Coles says these toys promote healthy eating. I say that’s rubbish



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Carla Liuzzo, Queensland University of Technology

As a parent, I find it so frustrating to take my children shopping, reusable bags in hand, only to be offered plastic toys at the checkout. It’s an incredibly confusing message to be sending kids. And it seems Coles is confused too.

Last year the company stated it wants to be “Australia’s most sustainable supermarket”. But with last week’s relaunch of “Stikeez” – yet another plastic collectables range off the back of their Little Shop promotion – Coles is showing dogged commitment to unsustainable marketing.

Stikeez are 24 plastic characters (plus four rare ones) in the shape of fruit and vegetables, aimed at encouraging kids to eat healthy food.




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After petitions against previous plastic “mini” campaigns by Coles and Woolworths, Coles will make the Stikeez characters returnable in store for recycling.

But this misses the point. Coles is generating waste needlessly in the first place. Surely it’s time to move beyond plastic freebies as a way of boosting sales?

Coles sent almost 100,000 tonnes of waste to landfill in 2019.
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Irresponsible marketing

We have a waste problem in this country. Australians are the third highest producers of waste per person, after the US and Canada. Some councils are having to stockpile plastic, there’s a federal plan to phase out exporting waste overseas and we have high rates of contamination of recyclables.

And Coles, one of Australia’s supermarket giants, sent almost 100,000 tonnes of waste to landfill in 2019. That’s 274 tonnes per day.




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But after their Little Shop collection provoked a consumer backlash, Coles took steps to reduce waste generated from their latest campaign. Stikeez wrapping contains partially recycled content, and Coles is providing in-store collection points where Stikeez can be returned and repurposed into shoe soles, in partnership with Save Our Soles.

Certainly this is preferable to throwing the items into the rubbish, but repurposing the plastic is not without environmental cost. Fuel is required to transport the waste and the process of repurposing plastic uses energy.

What’s more, asking shoppers to bring back their Stikeez puts the onus on consumers, rather than the company, to dispose of the items responsibly. And as we’ve seen by the low rates of recycling of soft plastics on a national level – recycling soft plastics is also offered in store – it’s far more convenient to throw items in the bin.

Coles haven’t publicised data about how many collectables they will produce.
Alpha/Flickr, CC BY-NC

Coles is also missing the point of the consumer backlash. When a company already generates huge quantities of waste in its core business and says it wants to be Australia’s most sustainable supermarket, it cannot generate additional waste on plastic marketing.

Boosting the bottom line

Last year Coles’ Little Shop put many parents offside. But Coles earned around A$200 million in extra revenue as a result of the original promotion.

Coles reported an increase in the first quarter of 2019 in sales of 5% and gained a competitive advantage over rival Woolworths, which managed only 1.5% in the same period. Obviously the bump in sales was too hard for Coles to resist.

It’s difficult to get an accurate figure on what waste this latest Stikeez campaign will generate. Coles haven’t publicised data about how many collectables they will produce. And waste contractors to Coles haven’t revealed how many collectables ended up in landfill last year, though there have been reports of Little Shop items ending up on beaches in Bali.

Last year, Coles said 94% of Little Shop collectables were either kept or given to family or friends. But University of Tasmania marketing expert Louise Grimmer discredited this data, saying it was not based on any meaningful longitudinal research that would allow such claims.

Stikeez undermines Coles’ sustainability efforts

If organisations produce plastic for marketing purposes, it’s difficult to see how we can achieve plastic recycling rates of 70% by 2025. This target – set by federal and state governments and which Coles has signed on to meet – also stipulates the removal of “problematic and unnecessary” single use plastic packaging.

Coles’ Little Shop promotion faced petitions from people concerned about the plastic waste it generated.
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Federal Assistant Minister for Waste, Trevor Evans, said finding a sustainable way to manage plastics was a major challenge and requires a coordinated effort. As a powerful household brand, Coles must unequivocally be part of this effort.




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Coles’ environmental policy says it’s “committed to doing business in an environmentally responsible manner”. But plastic freebies fly in the face of this policy.

Better waste regulation

Voluntary initiatives for companies to reduce packaging and plastic waste, which Coles have signed on to, have not produced meaningful results.

Currently only one-third of all plastic packaging in Australia is recycled.

