Coles links executive bonuses to online shopping success

Coles executives will have a greater portion of their short-term incentives governed by the supermarket’s online success.

Coles chief executuve Steven Cain. Picture: David Geraghty

Coles boss Steven Cain and his executive leadership team will have a greater portion of their short-term incentives governed by the supermarket’s success in online shopping, following changes made by the Coles board to its remuneration policy that reflect the retailer’s growing digital presence.

In the Coles annual report released on Thursday, director and chairman of the people and culture committee Richard Freudenstein said Coles’ online performance would now influence bonuses for key management personnel, other than the chief financial officer.

There will also be a component of customer satisfaction built into the bonus system for executives.

“In considering performance metrics to apply for the fiscal 2021 short-term incentives, the board has approved two key changes. Firstly, the introduction of a specific online sales metric for executive key management personnel in place of the cash realisation metric,’’ Mr Freudenstein said in the remuneration report.

“The exception to this will be the CFO, who will retain the cash realisation metric. This shift demonstrates the importance of growth in the online channel to achieving our strategic goals. Secondly, the customer metric will be adapted from a blended approach to a single net promoter score (NPS) metric. This simplifies the measurement and highlights the importance of going beyond merely satisfying our customers to recruiting them as advocates for our business.

“The board, as advised by the people and culture committee, regularly reviews the executive remuneration framework to ensure it remains relevant, competitive and appropriate in the context of changing business and economic conditions.”

It comes as online platforms become increasingly important for bricks and mortar operations such as Coles and other supermarket chains, with COVID-19 boosting online sales from consumers locked up at home or preferring to stay away from crowds.

In fiscal 2020, Coles’ online sales rose by 18.1 per cent after its digital platforms were disrupted in March and April by the emergence of COVID-19. In the fourth quarter online sales were up by more than 70 per cent.

Mr Cain is leading a heavy investment in Coles’ online platforms and building automated distribution centres that promise to almost double Coles’ capacity for home deliveries from online orders.

Meanwhile, according to the Coles annual report, Mr Cain had a fixed salary of $2.069m in 2020, up from $1.815m in 2019, with his total remuneration for 2020 hitting $6.965m against $5.396m in 2019. Mr Cain received short-term cash bonuses of $1.24m.

Mr Cain told shareholders in the supermarket’s annual report the retailer continued to transform since its demerger from conglomerate Wesfarmers to improve its fresh offer and win over customers.

“Since our successful demerger from Wesfarmers during the 2019 financial year, Coles has been executing our refreshed strategy to transform our business and lay the foundations for long-term sustainable growth,’’ he said in his CEO message.

Mr Cain told investors that COVID-19 had seen Coles classified as an “essential service” and its focus had been on team and customer safety and supporting vulnerable Australians in the community.

But the health crisis had not stopped Coles from improving its fleet of stores or its plan to shift to automated distribution centres.

It is part of Coles’ smarter selling strategy that should achieve cost savings of $250m, driven by the further use of technology in its supply chain.

“This included streamlining our store support centre and implementing new systems across finance and procurement, more efficient use of logistics so more trucks carry both inbound and outbound loads, new technology to help our store teams order the right amount of stock, reduced energy consumption through use of LED lights and refrigeration control systems, and improved measures to reduce stock loss in stores.

“Further progress was also made in tailoring our store formats to the needs of local communities, with 70 renewals completed during the year, including 10 Format A, 31 Format C and three Coles Local supermarkets.”