Fresh on the heels of Coles outperforming the market for the 18th consecutive quarter, Ian McLeod, Coles former managing director and the man credited with turning around the fortunes of the supermarket giant, outlined his tactics at the QUT Business Leaders' Forum this week.
The famous "big red hand" advertising campaign indicating prices were "down and staying down" might have been tacky and "polarising" but it worked.
"We wanted to make sure customers recognised that when prices came down they stayed down and we tried to communicate that in an engaging way through our advertising.
"The big red hand started off as an arrow then it became a finger then a hand and then a guitar ... 93 per cent of people linked it back to the brand."
He said children started stealing the red hands from the stores.
"Rather than prosecuting them we printed half a million and gave them away."
Mr McLeod said part of Coles' better value strategy was to offer "stronger, deeper promotions and fewer of them", value family meals, sourcing 90 per cent of produce from Australia and operating "below the brands" to lower prices on the overall basket. Targeting the cost of weekly staples such as milk, cheese, eggs and meat was key.
"We gave all suppliers price increases before we dropped the prices. We funded it all ourselves from the efficiencies we had gained."
Coles' spectacular doubling of profit in five years where once even a store manager admitted "he found it hard to convince his wife to shop there" helped Mr McLeod defend his $19 million pay packet last year when MC Kerry O'Brien asked if it was "healthy" for CEOs to earn 400 times more than those on the shop floor.
"What I earn is what I earn. A lot - 90 per cent of it is performance-related. I have no issue with how much is earned as long as it is earned. It's not for me to decide - it up to my board to decide," Mr McLeod said.
Now Wesfarmers Limited group commercial director, Mr McLeod said of course the group was looking at the burgeoning markets of China and India.
"We won't rush headlong and want appropriate returns... Many retailers have had their fingers burnt."
Former Governor General The Honourable Dame Quentin Bryce AD CVO will address the next and final 2014 QUT Business Leaders' Forum on November 28.
Media contact: Niki Widdowson, QUT media, 07 3138 2999 or n.widdowson@qut.edu.au
