Coles Group Limited (COL) Earnings Call Transcript & Summary

Hi , everyone, and welcome to the SSC. My name is Anita Healy, I'm the GM of Investor Relations here at Coles. We have an action-packed agenda here today, which you can see up on the screen. So we'll get started very shortly, but just a few housekeeping matters. So firstly, safety. If you hear -- not very good at this, but beep, beep, beep alert tone, please collect all your small belongings, leave any large ones behind and get ready to evacuate. If you hear whoop, whoop, whoop evacuation tone, please follow any of the Coles team members in their red polos or our wardens and they'll take you through a safety exit and get you to assemble outside. Secondly, bathrooms. Just as you came in today, there's bathrooms just near where the coffee machine was, so head out to the bathrooms there. Thirdly, photographs. We are asking that no one takes photos today either here at the SSC or at stores -- at our CFC this afternoon. But we do have stock photos. So if you would like photos for your record, please contact IR and we'll send you through photos for the day. Mobile phones. Could everyone turn their mobile phones on to silent, please? And then finally, Q&A. We'll run all of the presentations first today and then we'll have a Q&A just before lunch with all of the presenters. The Q&A is being run by Slido. So you can see the Slido here on the screen, but you've also got Slido QR codes on your table. So if you want to enter a question at any point during the presentation, feel free to enter that or during the Q&A. And we do ask, it is a strategy day, so we'd like you to limit your questions to the topics that we're covering today, it's not a trading update. And I think that's probably it for me. Over to Leah.

Thanks, Anita, and good morning, everyone. A big welcome to everyone in the room, but also to those folks that are joining us online today. So as Anita said, we've got an action-packed set of presentation this morning and then we'll head out to the CFC this afternoon. And we're very excited to share with you a bit more detail around the strategy, so let's get into it. So 2024 marks 110 years of Coles trading and operating in Australia. And there's a really rich history of innovation, customer focus and value over that time. GJ Coles opened his first discount variety store in Collingwood in 1914 with the purpose of lowering the cost of shopping for Australian households. And on the day of opening, a sign hung in the front window that said nothing over 1 pound. And after 10 days of trading, he had taken 935 pounds, 4 shillings and 0.01. In comparison to that, many of our big stores today take around $2 million per week. If we move forward through to 1960s, Coles launched its first stand-alone supermarket in Balwyn here in Victoria in 1960. And the ambition was to actually provide a store where customers could buy everything that they had on their weekly shopping list so they could get it all at one place. Then through to the 1970s, by that time, Coles had a nationwide footprint. And then as we moved into the 1990s, data and technology was embraced. So in 1993, Flybuys was launched. And at that time, customers of Shell, NAB and Coles Myer were able to earn points towards free air travel just by shopping with us. And after 12 months of operation of that program, 3.5 million households had joined up. Today, we have over 9 million households in the program. So obviously, that first year of growth was a bit faster than what we've been able to achieve subsequently. Then in 1999, we commenced calls online with 23 postcodes here in Melbourne, and we were really delighted this year to celebrate 25 years of Coles online operation by giving away a whole heap of chocolate mud cakes for free when customers ordered with us. And then through to 2024, and this year will really be marked by the opening of our 2 customer fulfillment centers, and you'll get to see the Victorian one later on this afternoon, but also the opening of our New South Wales ADC, which I know many of you are going along to tomorrow. And I would have to say it feels like in many ways, we've come full circle because 2024 has also been characterized as a year where we have really focused on value and lowering the cost of shopping for our customers. So what you're going to hear from us today are the plans that we have in place to enable this business to continue to trade for the next 110 years, and along the way, create shareholder value, which takes us to our vision. And our vision is to become the most trusted retailer in Australia and to grow long-term shareholder value. And we know that if we want to do that, we have to build strong relationships with all of our stakeholder groups. If we start with customers, we have 18 million transactions that go through our checkouts every week across a network of 1,800 stores, which comprise both our supermarkets and our liquor network. And this year, as I said, cost of living has very much been at the forefront of our customers' minds and they have really been seeking to balance the budget. If we combine that with the fact that we've had a significant amount of political and regulatory scrutiny over the last 12 months, there is a real job to be done to build trust as we move forward from here with our customers. Now we are a very important part of the Australian landscape with over 115,000 team members, which does make us one of the largest private employers in Australia, but it's also the place where many people have their first job, and we're very proud of that. We're also very proud of the fact that this year we achieved our best-ever mysay engagement score, which places in the top quartile of Australian corporates. We also focus very much on having a diverse, inclusive and respectful culture in our business. And safety is something, both from a physical safety and a psychological safety, that we spend a lot of time focusing on as a business. Moving to our suppliers. We have 8,000 suppliers that we work with and many of those relationships span decades. We know that without great suppliers, we cannot have great products to offer our customers. And so that relationship is absolutely crucial. We are very focused on developing mutually beneficial relationships with our suppliers, but also ones that help us to build supply chain resilience and also create points of difference for us when compared to other retailers. Now moving to community. Given we have stores in pretty much every part of the Australian landscape, the work we do with our communities is a really important part of what we do every day. And we're really proud to have contributed in FY '24 over $38 million to community causes through our partnerships with organizations like Flight MND, Redkite, Movember and Hospitals United for Sick Kids. We've also seen over the last couple of years as cost of living has become an increasing issue a rise in food insecurity in our communities. And so the work that we do with our food rescue partners, SecondBite and Foodbank, is critical to helping to address this. And last year, we donated the equivalent of almost 40 million meals or food to those partners. And it's something that we're proud to see that food getting utilized in community kitchens and pantries across the country to address that. And then finally to our shareholders. We have over 420,000 direct shareholders and millions of Australians that indirectly hold Coles shares through their superannuation funds. And we know that, that is as many of you would attest to a critical stakeholder group for us, and we've got an important role in ensuring that we deliver strong returns for that group. So when we reset the strategy in August of last year, we did redefine our purpose, and we very deliberately chose the words that came together to helping Australians eat and live better every day. So I did want to touch just briefly on each of these words. So helping really mean solving problems. For customers, that means what's for dinner tonight? How can I eat more healthily? How can I buy products that are more sustainable? How do we help them to solve those problems? The words eat and live really go back to the grounding of our business model, which is in food. If you go out on the street and you ask customers why do you go to Coles, they are going to tell you that they go there to get food. And we're pretty unashamed in the use of the word eat in our purpose. It is the heart of what we do. But we do know, and this is where live comes in, we do know, as GJ Coles did at the time, that it is very convenient to buy other things that are frequent-transaction items when you do your food shopping each week. So things like pet and home care, health and beauty items, liquor, they are all things that are very convenient to grab while you're in the shop getting your fruit and vegetables and your meat for the week. And those high-frequency transition items, which are close to our core, will continue to be a big part of our focus going forward. Better really refers to the passion that we have as a business to have more delicious, more healthy, more sustainable products. And finally, every day is a really important concept in this purpose because it points to the consistency that we are aspiring to have to deliver to every customer every day, regardless of whether it's in store or online, a really great experience and then for them to have a great experience with our products when they get them home. Now before I get into the detail of the strategy, I did just want to touch briefly on some of the customer insights that have led to its formation. Customer insights form a big part of the conversation that we have every week here. We have our Tell Coles, which is thousands of surveys that is done every week with our customers after they shop with us. But we also do a lot of focus groups and even accompanied shops to better understand how our customers are responding to the offers that we're putting out there. Now if you look over the last few years, we've actually had a number of significant disruptions