Supermarket giant Coles to slash number of products on shelves

Supermarket giant Coles is pushing forward with a plan to slash the number of products on its shelves by at least 10 per cent, in a move it says is designed to make it “easier” for shoppers.

Coles is slashing the number of products on its shelves in a move the supermarket giant say is designed to make it “easier” for shoppers.

But the decision has outraged suppliers who say removing their products from shelves is used as a tool to “pressure or punish them”.

It’s understood the retail chain has engaged a major consulting group with the objective of cutting its range by at least 10 per cent.

The reduction in its product range was flagged during a company investor presentation day when chief operations and sustainability officer Anna Croft revealed the nation’s second-largest supermarket chain was looking at “double digit rationalisation”.

Rationalisation is the reorganisation of a company, which often sees the stripping back of operations, strategy or products in order to increase its operating efficiency.

“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 the November investor update.

“So, the context behind that would be, this is about removing duplication but adding choice.”

Coles chief operations and sustainability officer Anna Croft. Picture: Glenn Hunt

Ms Croft gave an example of 13 basic table salts that Coles sold at the time.

“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 pointed to one of the company’s leading haircare brands that was sold in six different sizes.

“Now that drives huge complexity. We might not need six, we might have three,” she said.

While Coles flagged the reduction at its investor conference, it is now pushing ahead by hiring US consulting giant Bain to help implement it.

The push comes ahead of the final report from the Australian Competition and Consumer Commission’s supermarket inquiry.

The inquiry is examining the pricing practices of the supermarkets and the relationship between wholesale, including farmgate and retail prices.

The Australian Food and Grocery Council, which represents suppliers, said in a submission to the inquiry that delisting – removing a product from the supermarket’s range – was viewed by suppliers as a tool to “pressure or punish them”.

“A supermarket’s threat to delist can result in commercial detriment for the supplier,” the council said.

“While suppliers can recommend a retail price, the supermarkets ultimately control the shelf price.”

The decision comes ahead of the final report from the Australian Competition and Consumer Commission’s supermarket inquiry. Picture: Jeremy Piper

The council said while products can be delisted for numerous reasons, including failing to meet quality, quantity or delivery requirements and commercial sales targets, the criteria for not meeting profitability targets was “not transparent and widely open to interpretation”.

“A product’s commercial performance is influenced by many factors within the control of the supermarket and outside the control of the supplier, including the product’s position on the shelf, pricing architecture, store ranging, assortment, or availability,” they said.

“The AFGC is aware of numerous cases in which the supermarkets have raised shelf prices, resulting in a decline in sales, then initiated discussions on delisting the product unless they are provided with further financial support such as increased margin or additional promotions.

“In such cases, the supplier is commercially harmed by a decision made independently by the supermarket regarding its shelf price.”

A Coles spokesperson said the company was committed to having strong, collaborative relationships with their suppliers which was “fundamental to (their) success and essential for serving (their) customers”.

“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,” they said.

“We are committed to working with our suppliers to improve the value, quality, range and availability of our products for our customers.

“We hold regular listening sessions with our customers and work with our suppliers to tailor our ranges to meet our customers’ needs, removing duplication of products to make it easier for them to find products that suit their budgets.”

Originally published as Supermarket giant Coles to slash number of products on shelves