Coles to spend $880m on new robot supply centre as it reports higher grocery sales, flat on liquor

A discounted $9.50 block of cheese led a charge into Coles’ home brands as value-conscious shoppers squeezed by cost of living pressures traded down into cheaper groceries.

Coles revealed on Thursday that its supermarkets sales grew 3.5 per cent to $9.5 billion in the September quarter, with its premium in-house label Coles Finest surging 8.9 per cent as shoppers switched out of more expensive brands and sought out promotions to save money.

The one-kilogram block of home-brand cheese pitched at $9.50 was one of the retailer’s biggest hits during the quarter, with Coles investing its own margins back into the product to reduce prices and try and keep customers from shopping elsewhere.

“It definitely drives customers into the store,” chief executive Leah Weckert said of the cheese and other promotions.

“Ninety-five per cent of Australian households are now shopping at seven to eight retailers every month, whereas if you went back 12 months ago, it would have been around four.

“So that’s a pretty substantial change in behaviour and we would expect that for the short term, particularly until we see a rate cut, that’s definitely going to continue.

The sales update was accompanied by news Coles will splash out $880 million on a new automated distribution centre in Victoria as it pushes further into robotics to keep products on shelves when customers demand.

The supermarket giant will again partner with WITRON Australia, which has already helped it build two ADCs in NSW and Queensland over the past 18 months.

Coles said work on the new ADC in Truganina, just west of Melbourne’s CBD, could take up to five years to complete but would be 15 per cent bigger than its first two centres.

Once finished, it will process 4.6 million cartons a week, servicing all stores in Victoria and Tasmania — with integration into Coles’ existing supply chain in South Australia and WA — and will deliver full automation of the chain’s ambient distribution centre network across the eastern seaboard.

“This is another important step in Coles’ business transformation as we continue to invest in technology to enhance product availability for our customers and improve efficiency across our supply chain,” Ms Weckert said.

“This new automated distribution centre in Victoria will complement our existing sites in Queensland and New South Wales, enabling us to drive productivity and further capitalise on the advantages of world-leading automation technology.”

Coles said cost-of-living pressures remained a challenge for many customers in the first three months of the new financial year and it was focused on offering a “compelling” value proposition in the lead up to Christmas.

Sales in the first few weeks of the second quarter remained broadly in line with the first but liquor sales continued to lag as customers reined in discretionary spending.

“Cost of living remains a challenge for many of our customers, and we are focused on helping them find value in our stores through weekly specials, value campaigns, Flybuys and exclusive brands,” Ms Weckert said,

“Pleasingly for customers, meat, dairy, health and beauty and homecare categories were all in deflation during the quarter. Overall supermarkets inflation, excluding tobacco, declined to one per cent, remaining well below historic levels.”

Coles, along with fellow supermarket giant Woolworths, has faced scathing criticism from shoppers over alleged fake discounting scams that have bolstered sales at the expense of unsuspecting shoppers.

The Australian Competition and Consumer Commission is suing both over claims it jacked up the price of hundreds of products across its respective value campaigns, only to later reduce the price above the original and market it as a massive discount.

In a court hearing last week, both pushed the blame onto suppliers.