Private label continues to drive Coles Liquor growth

19 February, 2020 by Andy Young

Coles has released its half-year results, with sales revenue for the first half of the financial year, excluding fuel and hotels, up by 3.3 per cent with growth in all segments.

The supermarket giant recorded its 49th consecutive quarter of comparable sales growth in its supermarkets division, increasing to 3.6 per cent in the second quarter.

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The company also recorded a positive result in its liquor business, with liquor sales revenue at $1.7bn for the half, an increase of 3.3 per cent on the prior corresponding period, with comparable sales growth of 1.5 per cent.

In its results statement, Coles said of its Liquor Group performance: The refreshed First Choice Liquor Market conversions also contributed to sales growth and continue to perform strongly ahead of the rest of the fleet, with conversions rolled out to 47 per cent of the First Choice network. In December 2019, the Vintage Cellars trial store concept was also launched in Ashburton, Victoria.

The company also highlighted the continuing growth of its private label business, saying: “Exclusive Liquor Brand (ELB) sales continued to grow, particularly in the wine category which recorded sales growth of 5.7 per cent. Overall, 55 new ELB lines were launched during the half including the James Busby range, Coles’ Pinnacle wine offering, and Somma, an Australian first alcoholic mineral water.

“A total of 248 medals and awards were also received during the half, including Ballewindi Pinot Noir which was awarded best-in-class at the Sydney International Wine Competition.”

While sales revenue increased, the move to the Coles Tailored Range, did impact on EBITs, as Coles explained: “Tailored range change commenced during the half across the spirits, white and sparkling wine and craft beer categories. The associated clearance and promotional activity impacted gross margin which declined by 41bps to 21.9 per cent, and EBIT which declined by 9.9 per cent to $67 million.”

Looking at the second half of the year, the company said it expected the Tailored Range move to keep pressure on earnings, saying: “In Liquor, it is expected that earnings will remain under pressure in the second half as a result of the tailored range reviews and clearance activity which commenced in the first half. The bushfires have also had an impact on volumes.

“The new leadership team, under Darren Blackhurst who joined in January 2020, is undertaking a review of operations and an update will be provided at the full year results announcement.”

Overall Coles reported a 3.3 per cent increase in sales revenue on the prior corresponding period, to $1.88bn, with EBITs up 0.4 per cent to $910m.

The Coles results no longer contain details of the hotels performance, following last year’s deal with Australian Venue Co, to take over the running of its pubs business.