that have come into our sort of operating environment. We obviously had COVID, which was significant. We also had bushfires and floods and extreme weather events coming through. The last few years have been characterized by a level of disruption in the global supply chain networks that we haven't seen for a very long time. And along with that has come inflationary pressures that we haven't seen since the 1990s. And then more locally in our stores, it's also been a very challenging time for loss and for team member safety. And so at the same time, as you've got all of these changes that are happening in our operating environment, you've also got customer behaviors and preferences changing alongside that. And we are attempting to adapt the business to make sure that we are responding to all of those inputs. And what customers are telling us is that right now, value is top of their list every time in terms of what they're considering. We know that over 90% of our customers have changed their behavior in terms of how they shop for groceries in some way because of the need to balance the budget at home. But for many of our customers, it is not just price that makes up the value equation, it is also quality and they are unwilling to compromise on quality to still be able to put dinner on the table for the family. We've also seen a real acceleration in digital engagement. Now this really happened during COVID. So during COVID, our sales penetration in the digital space increased 3x. It then came off a little bit as we came out of COVID, but it has since then increased very steadily. And we're now at over 10% of our sales going through our e-commerce channels. Convenience, health and inspiration is also important. Customers are busier than they've ever been, and you probably all feel that in your own lives. And so they are really asking us to make it a lot easier for them to prepare meals at home. They're also more focused on health, that has been one of the big phenomenons post COVID. And they're interested in the relationship between health, aging and how diet can influence that. And they're also, we know, most engaged with brands that are helping them to achieve their goals and solve their problems through inspiration that does make life easier. And so that focus on the helping and the inspiration, that's something that customers are telling us we really need to do. Now finally, you see on here sustainability. I would say that sustainability has taken a bit more of a backseat in the last 12 to 18 months as cost of living has risen up the needs curve. But we definitely still have a large number of our customers that value the opportunity to shop in a sustainable way, particularly if it doesn't cost them any more to do so. So when you put all that together, what we developed and launched last year was our 3D strategy and there are 3 pillars to this. The first is destination for food and drink. The second is accelerated by digital and the third is delivered consistently for the future. And you can see here that the pillars are presented as a flywheel because actions in one area help to build on the other areas, and that creates a virtuous cycle. So to give you an example of that, if we drive efficiency and productivity benefits through our Simplify and Save to Invest program or the Supply Chain Modernisation Program, that then gives us capacity to invest back into the customer offer under destination for food and drink. That builds customer engagement that builds scale, and then that scale gives us the opportunity to drive further efficiencies and the cycle starts again. So starting with the first strategic pillar, destination for food and drink. In our communications with our customers, we are very much focused on a unique proposition that's the intersection of delicious, easy and affordable. And we're seeking to connect with our customers on the issues that matter to them most. And when customers talk about delicious, what they're talking about is products that are tasting, but also they have freshness that last when they get at home, particularly in the key areas of meat and fresh produce. When customers talk about easy, what they're really saying to us is they want help with planning their weekly meals. When they come in to shop with us, they actually want to be able to find the stuff that they've got on their list, so availability is really important. They want to be able to have a choice of checkouts when they get to the front end. Some customers like self-checkout because they don't have to talk to anyone. Some customers like a manned check out and the ability to have a nice chat. And when they engage with our team members, they want them to be friendly and helpful. All of these adds up to a shopping experience that they describe as easy. And finally, customers want their shopping experience to be affordable. Help me stick to my budget, make your specials and discounts easy to understand, and really importantly, reward me for the loyalty that I show from coming in to shop with you on a regular basis. So you can expect us going forward to -- you can expect to see us use these 3 concepts of delicious, easy and affordable to be the thing that we really orient our messaging around to the customer. Now the reality has to stack up to the message. And so we have key initiatives in this strategic pillar around making sure that, that is the case. The first one is value. Real value at the moment is absolutely critical. Customers are able to compare prices more easily than they have ever been able to do before. And we know through our specials, our everyday pricing and our Flybuys, when the customer puts together that value equation, it has to stack up versus our competitors because customers are shopping around. Moving on to fresh and exclusive to Coles. Fresh quality and days life that a customer gets on their fresh products in the house is actually just a foundational requirement for us to be considered a destination for food and drink. And Own Brand is an area where we already have a competitive advantage. So when we do our focus groups with customers, this is something that we very regularly hear from them that they consider our Own Brand to be better than others. And this is going to be an area that we will continue to enhance and amplify as part of our strategy going forward. And it really plays 2 important roles. One is to be a value option for customers so we can compete against the likes of discounters, but it also enables us to be a point of difference. And you'll see a lot of the Own Brand products that you'll get a chance to sample at lunch today, there are no equivalents for them in the rest of the store. They are unique. They are differentiated. They are a reason to choose to come and shop at Coles. Now moving on to tailored ranges. Space in our stores and DCs is one of our scarcest resources. We need to think very carefully about how we use that strategically to get the right offer for the customer. And we're increasingly using data and technology to tailor and optimize our ranges in store to make sure that we have the right range for every demographic. And then moving on to the integrated and convenient liquor offering. This is another area that we think differentiates us. From a structural perspective, we're now the largest integrated food and drinks retailer in Australia. And we believe that liquor is very important to us strategically because it is one of the closest adjacencies to food. So think the barbecue with the beer, the great steak with the Shiraz, those are things that inherently go together in the way that we consume food in Australia. And the largest part of our liquor network is actually Liquorland that are co-located with the supermarket. And so we intend as part of our strategy going forward to make more of that convenience that we have of that co-location. But we are also looking to integrate our proposition much more tightly than we have in the past. And the CFCs have been an important part of us going on that journey, and Michael will touch on this a bit more when he comes up to speak. So when we put all of that together, that's how we intend to deliver our destination and food and drink, so that when a customer is thinking about an event that they're planning or even just weekly meals and what needs to go into the lunch box, they're thinking about Coles as somewhere that they can come to get everything that they need to do that. And Anna and Michael are going to elaborate on this a bit more when they get out. So moving now on to our second pillar, which is accelerated by digital. As I said, we know customers are increasingly engaging with us through the digital channels. And when I watch a customer in store, many of them now have a phone in their hands when they're doing their shop. They're looking at their shopping lists, they're looking at a recipe. Increasingly, I'm seeing customers start to use our wayfinding tool to find a really tricky product. Ran into a customer the other day who was looking for vodka pasta sauce. And those sort of tools can help them find something that otherwise would have been quite frustrating to find in the past. We also know that our omnichannel customers are our most valuable. And so the work that we do in this strategic pillar is a way for us to engage with those omnichannel customers and to really elevate the experience of our most valuable customers to us. Now the way we plan to do this is, first of all, through offering a seamless customer experience, which means that we take all the friction out of the experience that a customer has. Make it easier to build a basket, easier to pay, easier to find information, easier to actually navigate through the various channels that we have. Secondly, we are increasingly going to be personalizing our interactions and our communications that we have with customers. Now customers are expecting us to do this and actually they are telling us right now that when we send them mass offers that don't relate to them, that is a waste of their space in their e-mail box or in their app. They