Coles says food and grocery prices must come down further

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Customers walk from a Coles Supermarket outlet in Sydney, Australia, May 25, 2016. Reuters/Jason Reed

Coles has invested at least $65 million in the December-quarter; second-half investment was "triple that.” The company seeks to reduce grocery prices and improve services.

John Durkan, Coles managing director, said food and grocery prices in Australia have to come down further, calling them “crazy” compared to the rest of the world. During a Wesfarmers' strategy day meeting on Wednesday, he told analysts that for him, it has been an overpriced grocery market and stressed that was something he has been saying for nine years.

"I still look at products here that are made overseas and they are crazy prices,” Sydney Morning Herald quotes him as saying. He believes the cost of those products would be a chance for Coles' private labelled products to grow.

Freshly baked bread

Durkan went on to say he wants the supermarket giant to be well-known for its fresh bread. He revealed plans to convert an additional 180 stores to include in-house bakeries to ensure every Cole store offers fresh bread. In 2014, Coles was accused of selling bread labelled as freshly baked but was allegedly frozen abroad.

Coles, Durkan said, is focusing on fresh produce as it lessens the range of some products to make it simpler for customers. For instance, they have opted to lessen the pasta sauce range with about 17 percent removed.

The strategy resulted to a lift in sales. “We have moved eight lines out of our garbage bag category, which was 20 percent of the items in that category, and in response, sales have increased by five per cent," he added.

As for its investments, it remains as strong as it did in Q3. Durkan said it’s a high level of investment, but the company is positive that its strategy would position Coles for continued growth over the long term.

Meanwhile, Wesfarmers announced its plans to renew between 45 and 49 stores this financial year. It is also planning to upgrade its entire store network over the next three years as a preparation for new competitors, which include US e-commerce giant Amazon.

Herald Sun notes its Officeworks division would continue to deal with variable trading conditions in the midst of competitive pressures and subdued consumer confidence. Last month, Wesfarmers took it off the sale block, citing challenging market conditions. Shares in the group dropped 2.1 percent to $40.53 on Wednesday.

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