Coles trials 'big box' booze format

Coles is trialling a range of formats for its underperforming liquor businesses - comprising the First Choice, Liquorland and Vintage Cellars groups - including a warehouse to compete against big-box market leader Dan Murphy's.'

The supermarket chain, owned by Perth-based conglomerate Wesfarmers, has opened a "Liquorland warehouse" in Sydney which is two to three times larger than the usual Liquorland format and offers a wider variety of wines, beers and other alcoholic drinks.

Situated in Sans Souci, south of Sydney, the Liquorland warehouse will use its larger buying power to offer lower prices.

"Liquorland warehouse in Sans Souci has been developed as a trial store that will provide us with an active retail space to test new innovation in liquor retailing," a Coles spokesman said.

The warehouse format trial, which began last week, is part of a wider strategy to improve Coles' liquor operation which has remained behind the pace of rival Woolworths and its Dan Murphy's stores for at least five years.

It's a problem that Wesfarmers boss Richard Goyder has highlighted, in several sales and profit updates in the past year, for acting as a drag on the turnaround of the Coles supermarket group and its sales momentum.

While Coles is still outperforming Woolworths in supermarket patronage and revenue growth, its liquor division remains the problem child of the business. Last quarter it shaved off 0.6 percentage points from Coles' supermarket sales growth. That was an improvement from the previous quarter when the drain from liquor on total food and liquor sales was 1.2 percentage points.

The weakness in Coles' liquor offering is in contrast to the continued expansion and success of the big-box Dan Murphy's store network.

When Wesfarmers bought the Coles business in 2007 it installed former Dan Murphy's boss Tony Leon to run its liquor operations. Last month it was announced Mr Leon would step down to be replaced by Brendan Sweeney, who joined Coles last year as head of multi-platform operations.

Andrew Charlton, a one-time staffer for Kevin Rudd, was shifted from his role of chief financial officer at Coles liquor to become head of the liquor retail network.