Finance Director, Wesfarmers Limited INSERT PICTURE Coles Operational Site Tour 2014 | 3
Slide 5: Strategic overview
Strategic overview John Durkan Managing Director INSERT PICTURE Coles Operational Site Tour 2014 | 4
Slide 6: Coles leadership team
Coles leadership team John Durkan Managing Director Andy Coleman Greg Davis Chris Nicholas George Dymond Richard Pearson Simon McDowell Operations & Supply Liquor Director Finance Director Merchandise Director Coles Express Director Marketing & Store Chain Director Development Director Jenny Bryant
Slide 7: The Australian retail environment
The Australian retail environment Consumer trends continue to move towards A highly competitive market value & more frequent shops • Discounters growing market share • Customers are becoming more value – Supported by a strong store opening program conscious – Expanding beyond the Eastern seaboard –
Slide 8: Features of the Australian market
Features of the Australian market Slower space growth More independents in the market Opportunity to grow online Selling area growth (FY09–FY13)1 Independents’ market share1 Online grocery sales (% total sales)1 1,585 1,585 Smaller average store size Discounters have similar market positions Less ex
Slide 9: Coles today
Coles today Coles vs. global best practice Coles Performance World class (FY09) Sales density ($/sqm) Freshness (days cover) Value Career & culture New services & channels (% of sales) Liquor (% of F&L sales) Supply chain (% of sales) Cost of doing business (% of sales) Note: Illustrative only & not
Slide 10: Our strategy for growth
Our strategy for growth Coles Operational Site Tour 2014 | 9
Slide 11: Invest in value & freshness
Invest in value & freshness Extend our value leadership Lowering prices for more than four years % • Truly understand the needs of our customers 10 5 • Reduce the cost of the weekly shopping 0 basket (5) • Greater investments in lower everyday prices – Increase volume & transactions ABS Food Price I
Slide 12: Generate savings through greater simplicity & an end to end approach
Generate savings through greater simplicity & an end to end approach Simpler supply chain Simpler stores Simpler store-support centre • Accelerate distribution centre • Focussed range & efficient use • Simplify key processes efficiencies of space • Streamlined decision making • Improve transport con
Slide 13: Build great careers
Build great careers • Attract talent & develop future leaders Retail leaders program – World class graduate program – Double graduate intake in 2015 – Fast track internal development – More retail leaders program in-store & across the supply chain • Foster a bold culture – Fast decision making Drivi
Slide 14: Strengthening supplier relationships
Strengthening supplier relationships • Providing growth, security & certainty to key suppliers through disciplined co-investments – Drives innovation – Enables lower prices for customers – Improves quality • Building deeper, longer-term partnerships with key suppliers • Launched the Coles Supplier C
Slide 15: Driving Coles Express
Driving Coles Express • Expand the network – More sites in the right place with the right facilities • Grow our C-shop – Clear, consistent value – Great customer service – Unique products & services • Partnering with Viva Energy to ensure the right fuel offer – Right mix & value – Always available •
Slide 16: Boldly extend into new services & channels
Boldly extend into new services & channels • Best customer offer – A new mobile-optimised website & Coles App – Same day delivery to the kitchen bench – Delivery on time up 3% – Great value with all catalogue specials available online & free delivery Wednesdays • Growing capacity for better convenie
Slide 17: Extend value leadership & focus on freshness
Extend value leadership & focus on freshness George Dymond Merchandise Director INSERT PICTURE Coles Operational Site Tour 2014 | 16
Slide 18: Extend value leadership
Extend value leadership • Become a trusted value leader – Further reduce cost of the weekly shopping basket – Greater investment in trusted pricing going forward – Continue strong promotions • Drive targeted marketing with flybuys & customer insights – Tailored value for customers – Utilise multiple
Slide 19: Trusted value
Trusted value Coles Operational Site Tour 2014 | 18
Slide 20: Clear value architecture