want things that are actually personalized and relevant to them. But it also benefits us because it means that we can be far more effective with the deployment of the investment that we have to put into the customer offer. Now moving to e-commerce. E-commerce is going to be a significant contributor to our sales growth over the next few years. And so we will be supporting that sales growth through making sure that we have a set of options that meet every mission that the customer could have in this space. And over the last 12 months, you've seen us rapidly expand -- I shouldn't have used rapidly. Our Rapid offer, which is our immediacy offer, but also move to the CFCs, actually, 2 offers that are at the opposite end of the spectrum from a mission perspective. Now we're also building new revenue streams as part of this strategic pillar. Coles 360, which is our retail media business, and Amanda will talk to this a bit later on, is really important for us. We have seen many of our peer organizations -- peer retailers overseas have built substantial businesses in retail media and actually and it plays a really important role in terms of the profitability of your overall digital business. And then QuiteLike, our meal kits business; and Swaggle, our pet specialty business, are great examples of digital-only businesses that we have launched to move into a space, which is very close to our core. It represents a significant market size that we can go after, but it is hard for us to access that through our bricks-and-mortar stores and so digital-only is actually a great way to do that. And Ben will talk a bit more about these when he gets up in his presentation. Now moving on to delivered consistently for the future. I boiled this pillar down really to it's about getting the basics right. And that does sound simple, but I am a firm believer that, that can be a source of competitive advantage because if you are consistently more reliable than your competition in terms of the availability, the experience, the quality of the product when you get at home, customers will choose to come to you over others because they are busy and they can't mess around with stuff that isn't right. So team capability is a really important part of our future plans in this space. And this is particularly is the case as we're starting to use more data and more technology to support our teams in doing their job every day. So we have equipped our stores with drillable dashboards and devices to be able to use them on the store floor. And that has all the information in it that our store teams need to be able to plan for their week, but also to run their stores. And we're also rolling out a set of new tools, more sophisticated tools, that are heavily grounded in the use of data to support things like workforce planning, loss and replenishment. And so with the use of these tools and the training that we're putting with them, our aspiration is that our customer -- our team will come -- become much closer to their customer, understand the customer needs in every store, but also will become a lot more efficient. Moving on to Simplify and Safe to Invest. I think most of you are fairly familiar with this, but the purpose of this program is to help us to offset the inflationary effects that we see coming through on our own cost base. And we're aiming to take out $1 billion over the course of 4 years. FY '24 was the first of those 4 years and we achieved savings of $238 million in that year. We're also very focused on sourcing and supply chain, and the reason for doing that is because a great set of arrangements in this place leads to great availability. And we know that, that is a real pain point for customers. We've been really pleased with the delivery that we've had of our automated distribution centers in both Queensland and New South Wales, and Queensland is now operating at business case with a substantially improved cost per carton versus the arrangements that we had in place before it was completed. And the next phase of this program will be the automated distribution center in Truganina here in Melbourne, which we were very excited to announce a couple of weeks ago. Now complementing these investments is the ongoing work that we're doing on our sourcing arrangements. And really, what we're working on there is how do we become more resilient and how can we set ourselves up so we're best placed to avoid the impacts that we've seen over time from things like extreme weather events and rail outages and the like. We've significantly improved how we placed in WA in particular on this front over the last 12 months. Store network is also critical for us to continue to grow and to maintain our market share. Even though e-commerce is a significant driver of our sales growth, there is no doubt that the majority of our actual sales will be going through our stores and our bricks-and-mortar network for some time to come. And as such, we are planning through the cycle to grow our new space in excess of 1.5%. And we've also been working to get a more efficient and effective renewal program, which allows us to do more with the capital that we have allocated there, and Anna will talk about that a bit more later as well as Charlie. Now finally, I just wanted to touch on sustainability. Sustainability continues to be really important strategically to us. And for those of you who dialed into the AGM this week, you would have seen it was a very big focus of the conversation at that event. It's really important also to our customers in the areas of plastic waste and food waste. And so we have been very focused on continuing to remove a lot of the plastic packaging that we have in our stores. Probably a good example in the last 6 months has been taking the plastic great bags out and replacing them with a paper great bag that now can be recycled curbside. And then on our emissions, we will achieve 100% renewably sourced energy in next calendar year. And we're making good progress in our Scope 1 and 2 emissions as well. In the Scope 3 space, this is a topic of significant work and conversation internally at the moment, as is the ASRS and TNFD requirements that will come in over the next few years. We're not going to touch on sustainability anymore today. But if you do want more information on it, please reach out to Anita in the IR team because we have a group of very passionate people internally who would be very happy to take you through it. So that's the 3 pillars covered, but our flywheel isn't quite complete. We have an inner ring to it, which has 2 components: win together, which is uniquely Coles and really focuses on our team, our community and suppliers; and also our foundations of financial discipline, technology and data. Financial discipline is something that we take very seriously, ensuring we're investing in the right assets and maintaining a flexible balance sheet. And I think you will see, as we talk today, technology and data are enablers that really underpin the vast majority of the strategic initiatives that we're working on. Finally, I just wanted to touch on our values. So if our purpose is our why, our strategy is our what, our values are our how. And we wanted to have a set of values that really resonated with our team. We did a lot of work last year asking the team what did Coles look like when it was at its best and what did they value most in our culture. And that led to the development of 4 values of care for each other, have courage to make the right choices, deliver for our customers and create for the future. And at this point in time, when business, and particularly, our business, is under increasing scrutiny for our practices and our governance, we are asking our team to really take these to heart and to make sure that they are using them in all of their decision-making and activity that they do every day. So bringing that all together, this is our overall strategic framework that we use. And I did want to just take a moment before I hand over to Anna to reflect on our progress that we've made on this over the past 12 months. So back in August last year, we did give a number of focus areas. So under destination, we said we were going to be focused on value and quality. Under digital, our digital experience and CFCs. And under delivered, we were going to focus on availability, loss, SSI and our ADC program. And I think as you can see from the dot points on the right, we have made a good start in terms of delivering against these. But obviously, there is a lot more to do, and that's what we're all pretty energized to share with you today. I would just like to finish my comments by saying that as a business, we are very focused on our core. We are very focused on execution. And we think there is a lot of value to be generated by focusing on that execution in the core. And so you can expect to hear me talk about that a lot on the results calls that we have going forward. You should also expect to hear us talking a lot about what we're hearing from customers. We are doing a lot of listening to customers, and we are adapting our offer to make sure that it's fit for purpose. And we are also really focused on maintaining financial discipline. So we want to make sure we are investing in the right assets. We want to have a strong and flexible balance sheet. We want to make sure that we have good generation of cash flow. And we want to make sure that we've got a good return coming back to our shareholders. So that's what I'm focused on. It's what I talk to the team about every day, and hopefully, you will see that come through in the presentations that we will do today. And with that, I would like to welcome to the stage Anna Croft, our Chief Commercial & Sustainability Officer, to talk through our first pillar of destination for food and drink. While she's coming up, we're just going to show you this year's Christmas ad. So enjoy. [Presentation]