Overseas countries have moved away from voluntary frameworks to more structured and enforceable regulations to reduce plastic production and waste. In fact, Europe voted to ban single use plastics last year.

As long as Australia lags on waste regulation, organisations such as Coles will continue to contravene their own environmental policies.


The Conversation contacted Coles for comment. Its response is as follows:

Customers have told us that they use Stikeez as a fun tool to encourage kids to eat more types of fresh foods. The collectibles form part of the Coles Fresh 5 Challenge which encourages kids to eat all the Five Food Groups daily. We made changes to the Stikeez campaign this year to ensure it’s more environmentally sustainable.

Stikeez collectibles, including those customers have from last year, can now be recycled at all Coles supermarkets. We have partnered with Australian recycling group Save our Soles so that Stikeez can be recycled through the same process that is used to recycle footwear in Australia since 2010 to create useful products like anti-fatigue mats, gym matting, retail flooring and carpet underlay.The Conversation

Carla Liuzzo, Sessional Lecturer, School of Business, Queensland University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Explainer: why Wesfarmers is ditching Coles



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Whoever buys Coles will have a huge store network.
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Gary Mortimer, Queensland University of Technology

Coles will soon be an independent company again, with more than 800 supermarkets, nearly 900 liquor stores, 700 service stations, and 88 hotels.

Spinning off Coles is a great example of how good Wesfarmers is at entering and exiting markets. Buying the ailing Coles in 2007 was a smart move.

But the supermarket sector has changed dramatically in the past decade in relation to intense competition, with the growth of discounters like Aldi and the emergence of price-conscious shoppers who simply shop across multiple brands of supermarket each week.

Customers have benefited from price deflation, but it is a different story for suppliers.

The nature of these relationships has regularly been criticised and investigated.

A new owner will bring these matters back to the forefront. Ultimately, private equity firms and global businesses only purchase companies and enter markets where considerable return on investments can be made.




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Cash cows and dogs

Most first-year business students deal with these conundrums and often rely on simple models like the classic Boston Consulting Group’s Matrix.

Boston Consulting Group’s growth share matrix.
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Businesses move around in these quadrants, depending upon external, macro-level impacts. A stronger Kmart will push Target from a “Star” into the “Dog” category very quickly.

Wesfarmers has successfully moved Coles from “Dog” status 10 years ago to “Cash Cow”, but profits have slid in recent years.

Coles also accounts for a staggering 61% of the capital deployed in Wesfarmers’ entire portfolio (which includes other retail brands, industrial, mining and energy businesses), but contributes just 34% of earnings before interest and tax.

The supermarket sector has seen a huge increase in competition in recent years, with the growth of discounters like Aldi. There is also a possibility of more international competition from the German discounters Kaufland and Lidl.

This month, Fred Harrison, chief executive of Ritchies, Australia’s largest chain of independent supermarkets, called for an end to the “price wars”. Metcash, a wholesaler for independent supermarkets, recently delivered a loss in its food and grocery business.

Coles itself has signalled a move away from its strategy of slashing prices.




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Other than putting cash back on Wesfarmers’ balance sheet, spinning off Coles creates two long-term revenue streams for Wesfarmers.

To begin with, Wesfarmers will aim to a hold 20% stake in Coles. So some profits will continue to flow back to Wesfarmers.

More importantly, Wesfarmers intends to retain “substantial” ownership in Flybuys, Coles’ loyalty program.

The value of loyalty programs is best highlighted by Woolworths’ purchase of Quantium in 2013 for almost A$20 million.

These programs hold a vast amount of data, giving Wesfarmers huge customer analytics capabilities with which to tailor promotions, product ranges and store layouts across all of its other retail businesses.

The new owners of Coles will also be eager to access this data.

Who will buy Coles?

While Wesfarmers will remain a minor shareholder, there will be plenty of interest in the majority share among private equity investors and international players (such as Walmart and Carrefour).

Walmart entered Canada through an acquisition, Mexico through a 50-50 joint venture with Cifra (Mexico’s largest retailer), and Brazil through a joint 60-40 (in favour of Walmart) with Lojas Americana.

Likewise, French retail giant Carrefour has adopted a range of approaches to international expansion, including joint ventures and acquisitions.




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Ultimately, private equity investors and global businesses will only buy companies and enter markets where they can make a considerable return on investment.

