25 February 2007

Coles brand backflips.

As DIFFUSION predicted (Is McCann set to give Coles a Walmart 9/4/06) Coles Group's roll out of it's new brand strategy is proving problematic.

Firstly, the much heralded closure of the Bi-Lo brand has not resulted in customers flocking to Coles supermarkets, as was hoped, but to competitors like Woolworths, Aldi and those pesky IGA stores. What this is likely to mean is that its other brands (K-Mart, Vintage Cellars) in the portfolio also slated for the chop are likely to be left standing while John Fletcher and those masterminds at McCann Erickson and Futurebrand rethink the much vaunted supercentre approach. Yes, supercentre is what they are going to be called. Just check out a recent National Retail Manager role Cole Group advertised two weeks ago describing the Coles Supacentre as "radically transforming the retail experience in Australia".

Secondly, there's the tiny issue of an imminent-any-time-any-day-now-soon sale after Fletcher and Coles Group Board chairman Rick Allert decided to throw in the towel and succomb to the inevitable private equity tsunami engulfing some large underperforming listed companies throughout Australia.

Thirdly, Coles Group's current lacklustre trading performance is putting even more pressure on Fletcher and Co to get the new strategy right. Here at DIFFUSION we've received word from Tooronga that there's quite a lot of internal dissatisfaction with the new direction. Insiders are wondering whether the new strategy is going to work.

In the end, it might all be for nought. If, after an equity group breaks it up and Woolworths nabs Coles' best performers Target and OfficeWorks, what will they be left? An underperforming supermarket chain and a lacklustre variety store. Hardly the stuff of dreams.