Thank you, Leah, and good morning, everybody. For those of you I haven't yet had the great pleasure of meeting, I am Anna Croft, the Chief Commercial & Sustainability Officer here at Coles. I've been with Coles now 10 months, but certainly not new to retail with a 25-year career across both the U.K. and Australia. And some of you will know, I actually spent a decade at Coles between 2010 and 2020. And in the last 4 years, I had the great pleasure of being the Chief Operating Officer at MECCA Brands, the retail business, but it is great to be back. In my role here at Coles, I look after all of our merchandise team and our store development team. So that means all of our buying teams that interact with our suppliers and set our customer offer and all of our teams that manage our store renewal program. And as of Monday of this week, I have the great pleasure of picking up sustainability as well as we move into the next phase of that strategy and how we align it much further up the supply chain with suppliers and we're very excited about how do we deliver our very ambitious goals in there. But today, I'm going to talk to you about what we are doing to make Coles the ultimate destination for food and drink. And as Leah said, we've got a wonderful plan. So let's get straight into it. As Leah talked, we do have 6 key priorities. But today, I'm only going to talk to you about 4 of those: I'm going to talk to you about what we're doing in our fresh quality and how we're going to step-change that business, what we're doing on value and incredibly topical right now, where we are taking our exclusive brands and our Own Brands and how we're going to step-change that and where we are going with range and our space in stores. So let's get straight into fresh. Step-changing fresh quality is absolutely critical. We know that 59% of customers choose where they're going to show based on the quality of the produce -- of our fresh offer. And when we know when customers buy fresh, their basket is bigger and actually their loyalty is much higher. However, we know that we have many, many baskets every single week that contain no fresh and we have a large proportion of our customers that buy no fresh at all from us. So this doesn't just only represent an extraordinary commercial opportunity, but an incredible opportunity to engage our customers in a very different way and drive big customer satisfaction. I think the good news here is we actually have a very strong transformation program that is now underway in fresh, both across meat and produce, and we're making good progress against that and it will be a multiyear journey. But fresh quality really begins with the partnerships we have with our dedicated farmers and suppliers, and we're working hard further upstream to select the very best partners. Then we are creating very deep and collaborative partnerships so that we can actually mutually invest to drive real innovation, differentiation and sustained growth over the long term together. I think a really good example of this. In the last month, we have extended by another 10 years our exclusive partnership with Sundrop Farms who supply, we think, the very best tomatoes in Australia exclusively to Coles, and we will be expanding together over the next decade of partnership to bring innovation, differentiation and a complete step-change in farming practices to Australia. The other area that actually continues to be a key priority for us is the Coles Nurture Fund. Now since 2015, we have granted nearly $36 million of investment to suppliers and farmers. And actually, what I'm really excited about the money being used to innovate, not only in products, in farming practices but sustainability. And actually, what I'm looking forward to is seeing those innovations coming to life through our stores and in the market much broader over time. And pleasingly, on the Nurture Fund, every single year now, we're seeing an acceleration in terms of the number of applicants. So I'm looking forward to seeing that continue to grow. But having an innovative, differentiated and quality offer in fresh is critical. And we are partnering with farmers and producers to deliver product and quality innovation and differentiation. And these innovations, in many cases, take multi-years to do, require a complete step-change in our supply chain further upstream and are very difficult to replicate. And that is where we are working on for the future. So let me give you some examples of what I mean by that. It could be Eureka blueberries that are exclusive to Coles and we worked on that partnership or Grandma's Heirloom Tomatoes with Sundrop where the team traveled 26,000 kilometers over a number of different months, tasted, I think, probably 100 varieties of different tomatoes to come back and plant with Sundrop exclusively. And we're working on the next phases of what that looks like in produce and I'm pretty excited about that future. Or on our meat business, whether it's our GRAZE program across lamb and beef, whether it's our carbon-neutral meat range or even hormone-free, as we know, a decade old now and no one has been able to replicate that. So we have a number of these in the pipeline. I'm feeling really excited that we are working much further up the supply chain in a collaborative, deep way with long-term partnerships to drive real sustainable quality, both from a product perspective, but also a quality perspective in the products. And then when it comes to innovating and differentiating on the offer is important, but so is freshness, quality and availability. And therefore, one of our key priorities is to move to a much more localized manufacturing network. We're aligning our processing closer to our store network for freshness, quality, improved lead times and improve cost. One example of this that brings it to life, and there are many I could share with you, is our WA for WA meat program. We have this year, moved all of our sourcing of WA -- of meat in WA to WA. We process in WA and we supply the stores to WA. And what that really means is we have much faster lead times, we have much better quality fresh and actually we are much more resilient when we have supply chain challenges to the West. And we are continuing to do that, we've just made all our pork into Queensland. And actually, we're also seeing not only the commercial benefits coming through, but the customer benefits are enormous and that localization and community feel really coming through in our customer NPS. So many more examples coming that way. But also this has to ensure if we think about fresh, we have to make sure we have the right operating model end-to-end, and it's really critical. And we are reviewing every single touch point in our entire network to make sure that we are speeding up our lead times, we are improving quality at every single touch point and that actually we have much better quality, much fresher, faster flows hitting stores and our customers and through both in-store and online. And this has to be underpinned by a transformation of an operating model in-store and we are using technology to really step-change that, be that all our in-house production tools for bakery and actually our other processes across all of our fresh departments. Meaning that actually we have incredible quality, brilliant freshness when the customers want it. But more importantly as well, we're much more efficient in that process. That means that actually we can be faster and much more cost-effective throughout. And then, but certainly not least on fresh, we are investing very, very heavily in training and development of all of our team members, whether that be further above store or in-store or throughout the whole network to create a real culture of obsession around fresh. And I think that really will be a differentiator when no one walks past anything that is not where we want it to be. And then moving on to value. We are going to step-change how we execute value because we need to drive customers into store. We are going to move to a more trusted pricing model on more every day value lines on the right lines. And this means that actually, we'll have increased trust for customers that they can rely on Coles for pricing on every day. We want to make specials truly special. We want to really, through a data-led program, invest in lines that make a true meaningful difference. We will do fewer, bigger, execute with impact and make a more meaningful difference to our customers. And then finally, we will drive more customers through the door by hyper personalization of value that you can only get at Coles. And we're already making increased inroads into personalization through Flybuys and through the work through all our digital assets, and Amanda will talk to you about that in more detail later on. But when I put all of this together, what we're trying to do is make it easier for customers to find relevant value at Coles. We're optimizing our investment we are making to value so that we're investing in the things that really make a difference and will move us forward with the greatest impact. Now moving on to where are we on our exclusive portfolio, now this plays an enormous role for us. It is a key differentiator. It is a key driver of quality and value for us. And actually, we think we are distinguished in the market by the exclusive brand portfolio we do have. It is over 30% of our total sales, but in our food business over 40% and will continue to increase. Now last year alone, we launched over 1,000 products and won 69 awards and I think that was a real testament to the amazing efforts and the innovation that the teams are creating. And therefore, we need to continue to drive this hard. So what are we going to do? Well, firstly, we have to deliver quality consistently. There is no other option for our customers. And hopefully, you would have all seen our great lengths for quality campaign that we've been running recently that I think demonstrates the great lengths we go to every single day to bring amazing quality products to our customers. And actually, that campaign has already started to change customer perception around our Own Brand and the quality perceptions that we do have. Our most recent campaign focuses on our dairy farmers