Horticulture – profit-enhancing innovations: Jackie Healing, Coles

I’m going to try and paint a
perspective of horticulture within a retail
landscape such as Coles or any large supermarketing
retail landscape. And I’m going to
focus on the customer and what the
customer’s telling us and why that’s driving us
to work with our suppliers, our produce growers and
producers in the way that we do. I’ll be talking about
some specific growers that we’ve worked closely with,
but by no means would that be the totality of the
great grower population that we’re working with. So those of you who might be
in the room who think well, why didn’t you mentioned me? Please forgive that,
I’ve done the best I can. I left Costas out because
they had their own moment. So I wasn’t going to do the
normal stuff about Coles and what Coles is– 700 stores,
40 million customers, whatever all that is. I was just going talk more
about Coles and its positioning from the point of view of
the customer, particularly in the area of fresh produce. So inevitably, in
fresh produce it’s an Australia first
sourcing policy, but it’s actually an
Australia first sourcing policy for our private
label across all categories that we sell, but 96%
percent of our fresh produce is grown in this country. We can now expand that
sort of great produce story across into our
frozen categories, and we’re looking into
our can categories as well to try and
bring as much as we can back into this
country because that matters to our customers. We work with around 350 fresh
produce suppliers directly. They’re the people that
pack the product for us, but sitting behind them will
be thousands and thousands of growers all over
the country who we also work very closely with. And we’re actually
very committed to the horticultural and
agricultural industries in Australia, not
least because we’ve got so many people work in those
industries that are suppliers to us, because actually a
third of our own workforce, our own team of 100,000
people live and work in rural Australia. And so this whole
agricultural landscape is really, really important
to us employing and retaining and motivating our own team. Sort of central–
well, absolutely central to what we
try to do and what we believe we do relatively well
is listening to our customers. And we spend a huge amount
of time talking to customers about what matters to them. Now we’ve heard a number of
presentations about how fickle that can be and how customers
can talk one thing and behave in quite another way, and we’re
lucky in that we can actually analyse both those behaviours
because we sit at the front end. The customers come
into our store, we can talk to them remotely, we
can talk to them with product, we can sample product with
them, but we can also watch their shopping behaviours. And we can do that through
our own sales data, but more importantly probably
are our FlyBuys data, where we get some very, very
detailed information out of those loyalty
cards around how people from various demographics
and various backgrounds and various family sizes
and various occupations shop and what they do under
certain situations when they come into our store. And that helps us
tailor our offer. We work very closely
with that data back up the chain with our
suppliers to try and make sure we’re tailoring
the offer in a way that is beneficial to us,
obviously our customers, and therefore to our
producers, our growers. So what do they tell us? So we have a good
understanding about customers as a consequence of all this. And they tell us that– well,
we know that the fresh food proposition in supermarkets is
what determines whether or not a customer comes into
the supermarket or not. So that centre plate protein
and the fruit and veg, or the veg particularly for
their dinner occasion will determine where they go to shop. And they’ll only
go where they’re confident in the quality
that they’re going to get. Now we know that only
around, somewhere around half of the customers that
come in our store– and that’s 14 million
people a week– are buying fresh fruit
and veg in our stores. So the opportunity is
massive from our perspective to grow that business and
to sell more fresh fruit and vegetables to our customers. What’s more important is
if when those customers come in who are prepared to buy
it with us, if they can’t see what they want they’ll leave. And when they leave,
from our perspective, they’ll take their
entire shop with them. And you will sometimes
walk around a supermarket and see a basket
abandoned in the aisle. That’s very rarely
because of the checkouts. That’s nearly always because
they lost interest in the shop because there was too many
things they couldn’t get. And they’ll be some items that
if they can’t get– bananas would be a classic example–
if they can’t get it, then they’re just
going to leave. If they come to the
store for bananas, it doesn’t matter how good
the rest of the stores is, if you haven’t got
bananas or the bananas they want, they’re going
to walk out of the store and they’ll leave the
rest of their shop behind. We know in the
fresh produce areas there is four really key things
that matter to customers. Freshness, and I’ll come
and talk a little bit about what means,
because what you think freshness means
isn’t necessarily what they think it means. Provenance, this whole
credence, however you want to describe it, this
whole where and how it’s been grown and produced. And these two trends
that we see emerging with customers that are
critical, that of health and that of convenience. So in terms of
freshness, customers mean a lot of different
things in this space. They want to know where it
was grown, how it was grown, how far it went. Interestingly, when you
get into further processed, the longer the shelf
life the fresher they think it is, which is kind
of completely opposite to what we would think it would be. The fact that it’s Australian
and more importantly local within Australia to a region
they recognise also tells them or they believe that gives
them a fresher product. It might not
necessarily be the case, but that’s what they believe. So for us, what’s that
done to our business model and how we’ve changed the way
we operate over the last five years? Well, fundamentally
