AI, automation to drive $1b Coles savings target

Coles says its supermarkets will make $1 billion in cumulative savings over the next three years thanks to investments in technology, automation, and artificial intelligence.

Jun 18, 2019, updated Jun 18, 2019
Use of artificial intelligence is a key plank of Coles' plan to save $1b by 2023. Photo: AAP/Joel Carrett

Use of artificial intelligence is a key plank of Coles' plan to save $1b by 2023. Photo: AAP/Joel Carrett

The supermarket giant has set the target as part of a new corporate strategy for its first investor day since listing on the ASX in November 2018.

“Our strategy directly aligns with the creation of long-term shareholder value by growing revenue at least in line with the market, reducing costs, and generating sufficient cash to fund growth and innovation while delivering an attractive dividend payout ratio,” chief executive Steven Cain said on Tuesday.

The supermarket chain cited the use of data analytics and artificial intelligence along with “optimising” its store network by tailoring up to 40 per cent of floor space to meet specific local customer requirements.

The move follows March’s announcement of a $150 million spend over four years to double Coles’ home delivery capacity using tech from UK online supermarket Ocado.

Cain said the prospect of increasing competition meant Coles was facing the toughest five years in its history.

He said maintaining market share would be an achievement in itself as discounters such as Aldi and Costco continue to grow in Australia, new players arrive, and online grocery sales outstrip bricks and mortar.

“The outlook for traditional bricks and mortar supermarkets is sales densities could decline in them medium term if action isn’t taken,” he said.

Coles’ savings target of $1 billion by FY23 includes Friday’s announcement that 450 jobs will be cut from the company’s Melbourne head office.

Cain said he expected “further reductions in manual operations” throughout stores and supply chain, while the company would not hesitate to close unprofitable stores.

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Coles also flagged opportunities in building on double-digit growth in its $400 million meat export segment, as well as harnessing the joint venture Flybuys initiative with former parent company Wesfarmers.

Cain said Coles would continue its trial with UberEats and was also looking at a meal kit partnership similar to the deal struck between Woolworths and Marley Spoon earlier this month.


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