and our partnership with 109 Aussie dairy farmers to supply us 500 million liters of milk every single year. And I think it really talks to the partnership we have further back up the supply chain, where we want to work in a very different way with all of our partners, and that really is coming to life. So it's going to be about consistently communicating that to customers, making sure that every single product stacks up and actually we'll be engineering a significant amount of products to continue to improve quality through our Own Brand ranges because we have to stay ahead of the market. But we have to continue to innovate in categories and white spaces to bring delicious, easy and affordable solutions to customers. And I spoke earlier around the work we're doing in fresh, but you will see that come across so many different categories. We're also going to work very differently with our key part of our business, Chef Fresh, to really think about a new operating model and an innovative way of bringing speed and innovation to customers in a much more agile, test-and-learn way so we can be ahead of market trends. This year, we'll launch over 1,000 new SKUs. And I think at the break and at lunch you will see our Christmas range coming out this year, and hopefully, you will agree I think it is our best one yet and we will continue to evolve that space. And then, finally, affordability plays a huge role at the moment in the total supermarket sector. But for us, this is where Own Brand can really come into its own. Whether that be across our kind of Coles Simply range, our Coles mid-tier or our Coles Finest and a number of our other brands, we think we can marry quality and value at a time that has never been more appropriate for customers as customers are far more receptive to Own Brand. And as I mentioned then, we often talk to you about just our 3 tiers of Coles brand, be that Simply, be that a mid-tier, be that Finest. But actually, we have over 50 exclusive brands within our Coles stable and we are really targeting to how do we make sure we have the right brand, the right offer and the right tiering in the right categories so that we can meet customer demand. And I thought it might be just worth sharing with you what some of those other brands are because we often wouldn't talk about them. We talked a bit about Coles Simply and now at 111 SKUs. Real entry price point with incredible quality, that means that customers should have no reason to shop anywhere else apart from Coles. We've got Finest delivering restaurant-quality solutions at home and growing last year at north of 20%. We've got UltraLife in our health business, which actually is the fastest-growing vitamin brand in the category at the moment and continues to outpace proprietary. We've got Coles PerFORM, which is actually approved by sport dieticians and is outperforming the category by 14x the growth at the moment and continues to really resonate with customers. In Baby, we've got our CUB nappy that was named the best by choice in 2024 and is the only nappy now with a Canstar 5-star rating, which we're incredibly proud of. And Coles Organic, it actually just received a Canstar Blue most satisfied customer award, and obviously, all organically certified. And then finally, if we think about the changing needs and the diets of Australians now, we've got Coles Nature's Kitchen, which is actually the largest Own Brand range of plant-based products offering easy and delicious solutions. So an awful lot going on, and we believe we are perfectly positioned to deliver trusted value through our Own Brand proposition at a time when customers have never been more receptive to our Own Brand. Well, let's move on to leveraging data and how we're thinking about that to really tailor our range. We have to meet the needs of our customers through the right range and the right straw, and we are leveraging technology and data to really do this. We are firstly going to simplify our range. We've grown our range significantly over the most recent period. And actually, in some cases, that has been to manage availability and poor availability on other brands. But actually, there's no doubt this has put pressure on our operating model, and we will simplify that. We will reduce the range, but we will reduce duplication and put more choice in where it matters most for customers. And then we will move through the use of data and technology now, we can manage store-specific ranging and macro space. So we'll bring specific ranges to customers by using the latest technology and AI to tailor our space and our range at store-specific level. And we now have this capability to do it. We have -- I think there's 10 categories on at the moment and the results are incredibly exciting, and we will roll over the coming years to all of our categories along with a macro space program, which will reset all of the space in store and really tailor it to the demographics. So you think Asian, you think Indian, we think affluence, we will be able to tailor not only the range but the macro space using smart technology to do that. And then finally, Charlie will talk more about this on optimizing our store renewal program, but we are continuing to be very focused on how we present our stores, how we bring innovation to our customer experience and how we step on our entire customer offer. And Charlie will talk more about it, but there's a very exciting plan in this space. So in summary, we are on a mission to make Coles the ultimate destination for food and drink. We want to be synonymous with delicious, easy and affordable food. And we can only do that by building trust with customers and delivering consistently through quality and value. And we can only do this with incredible partnerships further up the supply chain and really differentiating the way we work with our partners to enable this. So thank you so much. I look forward to speaking to many of you at both the morning tea and lunch. But now I'm going to hand over to Ben after a quick advert to talk to you about all things digital. Thanks very much. [Presentation]

Good morning. We'll try that again. Good morning. Thank you. My name is Ben Hassing, I'm the Chief Digital Officer here at Coles. And the way I think about it is I've been here a little over 4 years, but I joined and landed here in Australia 3 days before the first real lockdown. Very different times, but certainly goes into a part of the story around our accelerated by digital and the history of that time to where we're at today. Now when we think about accelerated by digital, there's essentially 5 building blocks. First, you have to have a great e-commerce foundation. We've made some pretty good progress that we'll update you on. Secondly, we're seeing more and more customers, as Leah said, adopt digital before they shop or as they engage with us. Third, you see a lot more personalization. In fact, a lot more of our customers are expecting personalized experiences through digital, but also in-store. And fourth, to the point on in-store, we're seeing a lot more customers actually use a mobile device while they're in store and we think that's a trend that's going to continue to increase and we have a plan in place to address that. Lastly, with digital, it allows you to test and innovate, tap into new growth opportunities, new profit pools and so you'll hear from both Amanda and myself on that. Now on progress with e-commerce, we've made some good progress. We go back to FY '20, kind of the first COVID year. Our contribution to supermarket sales has grown from 3.8%; in the last quarter, 10.8% and we expect that trend to continue. Our NPS is at an all-time high. There's a bit of context here. If we look at FY '21, our customers gave us a lot of credit for just being able to be an essential service and delivering or providing click-and-collect service during periods where there were lockdowns or COVID. But we had a platform with an app that wasn't shoppable. We had 2 separate websites, one with commerce, one with content. And over those 2 years, we brought those 2 websites together into one, coles.com.au. And we've made the app shoppable as well as added a lot more functionality that can be used for the in-store experience. And that takes us to today. Our NPS is at an all-time high, and we expect that trend to also continue. Lastly, market share. So what we look at is from the ABS online food retail and food service. We've seen a really good trend, in fact, an 800 basis point increase in market share over that -- those last 5 years. So good progress from a numbers standpoint. But if you unpick e-commerce and customers, in particular, we actually don't have e-commerce customers or we have very few customers that were store shoppers, they adopt online and then they only do online. 