what it’s meant is we’ve tried to
shortened that chain. We’ve tried to get as close
to the grower as we can, to buy directly,
to move it quickly so we can get into our stores
in the freshest possible state. Our aspiration, I
think, or certainly from a quality
perspective, my aspiration would be that we’re sort of
farm to store in 48 hours. That would be your
aspiration where the product is in season and local. And we try very hard to do that,
and there’s a number of issues that we face in
the chain to do it. But by going directly
to the suppliers, not only does it help with that
freshness cue for the customer, but it’s obviously giving
greater security of supply. It’s actually generating
greater level of income along the chain for some
people, certainly for the grower because there’s less middlemen
between us and the grower. And it gives us the
opportunity to talk directly with the grower about
opportunities for innovation, opportunities to close
the seasonal gaps, all the sorts of things that
particularly Costa were talking about earlier. It’s important to customers
to know where and how their product is grown. We’ve seen, we don’t need to
talk anymore about raspberries, I don’t think. But I mean everybody is asking
us how and where the product is being grown. And so we’ve been
doing a lot of work over the last couple of years,
particularly with our tier one growers, our key growers
to understand not only where they’re growing their
product, but how they’re growing their product. And that’s allowing us to
obviously monitor and keep an eye on it, but also
to report and to pick up those really great individual
stories that we can then use to communicate to
customers through the website, through [INAUDIBLE],
through in store, through other social
media outlets, et cetera. Stories about things
going on on farm which help them connect
them with the farmer, and that gives
them the confidence and the trust that’s important. Some quick examples
of things we’ve done, starting at the
very processed end. So working with particularly
on of our suppliers of bagged salad,
it’s a huge amount of work around
shelf life increase. We’ve managed to get
two more days life into this product, all of which
we’ve given to the customer through varietal changes,
through harvest changes, through investment in different
types of washing equipment, through gas flushing,
through a whole raft of different technologies. And that, not only has given
a fresher and better quality product, but it’s also
reduced the waste. So there’s an economic benefit
all the way through the chain. Working locally with growers
to reduce the amount of imports is also important to us, and
we’ve got a couple of examples. One here of onions
where through work on varietal development,
geographic location we’ve been able to
stop the imports. We achieved that
last year in 2014. Another one here where glass
houses from formally focusing on tomatoes then expanded out
into capsicums, [INAUDIBLE] right down in
Gibson in Victoria. Not only have they now
got a wider crop variety so they’ve reduced their
risk, they employ more people, and again, we get local product
rather than having to import. We’ve had some really
innovative– this is probably the most innovative
producer environment that we’ve got– down in
South Australia where we’ve got a very, very unique set
up running with Sundrop to do with tomato growing
using desalinated water, solar energy, zero pesticide. Quite a long protracted process
to get to to get into this partnership with this
organisation and a 10 year contract now to grow
these products for Coles. Matt Hood up in Rugby Farms,
green bean producer, again working on his
methodology of growing and picking and
packing and sorting to give us that consistent,
reliable quality, less defect in the pack, and
therefore more repeat purchase and more
confidence for the customer. These are all really,
really key things in driving like for like growth
in the category of produce from our perspective. And this health and
convenience trend, and I think this is the
one that’s probably got the greatest area to grow. When I joined Coles in 2006
we had around about three bagged salad lines and it
would take what we would call a quarter of a module. A module is about a metre
wide fixture in the store. And it would take about
a quarter of that module, a couple shelves. We now have in our
sort of bigger stores I think three or four modules
of prepared bagged salad. The growth has been
absolutely incredible. We can’t get enough
varietal variation. We actually can’t
get enough volume. It’s been a massive success
story for the industry involved in producing that
product, and that’s because customers are looking
for this convenience quality option. And they are willing to
pay for it as long as we can consistently deliver it. And that consistency is
really, really important, because the more you
value add in the product, the less tolerant customers
will be of defects. They’ll accept a defect on the
primary product and cut it out, but they won’t accept
it in the bag of salad. And so you have to be
really, really focused on your engineering and
your quality management and things like that as
you get up the chain. Clearly, the low GI has
been a huge success. And then portion control,
treating, snacking, these are all– as we
heard with the Purina– these are all trends
that it’s really important to look to
and think about in terms of future growth. So a quick rattle through, I’ll
be happy to chat to anybody after the event is over. But for us, we see
produce, there’s nothing more important–
the meat team won’t like me saying this–
but there is nothing more important in our stores
than the fresh produce offer. It’s key to bringing
that footfall, it’s key to building that trust. We’ve done a huge amount
with a great number of fantastic growers
around the country to get to the position
we’re in today. It’s given us
double digit growth year on year for the last
five years in that category. And we see no
reason, irrespective of that export market, for that
not to be a continued success story. So I thank all of you
who helped us with that, and I’ll leave it there. Thank you.

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