"What happens when Coles keeps prices down?” By - Ian McLeod, Coles Managing Director

1. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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**CHECK AGAINST DELIVERY**
Firstly, thank you for affording me the opportunity to talk to you
about Coles and what has been achieved over the last five years.
When I came to Australia in 2008, Coles was a tired, worn out,
demoralised business; a business that had fundamentally lost its
way.
Since then, I believe we have made very good progress; progress that
gives us the motivation to do more.
And there is much more to do before Coles can reclaim the mantle of
Australia’s favourite supermarket again.
Before I move to the central message I want to deliver today - about
how low prices are good for Coles and for Australia – I wanted to pay
tribute to our parent company Wesfarmers.
If the Perth-based Wesfarmers Group had not taken the brave step
of acquiring Coles in 2007, it is highly likely that the retail business
would have been taken over by overseas private equity, or worse still
possibly collapsed altogether.
If Coles had indeed been taken over by overseas private equity in
2007 – just on the door step of the Global Financial Crisis – it is not
clear that it would have survived in its current shape. The long term
view would have most likely given way to short term financial
expediency.

2. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
2 | P a g e
Wesfarmers copped a lot of flak in the early days over the acquisition
but I believe the decision has been fully justified by the turnaround
over the last five years.
Next year, both Wesfarmers and Coles celebrate their Centenary.
It is fitting that these two great Australian companies are joined at
the hip 100 years after they were established – one by a farmers’
cooperative in Perth and the other by the son of a British immigrant
who set up one shop in Smith Street, Collingwood in Melbourne in
1914.
It is part of an enduring legacy that the same low price ethos has
returned to Coles after 100 years – from the ‘nothing over 2/6’
opening in 1914 to Down Down, prices are down, and staying down
at Coles in 2014.
When I started at Coles five years ago I was the fourth Managing
Director in as many years.
Coles was widely regarded as a second rate player – with run down,
cluttered stores offering poor quality products at high prices.
Customers were actively avoiding shopping at our supermarkets a
few years ago and it was frankly hard to blame them.
The quality of our fresh food was not up to scratch.
And physically our supermarkets were so run down it seemed like
the strategy was to keep customers away, not invite them in.

3. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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The following video gives a better idea of the condition of Coles
when I arrived…
Our turnaround strategy was based on a very simple proposition – if
we genuinely put the interests of our customers at the heart of
everything we do, they would benefit and we should prosper.
And we have.
This simple vision, supported by a focused action plan, has driven the
turnaround over the last five years.
We’ve transitioned from a business that took little pride in food
quality or store appearance to one committed to quality and a great
in-store experience for customers.
100,000 Great Coles people were being let down by poor leadership.
We’ve grown from a business with 14 million customers per week to
one with 18 million per week.
And because they like our range, our quality and our value, our
customers choose to spend more with us too.
As a result, Coles return on capital has almost doubled in the last 5
years and our profit has pretty much done the same.

4. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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A central focus of our customer centric approach has been to drive
prices down, and keep them down.
In the last three financial years, Coles has cut the average grocery bill
for Australian families by nearly 5 per cent.
So while inflation has pushed most things up during this time, a
shopping basket at Coles has actually got cheaper.
I doubt many businesses can claim to have done that for their
customers?
But what does this mean?
What happens when Coles keeps prices down?
It may be good for customers but is it good for Australia?
We think it is and so do our customers.
We also think that it brings huge benefits to Australia, so today I’d
like to explain some of them.
In Sir Isaac Newton’s third law of physics he explained that “Every
action has an equal and opposite reaction.” So what is it that goes
up, when Coles keeps prices down?
Quite a few things actually; and we believe they’re good for
Australia.

5. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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Food is the second largest component of a family’s budget after
housing costs and one of the key drivers of the Consumer Price
Index.
Indeed in 2007, the high price of groceries in Australia became a key
election issue, with some justification.
Kevin Rudd, in his election speech in July 2007 stated “we will
establish a National Inquiry into grocery prices to make sure working
families aren’t ripped off”.
In fact, my first day on the job coincided with Coles’ first day on the
stand at the ACCC inquiry that followed.
If our strong competition in groceries was not dragging the CPI down,
inflation would be materially higher.
For thirty five years, food inflation ran at an average of 6% but since
we began the turnaround, we have turned food inflation into food
deflation at Coles; and it has reduced the ability of our competitors
to raise prices also.
In the second quarter of this financial year, the CPI was 2.2%, but
within that, housing costs went up 4.4%, education costs went up
6.1% and health costs went up 7.7%.
In contrast, Coles prices were roughly 1% lower than the previous
year.

6. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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Had food prices kept increasing at the rate they did for the 35 years
until 2009, the CPI would be over 40% higher.
Food affordability isn’t just about macro-economics for our
customers.
It simply means that the 18 million people a week that shop with us
can either get more or better groceries than they might otherwise
expect, or have more change in their pocket to save or spend on
other things.
The cost of living is a huge issue to more than a million Australians.
All of us have been affected by the surging price of electricity
But recent analysis by the Dietitians Association of Australia has
found at least five per cent of Australian households, or 1.15 million
people, are struggling to feed their families.
They found that rural homes run out of food and city-living
Australians struggle to afford healthy food.
The Salvation Army also surveyed clients and found that 92% have no
savings at all, 28% cannot afford a substantial meal once a day and
66% have cut down on basic necessities.
Keeping prices down helps: on average our customers have saved an
extra $450 last year compared to the 2009 financial year.

7. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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This is a week’s wages for many Australian families struggling to
make ends meet.
Five years ago you would often find identical products priced
differently in stores only a suburb apart. Customers told me and to
be honest I didn’t believe them… But they were right!
Like them, we did not think it was right that prices should be
different in different stores simply because the locals could afford to
pay more or were unable to shop anywhere else.
We also know that many things in rural and regional Australia are
more expensive than in cities.
So we introduced common pricing for similar products in all Coles’
supermarkets.
This means that with only limited exception, we charge the same
price across each State, regardless of distance and regardless of a
suburb’s affluence.
That means the price of Kellogg’s cornflakes or Vegemite or Coca
Cola is the same in Balmain as it is in Broken Hill.
People who live in rural and regional areas are not paying more for
their groceries at Coles because they live a long way from the cities.
Common State-based pricing was our first significant move to
engender high levels of customer trust about Coles pricing.
Five years into the Coles turnaround, we are still driving prices down
and we are keeping them down.

8. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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We’ve introduced value meal solutions that can feed a family of four
for $10, with recipes developed by one of Australia’s favourite chefs,
Curtis Stone.
And importantly we have Coles’ brand products that give customers
the choice of buying the same or better quality as branded
alternatives but for as much as 30% less.
Coles brand has also driven innovation, bringing hundreds of new
products to the shopper that simply weren’t available to Australians
before.
After the 2008 ACCC Inquiry into high grocery prices, I thought
lowering them might be regarded as a good thing!
However, there are many critics of big businesses such as Coles, and
as a result, our determination to lower prices for the Australian
customer has not been met with universal applause!
Some politicians think that as big companies don’t vote it is easy to
attack them to get a few media headlines at our expense.
Right wing commentators and left wing unions also regard us as fair
game.
They claim we make profits by bullying our suppliers, that we will
bring about the demise of the corner shop, or that we are killing off
truck drivers by the score.

9. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
9 | P a g e
Some claim that we hate farmers; even that we will climb over their
dead bodies, if there’s a buck in it!
Every one of these assumptions and claims are dead wrong.
What they also fail to recognise is that big companies aren’t just
faceless; they employ millions of people in Australia – and all of them
vote.
Coles’ employs over 100,000 team members – many of them in
electorates of politicians that attack us. Some politicians wish to cut
the number of stores we run, for example in Queensland alone this
would cause us to close 10 stores and 1,000 of our team members
would lose their jobs.
It upsets them the way their company is portrayed and that because
they work in a supermarket, their jobs aren’t worth fighting for.
A Deloitte report confirms that every dollar Coles spends, creates
another four to five dollars of income throughout the national
economy.
This is the lifeblood of many small businesses that operate across
Australia, especially in rural and regional areas.
Because we are big, some of our critics argue that we make too
much money.

10. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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Very simply, of every dollar that goes through our cash registers we
earn about 4 cents before tax.
This chart shows the average operating earnings of a range of
businesses, and at the end of the chart you can see that food retail
and fuel retail have the lowest profit margins in Australia; well below
food manufacturing and eclipsed by other sectors.
Even with Coles’ earnings under 5%, a huge slice of this is paid in tax,
and funds a variety of public services, as well as contributing to the
wages of the politicians that criticise us!
The tax we pay has actually quadrupled since 2008.
We wrote the ATO a cheque for $324 million last year.
The remaining money is either reinvested to make Coles better for
customers of distributed to almost half a million shareholders, the
majority of whom are Aussie mums and dads with their
superannuation accounts.

11. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
11 | P a g e
We do our best to give them a fair return, by attracting more and
more customers every week, by lowering prices, improving quality
and delivering a better service.
Every Coles’ customer survey group puts the cost of living as their
number one concern.
Politicians that attack Coles should remember that 18 million
customers support lower prices – and they all vote.
The net effect of political proposals to curb the growth of big
companies such as Coles means that food prices will be higher and
put people out of work.
Let me be clear: Coles is in the business of keeping the cost of living
down, so it’s more than a little frustrating when some politicians
criticise us for trying to do just that.
Australians are among the least loyal supermarket customers in the
world. It’s very easy to go elsewhere and shop with the competition.
One in six customers is prepared to change supermarkets for a 5 per
cent price decrease.
Quite simply, customers are prepared to cross the road for lower
prices and they can do that very easily in Australia.
That keeps us on our toes.

12. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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But competition transcends price; the priority our customers look for
is convenience, availability, quality and price - and we fight every day
to deliver that.
Parliamentary and government inquiries have found the sector is
competitive, and the entry of the far larger German and American
mega-corporations, Aldi and Costco, are unquestionably making
competition even more intense.
In the year 2000, Aldi had no supermarkets in Australia.
Just over ten years later, Aldi now has around 300 stores and they
are expected to double that in the next few years.
That means Aldi will nearly have as many stores as Coles – and our
750 supermarkets took almost a century to build.
Some argue that Coles’ low prices strategy is killing the convenience
store.
The facts, as you can see, do not support this assertion.
I have worked in the supermarket industry for over 30 years in the
UK, and in Europe, and in Australia. I can say that I can’t see a future
without the local store.
Supermarkets may be able to compete on price but they cannot
compete with the absolute convenience of location.

13. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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In fact, research shows that convenience stores in Australia have
grown by close to 50 per cent in the last decade.
If there is any competitive threat to corner stores it has come from
much bigger structural factors in the convenience market rather than
low prices in supermarkets
The truth is that Australians shop differently for big weekly shopping
visits to supermarkets compared to one-off daily visits to
convenience stores for selected grocery items.
As such, I believe convenience stores will always have a place in the
Australian retail landscape.
The first and most obvious evidence of this is that last year we
directly employed over 102,500 people in nearly 2,500 stores across
the country.
In addition, we support almost 120,000 further jobs throughout the
broader economy.
Coles team members are from all walks of life, 173 ethnic
backgrounds and rather brilliantly can speak a combined total of 313
languages!
About one third of all Coles’ stores and team members live and work
in rural and regional Australia.
We also have more than 900 indigenous team members, and employ
over almost 2,500 team members with a disability.
And then there’s Brenda, who, at 80 and after 47 years still works
part time in one of our Melbourne stores.

14. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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Having a cup of tea with Brenda in Malvern store tea room, she
happily told me how Edgar Coles used to come in, to check the store
out and have a cup of tea with the manager.
The original Coles used to be close to their customers and we want
to recapture that way of doing business - putting our customers first
and giving them a great shopping experience.
Since 2008, we have invested over $3 billion on rebuilding Coles.
We have opened 100 stores and refurbished a further 350 stores,
keeping a minimum of 8,000 contractors in work every year.
We have sought ways to provide greater growing capacity within
Australia to reduce the dependency of imported products to meet
customer demand. We have an “Australia First” Sourcing Policy
which means we have had to reduce imports where we can.
Successful recent examples include Coles brand yoghurt, Coles brand
cheese and this year, Coles capsicums and Coles avocados; all
previously imported to a degree, but now 100% Australian.
In fact Coles brand has more Aussie kangaroo symbols on its
products that any other brand in Australia.
Food manufacturing is facing challenges from rising input costs and a
high Australian dollar but Coles brand contracts provide greater
security for hundreds of businesses to not only survive but to thrive.
We have issued booklets, copies of which are on your table today, to
provide hard evidence of Australian businesses that have won from
producing Coles brand products.

15. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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Unfortunately these good news stories are rarely if ever covered in
the popular media which only prefers to focus on conflict.
What has really impressed me about Coles, is that it is not just
Brenda at Malvern who has served Coles for a long time.
About one in six of our team members have been with us for 10
years or more.
Almost 1,700 have been with us more than 25 years and a further
900 have been serving Coles customers for over 30 years.
One achievement that gives me great personal satisfaction is that we
have restored their faith in the company they work for, because
quite frankly five years ago there wasn’t a lot to be proud of!
Five years ago two thirds of our team members were casual but now
two thirds are permanent and we have invested over 1,000,000
hours into training to help service our customers better. We have
also promoted over 4,500 team members into management
positions in the company.
We want our team to feel that working for Coles is not just a job but
a career!
But this extends beyond direct employees – we’re trying to give our
suppliers longer contracts when we can – particularly farmers - so
they too have greater security.

16. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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This has meant that our relationships with suppliers – often
characterised as fractious in the media – have in fact, improved
substantially.
An independent audit of suppliers ranked Coles almost bottom in
2008, but as we have worked with our suppliers we have gone from
the bottom to near the top, in the latest survey.
Coles is a very major buyer of foods that are grown and made in
Australia, and we try to buy locally.
I have personally met numerous 2nd
& 3rd
generation Australian
supplier families who have seen their businesses double, triple …and
even quadruple in size in the last 4 years with Coles.
Around 96% of our fresh produce is Australian Grown and we are
working to increase that, by encouraging local farmers to enter long-
term contracts to grow specialty fruit and vegetables that can only
be sourced overseas at the moment.
In fact, compared to the 2008 financial year, we are now selling an
extra $4 billion of Australian food and 200,000 more tonnes of
Australian fruit and vegetables.
This is 30 times faster than the growth in imported fruit and
vegetables.
Farming is a notoriously tough business and Australia is particularly
good at it but crops are variable.

17. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
17 | P a g e
A couple of years ago there was a bumper lettuce crop. Farmers
couldn’t sell them, and were ploughing them back into the ground.
Coles stepped in recognising that if the prices were reduced,
Australian families would buy more.
So, in partnership with our lettuce farmers we reduced the price,
sold the oversupply and importantly increased sales and profits to
farmers.
It was a win for both our farmers and customers
As another example our customers want fresh strawberries year
round, so to solve that we funded protective tunnels for a local
farmer in Victoria
We try to meet customer demand for produce as diverse as purple
carrots and orange cauliflowers, and to do that we work with our
farmer partners, because it’s good business for all of us.
In fact, we are selling more Aussie food than Coles has ever done
before.
A healthy food manufacturing industry thrives on innovation which
leads to export opportunity and growth beyond our shores.
We encourage that.

18. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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We have worked with numerous Australian small companies to bring
new, innovative products to the market as well as quality products
under the Coles brand to lower the cost of shopping for our
customers
Similar to the strawberry tunnel example, in exceptional cases we
have provided loans to small suppliers where investment was badly
needed but funding was unavailable.
The idea was so compelling to allow the production of better quality
products or better value products to customers we decided to
support them directly.
We don’t make much noise about it but Coles raises tens of millions
for the community every year. This year we will give close to $30m to
charity.
We are a national partner of Guide Dogs Australia and raised nearly
$1 million for vision impaired Australians through our stores
nationwide.
We are an official partner of the Cancer Council and have been the
primary supermarket sponsor of Daffodil day since 1996.
Since then, we have raised more than $10 million for cancer
research.
And in 2013, we made Redkite our charity of the year to help families
struggling to meet the costs of helping their kids survive cancer.

19. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
19 | P a g e
We selected Redkite as our charity of the year this year. Redkite
raise much needed funds offering practical financial support for kids
with cancer and their families.
So far this year alone, Coles and its customers have raised over $3
million for Redkite, we’re on track for our $5 million target by the
end of the year.
We have asked Redkite to be with us today, and if any of you can
make a small donation (or even a very large one!), please fill out the
form on the tables or see the Redkite people who will gratefully
collect it at the end of the day.
Many people think we simply throw out food that reaches its use by
date.
However, Coles takes great pride in donating as much food as
possible to those are need help.
We are one of Foodbank’s biggest donors of grocery products.
It has been a ten year partnership and we have donated more than
ten million meals. Our contribution climbs every year.
A few weeks ago, I was privileged to receive an award on behalf of
Coles from the Governor-General for the good work that has been
done with Foodbank over the last 10 years.
And one of our new projects that really interest me is our
SecondBite partnership.

20. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
20 | P a g e
We donate fresh produce to SecondBite who work with local
community groups to transform it into hot meals for people that
have fallen on hard times.
We gave about 3 million hot meals last year and I hope that’ll reach 5
million this year.
But that is not all.
We have also been an active partner with State emergency services
in responding to crisis in our local communities such as the Victorian
bushfires in 2009 and the Queensland floods and cyclones in January
2011 and 2013; and the Tasmanian Bushfire Appeal this year also
many Coles team members and our customers are directly affected
when disaster strikes.
They are typically the first to react and support other Australians
facing difficult circumstances.
That is why we have provided over $2.5 million to local charities in
communities where our stores are located over the same period.
We have also worked in partnership with Junior Landcare since 2008
to provide over $1.3 million for 1,000 local schools gardens that
teach Australian children how to grow food and where food comes
from.

21. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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We also give $10 million of sports equipment to schools every year
through our Sports for Schools Program, because kids need it and
schools often struggle to provide it.
Press reports recently indicated some schools will see their electricity
bills double this year. They need all the help they can get.
The more we keep prices down, the more we sell, and the more we
sell the more we can donate to good community causes.
Australians are increasingly concerned about how their food is
produced.
Coles has made a decision to be ahead of the rest of the sector on
the issue.
Many customers and animal welfare groups have been pleading with
us to show the way and take a lead in areas where Australia is falling
behind the rest of the world.
All Coles Brand eggs are 100% cage free and Australian Grown, all
Coles Brand fresh pork is 100% sow stall free and Australian grown,
all Coles Brand fresh milk is 100% Australian milk and 96% of our
fresh fruit & veg is Australian grown.
We have stopped injecting our young cattle with growth hormones
and we have ensured our salmon is sustainably sourced.

22. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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We’re working collaboratively with our farmers and helping bring
real change.
Last week, Coles announced a major new partnership with AusVeg,
adopting their industry standard on sustainability as our best
practice approach to ensure clean and green fruit and vegetables for
our customers.
And we recycle 60% of our waste, and turn 23 tonnes of plastic into
furniture for schools.
We’re using renewable meat trays and cutting our carbon emissions.
Despite our growth as a business, we are using less energy now than
we were 3 years ago.
We’re trying to make a difference.
What I’ve outlined today I believe shows that when Coles keeps
prices down, competition, affordability, ethical sourcing, community
support, farm sales, food manufacturing, jobs and job security all go
up.
We think that’s a good thing, so we are going to keep doing it. It’s all
about affordable food for our customers and helping Australia grow.
Five years ago Coles was going backwards because we weren’t giving
customers what they wanted.

23. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
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Had we kept that up we might well have gone broke, and we’d have
deserved it.
But we’ve fixed it by putting our customer first.
We want the customer to be at the heart of everything we do.
Coles is important to the growth of many new family-owned stores
that spring up around us in shopping centres.
They thrive because they are giving customers what they want. And
that’s what we do too.
Unashamedly we want value for our customers and believe that
what we are doing is the right thing to do.
It's the right thing to do, because it is lowering the cost of living for
ordinary Australians who are shopping on a budget and have been
frustrated for many years by a constant flow of rising food prices,
poor service, poor quality and poor operating standards.
It means challenging the status quo and sometimes challenging
suppliers where we believe Australians deserve a better deal.
Take our multi-national suppliers for example, many of them are
bigger than Coles and make far larger profit margins. Prices are
higher than overseas and that’s why we challenge it for our
customers.

24. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
24 | P a g e
These examples include products made overseas and sold overseas
at lower retail prices… much lower!
Differences in manufacturing costs explains some of it… But nowhere
near all of it.
Astonishingly, it also includes examples of products made in Australia
but still sold cheaper overseas.
What should we do for Australians, turn a blind eye, or challenge it?
Our $1 per litre milk initiative has been controversial.
Our intent has been and remains providing lower priced milk for our
customers while not adversely affecting our farmer suppliers.
We have achieved this sustainable price reduction in two ways.
First we took a price hit ourselves, reducing our profit margin on milk
to fund a lower retail price.
Secondly, we paid dairy processors more for their milk, so dairy
farmers would not suffer.
Since then, we have paid dairy processors more when they have
asked for it to sustain farm gate prices.
However, the lack of transparency in the farm gate price has been of
increasing concern to us.

25. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
25 | P a g e
We have therefore recently agreed a new deal with the two largest
farmer co-operatives in Australia, Murray Goulburn and Norcp to
build new plants and process Coles brand milk as part of that co-
operative.
This will provide long term security through long term contracts for
over 2600 dairy farmers and a premium farm gate price.
This will also provide much greater price transparency for dairy
farmers.
The 10 year agreement will directly benefit the dairy farmers that
own the dairy cooperatives.
I believe this is a game changer in the Australian dairy market.
Let me give you a picture of where we are going over the next five
years, and some of the implications of that.
We have a single minded vision: to become Australia’s best
supermarket.
The best supermarket for customers;
the best supermarket for team members,
the best supermarket for Australian suppliers,
and the best supermarket for the mums and dads who invest their
hard-earned savings in our company.

26. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
26 | P a g e
The key to achieving this vision will be keeping prices down.
Keeping prices down will give us the volume to continually improve
supplier quality.
Keeping prices down will give us the revenue to continue creating
jobs; jobs for people for whom Coles represents a serious career, and
people with trade skills like the hundreds of butchers and bakers we
will train and employ.
Our strategy is to grow largely through improving stores rather than
dramatically increasing the number of them.
Keeping prices down will enable us to renovate another 300 stores
and upgrade our delicatessens and bakeries…..and we will continue
to innovate.
We renovated our stores 5 years ago and we are doing it again now.
It is like painting the Harbour Bridge, when you finish painting it you
have to start all over again!! And we also try and change the share of
the bridge as well!
The following video shows how we are shaping Coles stores of the
future.
Keeping prices down will enable us to invest in more local
innovation, which creates even more jobs, and meets the needs of
customers as the population ages and demands change.
As our volume grows we aim to reduce imports even further and
increase local production.
We already source 96% of fresh produce locally, and want to source
more.

27. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
27 | P a g e
More than 90% of our Coles Brand products are already Australian
made but we want to source more.
Keeping prices down will lead to many extra direct and indirect jobs
over the next five years.
For our suppliers keeping prices down will lead to hundreds more
suppliers benefitting from longer term secure contracts, and this in
turn will allow them to invest and employ with certainty.
Our five year pricing vision is to have a basket of groceries cost less
than it does today in real terms.
Keeping prices down will continue to drive competition, so people
that shop somewhere other than Coles still share the benefits of
lower grocery prices.
And naturally keeping prices down will pull the cost of living and
inflation down during a difficult economic period.
Keeping prices down will increase our earnings, and we will share
this as we always do,
with customers through further savings,
with team members through growth and opportunity,

28. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
28 | P a g e
with the Government through tax, and
importantly with our shareholders through dividends and capital
growth as they deserve fair, solid and reliable returns on their
investment.
And if we can keep prices down in Food, perhaps we can help our
customers by broadening our offer even further.
We will keep looking, we will keep trying.
At Coles, we constantly strive to do better and the customer comes
first…always!
What matters is keeping the customer front and centre by keeping
range, convenience and quality up, but prices down.
By keeping prices down we’ve already increased affordability,
competition, local sales – particularly for farmers – community
contributions, job security and employment.
That’s what we’ve already done and over the next five years we’ll be
doing much more of it.

29. “What happens when Coles keeps prices down?”
Ian McLeod, Coles Managing Director, Speech to the American Chamber of Commerce in Sydney
4 June 2013
29 | P a g e
Five years ago we set ourselves the goal to give the People of
Australia a shop they trust, delivering quality, service & value.
It was our goal five years ago and it remains our goal now.
We are serving our customers better now than 5 years ago and over
the next 5 years, our aim will be to serve them even better.
Thank you for your time.