96% of our customers today that shop with us online, within 13 weeks they also shop in-store. So they love going to the store. They love testing the products, smelling the products, touching the products. And we don't see trends really changing. The great thing about an online transaction, though, is the size. The size on average versus an in-store transaction, 4.6x larger. And when you think about the economics of a basket that's 4.6x larger than in-store, you have a lot more gross profit to work with to offset your costs that come with pick, pack and delivery. The other thing about that large transaction size, when it comes to market share, is customers aren't cross shopping. They're not cross-shopping when they go to a shopping, I would call, mall or a center where we have a lot of different competitors. They're making a choice on where they're going to do their shopping online, so that's a huge benefit when it comes to driving market share. And of course, it's also a proxy for loyalty. When we see customers adopt omnichannel behavior, shop in-store and online, they spend with Coles 2.2x more than those that don't. Now as Leah said, we are serving 3 key shopping missions for customers and it's using physical stores, digital platforms and now also the CFCs. The weekly stock-up is essentially, in e-commerce, our bread-and-butter. So where the majority of customers go for online is to fulfill their full weekly needs. We offer the same prices as in-store, the same promotions, the same range. But now with CFCs, we have extended range, but that is our bread-and-butter. But as we use the network in terms of delivery in stores, we're also able to serve that weekly -- in-week shop, the top-up, where I need a few items to get through the week or for next week. And then the third area, which is really growing fast for us is the immediate need. I'm a mom, it's 5:00 at night. I've got to prepare 3 kids' lunches for tomorrow and I don't have what I need in the pantry of the refrigerator. They could go to an Uber and a DoorDash and we offer that service, but we've really invested in Rapid, as Leah mentioned. And the great thing about our approach is it's a unified experience. So you can get that same access to that service on coles.com or the app. It's not a separate app that you need to go to. So less operating complexity and also lower cost of acquisition. Now CFCs, I think all of you today at least have the invitation to visit the CFCs. I highly encourage you to actually see it, experience. Physically, it just shows you the scale in the business. But the great thing that's proving out to be true that we always had the hypothesis for was fill rate. The #1 pain point in our online grocery is that I placed an order on average for 46 items, and from a store fulfillment, I'm able to fulfill 46 items. Those 2 missing items that we do our very best to substitute for are still a major pain point. And that's why customers will switch back to store or to somebody else. With the CFC, a differentiator in the market, the perfect order rate, the percent of our orders that are perfectly filled, is more than double our rate from in-store. We think it's world-class and certainly best-in-class in this market. The CFCs also bring a new version of fresh. We're able to commit on thousands of SKUs a minimum day life. So you could get here, in this case, a no-added hormone beef porterhouse steak and know that you will have a minimum of 7 days' life. Same with milk, 7 days' life. There's, again, thousands of SKUs where we can provide this guarantee to customers that they will have minimum of days life. That is resonating with our customer. A third area is expanded range. So we do have a few thousand products in the CFCs that we don't have space for in store. And it's a great way for our partners as well as with Own Brands to test trial and innovate new products, bring those to market at a very low cost, low working capital for us and we're going to continue to iterate and innovate on that front. Now being part of the Ocado family and having other retailers around the world test and try their new innovations is a benefit for us. And there's a number of innovations that will be coming that we'll be talking about at the CFC. The totes, for example, the totes have the capability of having multiple SKUs. So as we think about extended range, there's potential to further extend the range by carrying multiple SKUs in a single tote. Automated bagging stations. For those operationally, they know that how hard it is for a human being to simply put a bag in a tote and do this over and over and it's redundant. And it's really hard to retain people to do this work. We have coming an automated bagging solution in the near future. The third is doing the picking. So Ocado has automated robot, the OGRP solution, that sits above the grid, can do the picking that is done in the pick station. And so we have one today in place you'll have a chance to see that. The frame load creates automated -- it creates operating efficiency, but it also reduces material handling. So a lot less lifting by human beings. So it actually drives a great safety benefit for our team members. And then we know more and more customers also want same day, like we talked about. And in the future, we'll be able to deliver same day through the CFC as well as next day. I'd also emphasize, though, you can place an order up to 8 p.m. and have that delivered tomorrow at 5:00 a.m. Now Leah said stores are very important. Certainly, that's the case for in-store shopping, but also for activating other e-commerce models. Two areas that we've been focused on and we're going to continue to expand is Click & Collect. It makes up more than 40% of our sales in e-comm has a very healthy growth rate. And we've been focused on experience through technology and geofencing, but also changing process with team members. The #1 pain point for Click & Collect is wait time. I park in the parking lot, I don't get out of the car. We don't offer a service beyond just bringing the product to the boot, but I'm waiting quite a while. We've addressed that significantly this year, reducing our wait time for customers, and we're getting a lot of credit in terms of our NPS as well as retention. The second area is Rapid delivery, serving that immediate need. Through technology, through process reinvention, we've cut by more than 50% the time it takes to pick, pack and consolidate the order. From a customer experience standpoint, we've been able to provide a live ETA. So that when I go on coles.com, not a separate platform, I placed an order for Rapid, I know how much time it's going to take for my specific order to be delivered. And on average today, that's less than 1 hour. But there's also, again, been a lot of operating efficiencies and cost-out in what we've been doing with Rapid. Now moving from e-comm to more of the general behavior changes with consumers. More and more of us in our daily lives are using digital to solve problems, to research. In fact, we follow customers and we can see that today, 23% of those customers that shop in store within 3 days before they shopped they researched online before they bought in-store. They'll check and try to be inspired by the new categories and new promotions we have. We're running a great Black Friday event. By the way, today is the last day. If you place an order, you can get some really great movie tickets, just a plug there. But more and more customers are researching before they go online. So we're able to facilitate in-store sales by how we surface information. Finding value, of course, is another key reason why customers, especially today, are coming to us digitally. And we expect that trend to continue into the future. We're offering a number of features to enhance that experience to allow customers to find value. Weekly specialists, for example, we certainly offer the weekly catalog, digital catalog. But we're also now personalizing that list of items that you see versus what I see in terms of order. So there's an element of curation there. Product pages. When you go to a product page and the items that we might recommend with that product, also an area where we're personalizing. And then the shopping list. Today, we have over 1 million customers that are building a shopping list and they're personalizing their list, of course, but we also offer the service of suggested lists and we can personalize those lists for customers so they can build a trolley for online checkout or they can use that list to shop in store. Now as Leah said, more and more customers that we see in store have a mobile device and they're using it. And so we have a number of features to help it enhance their experience through the app. For example, we talked about -- I talked about shopping list. The customer can build a specific shopping list for a specific location. And we tell them we categorize each of those items into each department and what aisle those items can be found. We've taken the next step in 15 stores here in Victoria, where we actually wayfind that list. So you may have 20 items, we will tell you where to go throughout the store, how you can save time while you shop in-store. When you think about the other extensions that can come with that in the future, gamification, and certainly, when Amanda talks about Coles 360, opportunities to monetize. The checkout experience is certainly key and there's an opportunity for us to help enhance and personalize that experience. We'll have a wallet that comes in play this fiscal year. So we're expecting big things from that. And we're also seeing customers engage with us around things like digital receipts. I want to go to the app to understand my purchase history, whether it's in-store or online, and I also want the benefit of not carrying or having to carry a paper invoice with me. Now we have 2 areas where we've been innovating from really an online pure play. The first is around specialty pet. And we're looking at these businesses as ways to grow outside of the core and we can't serve from a supermarket. We offer 94% of the SKUs that we carry on Swaggle we don't carry in-store. So it's a great way for us to grow into what is a high-growth category today. Secondly, with QuiteLike, it allows foodies or people that just enjoy eating to be inspired by great recipes, test and learn, not have any remaining inventory leftover and this is our meal kit business. The great thing, too, about these platforms is speed and low capital intensity. Both of these platforms are brought to market in less than 9 months, PowerPoint to hands of customer in less than 9 months. And done so with very low cash. It also allows us a platform to test and trial services that we could bring into the core. I'd use one example. With Swaggle, you have the ability as a customer to subscribe to a product and you do so by getting a coupon or a voucher. You can't do that model in a store, in a store fulfillment type, but you could with the CFC. So it allows us to test on a separate platform before we bring that at scale. Lastly, we're also doing some trials and tests, and there will be a breakout at lunch where you can actually try these innovations, smart trolleys, electric shelf labels and availability cameras. These are spaces where, again, not all customers are going to use the app when they shop, but they will try the smart shopping cart. It's a test to trial, we'll learn. I think one thing that I'd say, too, about it is we didn't build it ourselves. We worked with a global leading online grocery technology partner called Instacart. And that allows us to quickly test and trial versus making big bets on our own. So at lunch time, I'd encourage you to go through the rotation. You'll get a full walk-through demo and trial. Thanks for your time, and I'll invite Amanda, our Chief Customer Officer, to the stage. Thank you. [Presentation]

