‘Test yourself against the reality’: Coles invites grocery suppliers to try the $150 challenge

COLES has challenged its suppliers to try feed their families for $150 a week, as it warns any cost increases “will not just be waved through”.

COLES has challenged its suppliers to feed their families on $150 a week, as the supermarket warns any cost increases “will not just be waved through” without explanation.

Speaking at the Australian Food and Grocery Council conference in Brisbane last week, Coles merchandise director Chris Nicholas said cost increases “really need to be justified”.

“We are committed to lowering prices,” Mr Nicholas said. “If you want to add to our cost of doing business, you must expect to be challenged.”

In 2015, Coles sparked a stoush with Arnott’s when it refused to pass on cost increases on a number of products. Coles said the biscuit maker refused to justify the increases, prompting Arnott’s to stop supplying six Tim Tam varieties and a range of other biscuits.

Mr Nicholas said keeping prices low was necessary not just to remain competitive, but because customers were struggling. He challenged suppliers who doubted him to try shopping for a week’s worth of food on $150, like 40 per cent of Australian families.

“None of this is a threat or browbeating,” he said. “Customers communicate this very clearly — when the prices of proprietary brands increase, the demand for Coles Brand increases. I’m just stating the fact.”

Last year, Coles set its team members, including all senior executives, the “$150 challenge” so they could experience the cost-of-living crunch first-hand. Coles has offered suppliers the opportunity to try it themselves.

“If you want to see what value means to more than a third of our customers who are limited to a grocery spend of $150 a week ... give it a go,” he said. “We will facilitate it for you. Test yourself against the reality faced by millions of households in this country.”

Mr Nicholas said the feedback from mums “can be brutal” when working through the whole shopping list. “Go into a store with $150 in your pocket and front up to the tough choices faced by so many Australian mums as they shop for their families for the week ahead — dinners, breakfasts, milk and bread for a week, school lunches, fresh fruit and veg, toiletries, cleaning agents, snacks for the kids, desserts,” he said.

“Recently, I did the $150 shop with Jenny, a low-income mum who has only $130 a week for her grocery shopping and she has three teenage sons. She wants the best for her family, she will not compromise on quality, but she has to make do with incredibly limited resources. It was a grind for her.

“For anyone here who thinks value doesn’t matter so much, or that inflation is on the up, I invite you to shop with someone like Jenny. Only if you walk in her shoes do you get a true sense of how difficult the choices can be.”

A typical Coles or Woolworths stocks around 24,000 products, compared with just 1450 at discount retailer Aldi. Mr Nicholas said Coles’ range was coming down.

“That’s good for customers, good for us and good for suppliers,” he said. “It will make space for value, for fresh and for innovation. But, more than that, it makes for a simpler and more pleasurable shop for the customer.”

Mr Nicholas stressed that Coles wanted to work with suppliers to deliver product innovation, citing a new range of San Remo products promoted by Casey Donovan as part of its new “Down, Down” disco campaign.

“We are proud of brands and when we get decent prices, we will execute it big,” he said. But he added that the growth in Coles Brand was “great for domestic suppliers, when you consider that 80 per cent of the volume ... comes from Australian suppliers”.

According to the 2016 Advantage Survey, Coles’ net favourability among suppliers has almost doubled since 2014. “We still have a way to go,” Mr Nicholas said.

“One respondent said: ‘The strategies are clear and they are consistently executing against it. We do not come away from any meeting with Coles unsure about our role and how to do things together.’ I wish I heard that more often. This is the sort of feedback we all like to hear.”

It comes after a UBS supplier survey, also presented at the AFGC conference, suggested Woolworths was “turning around faster than expected”, with a “surprising” amount of negativity towards Coles, which the investment bank said was expected to be “one of the worst performers over the next 12 months”.

“We believe pressure at Coles will continue near term as Woolworths regains momentum and Aldi refurbishes its east-coast fleet, in line with supplier expectations, ranking Coles equal third from a sales perspective over the next 12 months,” UBS analyst Ben Gilbert wrote.

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Originally published as ‘Test yourself against the reality’: Coles invites grocery suppliers to try the $150 challenge