Clear value architecture In-store Targeted offers • Great prices every day • Personalised, relevant ‘my • Lowering the cost of the weekly special’ email weekly shop • Based on flybuys shopping history • Weekly specials & • Customised & targeted promotions offers • Offering exceptional savings • Spec
Slide 21: New products & innovation
New products & innovation • Provide compelling value through new core products – Quality at a great price – Reduce the weekly shopping basket – Create ‘iconic’ price points • Drive a point of differentiation through new unique products Healthier More convenient Exceptional quality Coles Operational
Slide 22: Better quality Coles Brand
Better quality Coles Brand Rigorous & continuous process for product development & responsible sourcing Healthy for you Responsible sourcing Environmental Caring for Supporting healthier living Ethical sourcing stewardship animals Australia first No added MSG or Recycled PET water RSPCA appr
Slide 23: Focus on freshness
Focus on freshness Quality of fresh food is a key driver of store choice Fruit & vegetables Meat • FY14 sales volume 70% • Strong value proposition on every day higher than FY08 products • Drive sales through • Step-change communication increased availability of quality & welfare credentials • Inves
Slide 24: Driving fresh outperformance
Driving fresh outperformance Better value through trusted Focus on quality Invest in team member pricing & greater choice & freshness trade skills Deeper, longer, more collaborative End to end supply chain Roll-out of new partnership with Australian suppliers enhancements to improve availability for
Slide 25: Simplicity – End to End Supply Chain
Simplicity – End to End Supply Chain Andy Coleman Operations & Supply Chain Director INSERT PICTURE Coles Operational Site Tour 2014 | 24
Slide 26: End to End Supply Chain
Project Unity End to End Supply Chain Distribution Automated Space Simpler Suppliers Transport centre ordering economics stores Coles Operational Site Tour 2014 | 25
Slide 27: Our Victorian Coles brand milk
Our Victorian Coles brand milk Suppliers Supply chain In-store Customers • New 10-year • Seven day • Easy Ordering to • Milk packaging commitment deliveries to store maximise that does not leak availability • State of the art • Minimise life loss • Fresher product facilities by moving product • Sale
Slide 28: We continue to right size our distribution centre network
We continue to right size our distribution centre network • Five international consolidation centres in Malaysia & China • Now have 20 distribution centres compared to 32 in 2008 Coles Distribution Centre We have 12 less distribution centres than 2008 but are issuing over 75% more cartons every week
Slide 29: Distribution centres – efficiency to invest in value
Distribution centres – efficiency to invest in value Improving our distribution Better processes & Ongoing gains in distribution centres systems centre productivity • Invested in Lean Six Sigma, with • Labour planning • Improvements in pick path team members trained to at least efficiency • Pick pro
Slide 30: Transport – efficiency to invest in value
Transport – efficiency to invest in value Rolling out Coles owned Optimising planning & Ongoing gains in transport trailers & open book execution, managed productivity partnerships centrally • Coles owned trailers • Investing in transport systems • Improvements in cost per carton • Right deliveries
Slide 31: Working with suppliers
Working with suppliers Deeper, longer, more collaborative partnerships Easy Ordering – Fresh produce assisted with Australian suppliers successfully executed ordering • Muddy boots quality control in • Grocery, Frozen & Dairy have • 646 stores live chilled distribution centres been on Easy Ordering
Slide 32: We're simplifying our stores so they can focus on selling
We’re simplifying our stores so they can focus on selling Rolling out store specific layouts Building a great team Improving store productivity Investing in smarter stores Coles Operational Site Tour 2014 | 31
Slide 33: Project Unity – our strategy going forward
Project Unity – our strategy going forward • End to end focus - flow of product • Continue to accelerate distribution centre & transport efficiency • Fast track efficiency of space • Working capital Suppliers, supply chain & stores delivering for customers today & tomorrow Coles Operational Site Tou
