Coles Supermarkets is cutting the number of products on its shelves to make shopping “easier” for customers. The retail giant is implementing a “double-digit rationalisation,” which means at least 10% of its products will be removed. This decision follows customer feedback indicating that the variety was overwhelming and filled with unnecessary duplication.
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Coles’ Strategy Behind the Product Reduction
Anna Croft, Coles’ Chief Commercial Officer, explained the rationale behind this shift. She told investors that the supermarket is focusing on “simplifying” the shopping experience.
“Even if I went hard year after year for two years on the trot and did double-digit rationalisation, I would still have more range than I had in 2019,” Ms Croft said at a stakeholder meeting in November.
Coles is not just reducing products but reinvesting in key categories. Ms Croft said the supermarket aims to remove duplicate items while enhancing the variety in essential product lines.
How the Changes Will Impact Customers
Ms Croft provided examples of product duplication at supermarkets. She noted that there were “13 basic table salts” available, which she believes is excessive.
“We don’t need those. We might go to five and we might add three different types of salt in to give customers more choice,” she said.
She also highlighted an issue with haircare products, where a leading brand had six different pack sizes, ranging from 80ml to 1.1 litres. “Now that drives huge complexity,” she added.
‘Approach is to reduce unnecessary variety while introducing relevant alternatives. Ms Croft explained that the supermarket is “reinvesting in the categories in the space that makes the most amount of difference to customers.”
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Financial and Market Implications
Coles is aggressively reducing its product range in a move that may impact suppliers but could lead to higher profits for the retailer. The company has been working with consultants at Bain to streamline its offerings. Analysts believe this will boost sales for the remaining products as suppliers compete for shelf space.
JPMorgan analyst Bryan Raymond said the decision comes at an interesting time. “The tone of negotiations indicates that Coles sees limited risk of change from the ACCC’s inquiry,” he said.
The supermarket’s strategy aims to increase profitability, but some experts question its long-term effectiveness. Mr Raymond said, “Every year this strategy becomes more challenging. If the primary motivation is margin, this might make the remaining range less appealing to consumers.”
Political and Regulatory Concerns
Coles’ decision to cut products follows rising tensions between major supermarkets and their suppliers. The Coalition and Labor have both criticised Coles and Woolworths for contributing to rising grocery prices. However, the supermarkets argue that price hikes have come from suppliers.
The Australian Competition and Consumer Commission (ACCC) is currently investigating the power of Coles and Woolworths in price-setting and their dealings with suppliers.
Nationals leader David Littleproud has expressed concerns about the supermarket giants’ influence. He argued that reducing product numbers removes competition. “This isn’t about anything other than Coles getting bigger margins at Australians’ expense by reducing competition,” he said.
Coles’ Commitment to Compliance and Customer Satisfaction
A Coles spokesperson said the company is committed to working with suppliers to improve the value, quality, range, and availability of products.
“Coles takes compliance with Australian consumer law very seriously, and we place great emphasis on building trust with all of our stakeholders, particularly our customers, team, and suppliers,” the spokesperson said.
The supermarket conducts regular research and discussions with suppliers to adjust product ranges. These efforts aim to remove duplication and make it easier for shoppers to find suitable products.
Industry Reactions and Future Outlook
The Australian Food & Grocery Council, which represents suppliers, raised concerns about the power of supermarkets. The council’s submission to the ACCC alleged that supermarkets pressure suppliers by threatening to remove products unless they agree to better financial terms.
Product range reduction strategy will likely continue in the coming months. While the supermarket claims the changes will benefit customers, industry experts will closely monitor the impact on pricing, supplier relationships, and consumer choice.