Considering the declining margins in supermarkets, driven by low-cost operators like Aldi, it is likely that this will be done by squeezing suppliers.

On the other hand, a new Coles will no longer be constrained by Wesfarmers’ conglomerate ownership model. One of the challenges faced by large conglomerates is “strategic inertia”.

The ConversationA separate business will lead to faster innovation, greater investment and potentially another battle for market share between Australia’s two big supermarkets.

Gary Mortimer, Associate Professor in Marketing and International Business, Queensland University of Technology

This article was originally published on The Conversation. Read the original article.

‘Down down’ and ‘cheap cheap’ are gone gone: why supermarkets are moving away from price



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Coles was once the market leader thanks to its ‘down down’ low pricing marketing.
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Gary Mortimer, Queensland University of Technology and Louise Grimmer, University of Tasmania

On January 26, 2011, Coles fired the first shot in what would soon be dubbed the “supermarket price wars” by reducing the price of its own-brand milk to A$1 per litre. Woolworths fired back, triggering seven years of intense price competition.

But now Coles has waved the white flag, indicating a move away from price-based marketing, to a focus on other attributes, such as sustainability, local produce and community.

Coles’ new ad campaign.

Research shows if price is the main selling point, shopper loyalty decreases and customers become more conscious of price. Price wars are also costly for retailers.

While operational costs (wages, rent, bills) remain fixed or go up, prices can’t keep coming down. You eventually run out of margin.

Coles recent half yearly results reflect this, with a drop in earnings of 14.1% from A$920 million to A$790 million.

In contrast, Woolworths announced an 11.1% increase in earnings for their supermarket business. But Woolworths dropped their “cheap, cheap” price cutting campaign nearly two years ago.




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Down, down but not different: Australia’s supermarkets in a race to the bottom


Other retailers also get caught in the cross fire of price cutting. Case in point is Aussie Farmers Direct, which fell into administration this week saying they were:

…no longer able to compete against the domination of the major two supermarkets.

While it may be overly simplistic to blame the two big supermarkets for the downfall of Aussie Farmers Direct, price conscious consumers and thin grocery margins certainly contributed.

How this strategy came about

Supermarkets are now looking beyond price to stand out.

Both Coles and Woolworths are very similar in the brands they offer, prices, layouts, weekly specials and online channels. The move away from price gets shoppers thinking about what is unique to each chain.

So, rather than price, the focus has shifted to service quality, social programs and connecting with the community.




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Shoppers who are continually exposed to loyalty program logos, may eventually stop noticing these logos, or “switch off”. This is because of a behavioural tendency called “habituation”.

What these new strategies are trying to sell

So, if Coles are no longer selling themselves on price, what are they selling?

Coles’ new approach is more subtle, selling themselves through aspirational stories and employing classic advertising techniques to do it.

These techniques are used in advertising to convey positive feelings and emotions associated with a particular experience. A simple way to achieve this in advertising is to feature people telling their own stories – as seen in the new Coles advert launched this week.

Woolworths ad campaign.

With the Commonwealth Games near, both supermarkets are also featuring sports stars in their marketing. Woolworths new campaign features athletes and their connection with fresh food, positions the company, once again, as “Australia’s Fresh Food People”.

Meanwhile, Coles have partnered with Uncle Toby’s for their Sports for Schools campaign. Their advertisements feature an array of young, fit, attractive and successful athletes linking the athletic success with the purchase of products from Coles.

By moving away from price and focusing on a story telling strategy, both supermarkets can engage consumers with a process called “internalisation”. This is where people accept the endorser’s position on an issue as their own.

Internalisation is a powerful psychological mechanism because even if the source used in the campaign is forgotten, the internalised attitude usually remains. Price doesn’t create this effect.

While food prices won’t necessarily go up any time soon, consumers shouldn’t expect to see any further significant price drops. Instead, Coles and Woolworths will draw attention to other important attributes.

The ConversationFaced with the expansion of Aldi across South Australia and Western Australia and the entry of German supermarket Kaufland, Coles has recognised they can’t keep fighting a battle on price alone.

Gary Mortimer, Associate Professor in Marketing and International Business, Queensland University of Technology and Louise Grimmer, Lecturer in Marketing, Tasmanian School of Business and Economics, University of Tasmania

This article was originally published on The Conversation. Read the original article.