Slide 34: Deliver a better store network
Deliver a better store network Rob Scott Managing Director Financial Services, Wesfarmers INSERT PICTURE Coles Operational Site Tour 2014 | 33
Slide 35: The Coles network
The Coles network As at 30 September 2014 • Improved supermarket network – 58% of fleet renewed to date – Opened 113 larger stores, closed 98 6 7 11 underperforming stores since FY08 • Liquor network a sizable opportunity 158 222 77 85 108 5 – Hotels network relatively unchanged 120 56 34 7 68 • Ste
Slide 36: Strategy to deliver an efficient network
Strategy to deliver an efficient network • Increase sales density growth Increased sales density – Focus on fresh food 130 +28% – Better range & use of space 120 110 • Consistent space growth 100 – 2% - 3% p.a. net selling area growth 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 – “Bigger, better” new & existing s
Slide 37: Investing in existing sites
Investing in existing sites • Improve customer experience & introduce new concepts • Renew, replace or resize stores – Renew existing stores where location & size is optimum – Resize stores in right location but under-sized – Replace stores in compromised location & size • Remain returns focussed Ex
Slide 38: Investing in new sites
Investing in new sites • A rigorous selection process • Internal network plan to identify gaps & opportunities – Defined criteria based on existing market share, level of competition & demographics – Sophisticated ‘Gravity Model’ using drive time to forecast sales – Leveraging flybuys data insights
Slide 39: New sites enhancing portfolio quality & sales density
New sites enhancing portfolio quality & sales density Deeragun, Qld – Regional Brighton, VIC – Urban Before Before After After Coles Operational Site Tour 2014 | 38
Slide 40: Financial services
Financial services Rob Scott Managing Director Financial Services, Wesfarmers INSERT PICTURE Coles Operational Site Tour 2014 | 39
Slide 41: Boldly extend into new channels – Financial services
Boldly extend into new channels Financial services Truly better value Best customer experience • Insurance price beat guarantee for car & life • Instant $10 off flybuys redemptions at Coles • No annual fee credit card supermarkets for Coles insurance & credit card customers • Fastest way to earn fly
Slide 42: Coles financial services operating model
Boldly extend into new channels Financial services Coles financial services operating model Credit cards / personal Insurance lending Using technology to deliver better value & more convenience Customer facing Analytics capability (flybuys + Coles + FS data) Joint venture with GE Capital Backed by •
Slide 43: The webcast will recommence shortly.
The webcast will recommence shortly. Coles Operational Site Tour 2014 | 42
Slide 44: Transform Liquor
Transform Liquor Greg Davis Liquor Director INSERT PICTURE Coles Operational Site Tour 2014 | 43
Slide 45: Long-term underperformance
Long-term underperformance • Underinvested teams • Poor value perception • Inefficient processes & systems Poor • Complex promotions Under customer • Weak online proposition investment • Cluttered & difficult to shop experience • Tired stores • Confusing layout & signage • Compromised sites Opportun
Slide 46: A long-term turnaround
A long-term turnaround Phase 3 Phase 1 Phase 2 Drive the difference Build a solid foundation Deliver consistently well • Build team & capabilities • Customer centric culture • World-class team, unique culture • Accelerate store closures • Refresh all stores • Engaging brands, exceeding • Refresh sto
Slide 47: Reviewing customer format plans
Reviewing customer format plans Convenience Destination Specialist • Make shopping easier • Restructure the network • Build team member • Invest in prices • Engaging customer knowledge & expertise • Simplify range experience • Broaden the customer base • More co-located stores • Lower prices / bette
Slide 48: First 100 days
First 100 days • New Liquor leadership team in place • Organisation restructured & realigned to brands • First stage of price reductions • New value campaign • Commenced range reset • Initial steps in reducing working capital • Detailed store network review underway • Commenced programme of store cl
Slide 49: Questions
Questions INSERT PICTURE Coles Operational Site Tour 2014 | 48
Slide 50: Coles Operational Site Tour 2014 | 49
Coles Operational Site Tour 2014 | 49