Thank you, Ben, and what a great advert. Hello, everyone. I'm Amanda McVay, our Chief Customer Officer. This is my first time with you today as I am 17 months into my role at Coles as well as my time in Australia. I came to Coles with 20 years of experience across 2 major retailers in the U.S. I spent 10 years with Target Corporation across merchandise buying, category management and financial planning roles. I then spent 10 years with the large regional grocer, Meijer, across the Central U.S. leading commercial, digital and customer teams. At Coles, I look after our customer research and insight, marketing and brand, customer engagement and loyalty and our retail media network. I'm happy to share updates today, specifically on Cole's loyalty and the retail media. Customers are seeking value more than ever. What they are looking for most is value that is relevant to them and just makes it easy to meet their needs. Customers expect that when they choose to shop a particular retailer, that retailer should know and understand their interests and reward their shopping behavior with relevant offers that save them time from shopping around and help them stick to the budget. Customers are increasing their expectation to be provided offers, to be shown content that actually matters to their specific shopping needs. We reach a large number of Australians with the Flybuys program. We have seen strong growth in the participation and engagement with our Flybuys loyalty program, seeing an over 14% increase in our active members. Customers responded favorably with the introduction of an easier redemption service experience at our checkout. After that introduction of easier redemptions at checkout, we saw more than 2 million customers redeem their Flybuys points for the very first time at Coles. We also brought to market additional opportunities for customers to invest in subscription services that often more value to customers. We are in the early stages of our introduction of Coles Plus Saver, which allows customers to pay monthly for a 10% discount of any one shop of choice in-store or online every month. We continue to see increasing engagement with our Coles Plus subscription offer, which provides free delivery as well as free access to our Rapid Click & Collect service. All of our subscription offers provide additional Flybuy points for members as well. When a customer chooses to identify themselves with us, we are able to provide greater value they expect that meets their specific needs. Customers demonstrate higher loyalty with Coles in return with their increased spend and visits, and they rate their experience with Coles more positively as a whole. We do have more work to do to continue to enhance our customer offering with a focus on creating more personalized value and show more personalized content to these identified customers by leveraging the insight of that first-party shopping data. This focus will not only generate demand for shopping at Coles, but also creates value for our Coles 360 advertising offering. The rich customer first-party shopping data that is captured from loyalty and engagement programs is what fuels the value and performance of retail media for the advertising industry. This rich customer shopping behavior data understood through these programs capture transactions across both e-commerce and in-store fulfillment choices of customers. Before I jump into specifics regarding Coles 360, I would like to share what has been happening globally in the retail media space. Why are we seeing a shift in advertising spend to retail media networks? What value is being created? First of all, there is interest pointing towards targeted advertising over traditional mass media due to the strategic effectiveness of precise demand generation. The effectiveness in targeting is amplified when the identifiers of customer demand are based on actual past purchase behavior, which is what retailers know best. Retail media also provide a wide range of access points presented to the potential customers from the targeting of ads throughout daily life prior to shopping to access points presented when the customer is in that purchase mindset further down that path to purchase with the ability to capture that attention so close to the moment of the customer purchase decision. The sophistication of measuring the advertising exposure points, whether that be a singular activity or a strategic combination of activity, correlated to the purchase behavior outcomes and then -- the objectives correlating the purchase behavior objectives, then of course, to the purchase behavior outcomes is what makes retail media networks unique proposition. Because of this unique proposition and the value created for advertisers, that has been why we've seen that high growth globally. Our Australian market is on this retail media journey, but we're in the early stages. Australian brands are interested, especially those that have seen success in those other markets. It is good to remember that there is not more advertising spend in aggregate, but a shift in where the spend is pointed. According to IAB Australia, 40% of retail media investment is coming from new budgets pointed at retailers due to that interest in the targeted and measured advertising investment. These budgets are pointed away from investment that can't provide that first-party data shopping behavior targets and outcome. There are various projections that show our market will follow similar trajectories with expectations that the share of digital and total ad spend in Australian market will reach 70%, which is in line with the other developed countries. This is due to that consumer behavior of time spent on digital devices as well as that efficacy of the measurement of the activity. But there is work to be done to be ready to create that value for advertisers in retail media. We have to have the advertising inventory available at those key access points I spoke of in front of the consumers and we have to be able to understand and connect our customer first-party data to those access points. For Coles 360, we are building advertising offerings across that consumer's path to final purchase. The activity offerings create interest by capturing that attention of the intended consumers while they spend time in their daily life outside of shopping, especially on those digital devices. We then have the advertising offerings available when that potential customer shifts into that shopping mindset on our website or our app, and of course, in our in-store aisles. Here are some examples of our in-store advertising assets for Coles 360. Our Coles Magazine as the #1 most read magazine in Australia and the readers are customers seeking solutions for their meal prep tasks, and advertising can play a role in that relevant content. Our in-store digital screens, our Coles Radio audio offering as well as the absolute closest moment of that customer decision-making are at-shelf assets, complete the in-store offer. These advertisements serve as great opportunities to reach consumers when they are so close to that moment of purchase. Our digital advertising assets on our website and our app are also opportunities to reach customers in that shopping mindset. This is our digital storefront, and as you heard from Ben, where consumers conduct their research to seek those solutions to solve their shopping needs, deciding ultimately what they will purchase at Coles. The digital nature of that advertising allows us to further target and measure the effectiveness of these activities. The off-site targeting of advertising is where we are very early in our journey. However, it is where the growth will come as it did in other markets. Prior to shopping, this advertising targets the customers from an audience perspective based on the Coles shopping first-party data and then it measures the impact on actual purchases. This is where retail media's unique proposition really is powerful as brands can target and measure effectiveness of their ads across the entire digital advertising universe, using Coles first-party shopping behavior data. There is work to be done to build out this offering, but we are focused on creating and demonstrating that value that we can bring to advertisers. Importantly, the measurement offering is where the focus has been and will continue to be as we build out the retail media network. We are in our infancy, but we are confident in the setup of our suite of measurement capability. In order to cater to those differing advertiser objectives, coupled with all of our different assets, there are different measurement frameworks that are offered. The market lift measurement is focused on that in-store activity on the basis of a test and control store basis. The customer lift measurement compares outcomes of those consumers that are exposed or not exposed to the advertisement. And the final offerings are just getting off the ground, and this is where we are very excited to begin to measure the sales impact of targeted audiences of customers outside of the Coles owned assets. We have the focus to enhance our loyalty proposition that leads to more personalized value for our customers. This value created in turn unlocks further understanding of our customer shopping behavior, which not only informs how to generate further demand for Coles, but then also can be leveraged to create value for the advertising industry through the unique proposition that only retail media can provide. I will now turn it over to Anita, which I believe it is now morning tea. Thank you.

