From down, down to Coles turnaround

18/12/2014

With 2014 marking the centenary of supermarket goliath Coles, who better to recount its history than former CEO Ian McLeod, the guest speaker at the Dean’s Leaders Forum in November, attended by more than 100 MBA students, alumni, faculty and visitors.

 

Like its prices, Coles’ fortunes have been up and down over the past 100 years. While mainly up (in contrast to its mainly down, down prices, according to that ad), its turnaround story since hitting the depths in 2007 is inspiring – especially when told with a Gaelic lilt and good humour by the man responsible.

When Ian joined Coles as Managing Director in 2008 – after a successful career as CEO of UK car parts and accessories chain Halfords and senior roles at Wal-Mart Germany and ASDA supermarkets in the UK – Australia’s second-largest grocery chain was a basket case.

Ian asked his senior managers what they thought had gone wrong, and one of them told him, “I find it hard to convince my wife to shop at Coles.”

To add pressure to his turnaround task, Perth-based Wesfarmers had just paid almost $20 billion for the company, an Australian record. He needed results fast.

Armed with a camera, Ian visited several stores himself to document half-empty shelves, confusing prices, rotten fruit and bag searches at checkouts that treated customers like shoplifters.

He returned to his office from one trip with a bag of damaged fruit, which he dumped on a manager’s desk, saying, “What do you think of that? That’s what we’re selling to our customers.”

Seeing his photographs of deserted shelves, decomposing vegies and airport- like checkout security at the forum, it was clear he had to do something. 

To fill the shelves and boost quality, he improved the supply chain, supported growers and suppliers through partnerships and large volumes, and narrowed the product range.

And to end the confusion over prices, which varied from store to store across the country, he enlisted the help of his favourite rockers from his youth – you guessed it – Status Quo, whose rejigged number one hit, Down Down, pile-drived home the message that Coles’ prices were now a one-way street.

Standing in front of a projected image of his 17-year-old self in Edinburgh – a big ball of hair, flapping flairs and pumped-up platform shoes, as if dressed for a Status Quo concert – Ian spoke with pride about the price campaign.

“We’ve saved customers over $1 billion, or about $570 a year for the average family,” he said. “We’re fighting inflation.”

He said it cost Coles $10 million dollars to drop the price of milk to $2 – where it’s remained for three years, alongside $1 bread – and led to a Senate inquiry. But it helped turn the company around.

 From the time Ian took over at Coles to assuming his new role as Group Commercial Director at Wesfarmers in 2014, Coles doubled its turnover and posted 18 consecutive quarters of unbroken revenue growth from 2009.

Ian said putting customers first and boosting staff morale played a big part in that success.

“Staff now come to work because they want to, not because they have to.”

He also said a company needs a personality to succeed, something Ian has in spades.

After taking questions from the floor and recommending books of turnaround tales that inspired him – Leading Change by Harvard Business School’s John Kotter, Zapp by William Byham and Jeff Cox, and Nuts! by Southwest Airlines founder Herb Kelleher – Ian left his best bit of advice to last.

“I was in a very fortunate position to spend time with Lee Scott, who was the CEO of Wal-Mart worldwide, and I asked him at one meeting , ‘If you were going to give me one piece of advice, what would that be?’ And he said, ‘Be humble,’ and I’ve never forgotten that.”

Coming from a man who’s achieved so much, it’s unlikely anyone at the forum will forget either.

In joining Dean Zeger Degraeve to thank Ian for sharing his insights, anecdotes and photos, MBA student Duncan Graham said it was important for his peers – tomorrow’s executives – to hear from someone who has surmounted his challenges so convincingly.

Keep an eye on the MBS website for the guest and date of the next Dean’s Leaders Forum, which we hope to hold in March 2015.