'New era' to put Coles to the test

JOHN DURIE
THE AUSTRALIAN
Wesfarmers retail guru Archie Norman calls the supermarket battles in Australia a “new era” that Coles must respond to early and that will inevitably affect the supply base.
By that he means the suppliers will feel the pain, with Aldi commanding 15 per cent of the east coast market and expanding west. The Coles response will be based on its role as a “trusted value” supplier, matching Aldi but with a wider quality offering to fully satisfy shoppers.
Aldi operates smaller stores with 1300 lines of mainly house brands — against the 28,000 lines in a full service supermarket — and tends to provide just part of a shopper’s weekly needs.
Mr Norman spoke to The Australian — his first ever interview here — on his 56th visit to Australia since the heady days of the 2007 Wesfarmers takeover of Coles.
Back then, Mr Norman was invited by Steven Cain (then at PEP, now at Metcash) to join the proposed private equity consortium jointly bidding with Wesfarmers. When the consortium broke up Richard Goyder convinced him to help Wesfarmers plot the revival of its new retail empire.
Mr Norman made his name in Britain by turning around the Asda chain before it was acquired by WalMart in 1999, and has since served as a Conservative Party politician and company director.
He got a view into the future in 2007 when meeting the then Woolworths chair, the late James Strong, who told him that Woolworths was one of the top retail brands in the world.
At that stage Mr Norman didn’t agree, thinking Australia was a decade behind some overseas trends, and that misguided self-belief has seen Woolworths stumble badly since.
Mr Norman was astonished to witness the huge bet Woolworths took on Masters, buying 100 sites before the first store was even open. “That’s a huge bet,” he confides, adding that “retail is built on people, culture and attitude, unrelenting energy — the store manager must be king and then you need to get the store to look like it reflects your vision”.
He is now devoting some time in helping Stuart Machin get ­Target working again. “The good thing with Target is people like it and want it to work”, whereas with the rival Big W chain “you don’t know what it is”.
Mr Norman is sure Woolworths will get its supermarkets back up to scratch eventually — with Coles having beaten it in 23 straight quarters of comparable store sales — but he is not so sure with Masters, which he thinks has a big distance to travel if it is ever going to work.
Kmart under Guy Rossi has been an extraordinary success story, built largely by having the lowest price, cutting its stock, and moving to direct sourcing with suppliers to control costs. That’s a similar journey to the one Target is on now, but ultimately “customers want fast fashion; they want to see change in the stores and a ­limited range”, he says.
Mr Norman sees plenty of room for improvement at Coles and says it comes down to “an exceptional culture, when you have positive enthusiasm service comes from the heart and everyone is working towards the same goal”.
Mr Norman is convinced you can’t train people to have the right attitude so it comes down to hiring the right people and treating them well.
“If someone wants to come to work for you at Coles we owe it to them to make a good living,” he says.
There are four areas of focus at Coles, starting with promotions, which Mr Norman sees as being inefficient in Australia because they are run for just one week compared to at least a fortnight in Britain.
Promotions will still be a ­feature of the offering at Coles ­because Australians have got used to the feeling they are getting ­bargains.
But the retailer is looking at how to make them more efficient.
Bakery is another area of focus, with the concept that fresh bread is such a great product that the stores must do it better.
Deli is another area where there is plenty of room for improvement.
That is the line of defence against Aldi in Coles being a trusted value provider with all the alternatives of a great fresh offer and a better deli and bakery offering.
The fourth area of attack for Coles is regulation, which he sees as a key focus.
“We want people to see Coles as a force for good,” he says.
“When you have 30 per cent market share you have to expect some regulatory focus but not if it’s unjustified.”
Coles has a long list of regulatory challenges, including the Harper review (section 46), the Horticulture Code, country-of-­origin labelling, parliamentary ­inquiries into seafood labelling and red meat processing, the ACCC, and the Fair Work Ombudsman looking at illegal hiring in the poultry industry.
Mr Norman is a big believer in business leaders taking a high profile in public debates.
“The best way to influence the government is to influence public opinion,” he says.
At Wesfarmers he acts as an adviser and coach as well as being a consultant to the board.
“It’s a bit of fun,” he says, in between his day jobs in Britain, which include being chairman of ITV and the British arm of Lazard, and with some friends on a smaller company called Hobbycraft.
He is a huge supporter of Wesfarmers chief Goyder, who he says has a “great relationship and trust with his CEOs, who all operate like it’s their business and want to work with Richard”.
It’s a job he was planning to keep even if the Tesco board had come to the party with his planned appointment as chair of the giant British retailer.
Mr Norman considered the Tesco job but as a more of a hands-on role than the board wanted in the end. For the foreseeable future he will still be making the trip out to Australia to help the Wesfarmers retail revival.
This article first appeared in The Australian Business Review.