Coles pushes on with supply chain overhaul

The way grocery brand owners have their stock handled and promoted in supermarkets is set to change after Coles decided to push ahead with an overhaul of its supply chain and launch its new system by Christmas.

The way grocery brand owners have their stock handled and promoted in supermarkets is set to change after Coles decided to push ahead with an overhaul of its supply chain and launch its new system by Christmas.

A letter sent to Coles' suppliers this week, and obtained by BusinessDay, reveals the nation's second-biggest supermarket chain has chosen marketing services companies Crossmark and AMC to be its first "preferred providers" of merchandising services in its stores.

The new system will start before the end of the year, with suppliers not wishing to hire Crossmark and AMC required to have their merchandising agents undertake an accreditation course from February.

In its letter to top suppliers, Coles' supply management team says the supermarket has developed the new structure for merchandising reps to reduce disruption in the stores and provide a better and lower-cost service to suppliers.

"As you are aware, there are up to 30 merchandise representatives that currently visit Coles stores on a busy day and there is no standard process, which causes significant business disruption in store, and a resource cost without a material benefit," the letter says.

"To help reduce this in-store disruption, and cost to both suppliers and Coles, we have selected two preferred field force providers, AMC and Crossmark.

"Coles has selected these providers due to their experience and ability to service large and small suppliers across our stores nationally, with a strong IT infrastructure capability."

As BusinessDay reported in June, the overhaul has sent shocks through agents, also known as merchandising reps, whose daily job is to watch over products on behalf of suppliers inside the store, including everything from restocking to replacing price tags.

These field reps also typically replace perishable food stock, such as bread, and negotiate deals with supermarket store managers over special promotions - all of which are key to promoting grocery brands and driving sales to shoppers.

Suppliers will be nudged into going through Coles' new merchandising structure, with those that use Crossmark and AMC expected to get a better value and service in-store for their brands.

"If suppliers opt to use their current field force or an independent third-party field force provider, Coles would still look to align their approach with our new preferred operational standards to ensure consistency in our stores," the letter to suppliers says.

Coles is yet to agree with Crossmark and AMC over the level of rebate they will pay back to the supermarket group to be on their preferred list of offering brand promotion, display and restocking services to grocery suppliers.

Crossmark and AMC are understood to believe the closer relationship with Coles, replacing the direct relationship with suppliers, will be an earnings winner.

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