So we're just going to take a short 15-minute break. Morning tea will be held outside where you were gathered before you came in the room, and we'd ask that you come back in here by 10 past 11 because we're running a tight program today. Thanks, guys. [Break]

Good morning. My name is Matt Swindells, and I am the Chief Operations and Supply Chain Officer. I look after our end-to-end operations from manufacturing through automation, through our distribution centers, our transport network and all of our stores. And I'm going to talk to you today about the third pillar, deliver consistently for the future. You've already heard from Anna, Amanda and Ben about the shift in customer expectations and our plans to have a destination for food and drink and accelerate our digital business. This brings with it a degree of personalization, a degree of tailored ranging, a degree of multi-shop missions that adds complexity to the retailer. Delivered consistently is how we overcome that complexity through simplicity and efficiency to deliver on those customer expectations and meet our overall business needs. It is about excellent execution every day. I'm going to talk through 3 main parts to that today. The first is our track record of delivery. We do have a history of execution in this space and we are not at the start of a journey. I will then touch on the key transformation programs that are either already underway or will be evolved in the future to continue that program. And then finally, I'll talk about how do we see the opportunity to integrate and leverage these assets for further value. So here is our track record. Over the last 5 years, we have delivered just over $1.25 billion in efficiency improvement within the business. The first program, Smarter Selling, started back in FY '20 and that covered a series of structural and technology-led initiatives. We delivered service transformation, probably the biggest change in the checkout process for some time. It is a more flexible experience for the customer. It provides the store 20% more capacity at the checkout and reduces queuing time and it's more efficient for our team members. We've also leveraged our advanced analytics capability to introduce dynamic markdowns. Our stores are given a markdown value by item not just by day, but by the hour on the rate of sale. We are able to target the clearance value to that degree of granularity, and we're also able to track the execution to create a feedback loop that then tells us whether that was delivered consistently and executed excellently on what the outcomes were. It's a capability to learn as we go. Importantly, it's not just technology that helped deliver the $1 billion. We had a people and process change where we brought the 2 operational teams together, between supply chain and stores, under one group. And we moved away from functional budgets to an overall P&L approach, unlocking further value and moving a lot quicker to drive further efficiency. So this program, this methodology is always on. And we are already 1 year into the next phase of Simplify and Save to Invest, and we have already delivered $238 million of efficiency. The changes we've made in this horizon are broader and they're more encompassed. We have gone back through our meat operating model, and we have rationalized parts of the range. We've reduced lead time in manufacturing. We revisited in-store process and applied some of the tools from grocery to fresh. There are still structural changes. They're technology led. They are absolutely customer facing and driving improvements in efficiency. We have also digitized our stock rooms. We've taken advanced analytics and insights and we found even more efficient ways to replenish our stores. And we've worked with Ben and the digital team to improve not only the efficiency of the pick through our in-store rover tool, but also we've automated the call center to take out further cost. This is an all-of-enterprise approach and we all worked together to drive the right customer outcomes with the right cost base. The next $1 billion excludes ADC benefit. That is incremental to that value. And I'll start with our supply chain transformation. Supply chains historically have been manual sheds, large assets, highly labor-intensive, responding to the flow of inventory in variable degrees of control. Technology, automation and data is transforming supply chains. The manual processes moving to automation not only give a higher degree of productivity, but also a high agree of accuracy, and importantly, a high degree of safety. The way in which the omnichannel customer shops means that no longer do we think about a supply chain from a distribution center to a store, we think about a supply loop. The CFC is now part of that. Customers can shop in-store, they can shop online and we have to meet all those needs. And we also have to control the flow of product more accurately. We have some fantastic replenishment planning systems, but we've also got to make sure that all the product movements are visible and controllable and data-led and optimized and that now also includes transport. So I'll talk to the ADCs. We are now live in Queensland and New South Wales. Redbank is fully ramped and is delivering against its business case. Kemps Creek is just over 85% ramped, will complete early next year and it is a twin of Redbank. They are identical. If I look at the performance metrics from Kemps, they are as good, if not better, than Redbank and they should be because you get better as you do more. And we have got absolute confidence that both of those sites will deliver back against the investment case of half the footprint, twice the capacity, 2/3 of the labor cost. What we're also seeing, though, is improvements in availability. Having the total range in the state brings it 1 day closer to the stores in Queensland. And having the total range in 1 location means that we've got 20% more frequent deliveries for slow-moving items to stores. Our availability in New South Wales improved 20%, 25% in the stores that converted in the same way that Queensland did. And there's further benefit in optimizing for store-specific deliveries and there's further benefit coming through in the accuracy of those orders that are going out to stores. It is very consistently performing. We are still very pleased and very confident that Witron, our exclusive partner here, are absolutely the right people to work with. And that is why we were so excited to announce our Victorian ADC recently. The third ambient automated distribution center down the Eastern Seaboard that will not only service Victoria and Tasmania, it also integrates into the existing Western Australia and South Australia networks. When the Vic ADC in Truganina goes live, every single Coles store in the network nationwide will receive in some part of delivery from an ADC. And those availability and efficiency benefits will also flow through. The CFC, you will get to see later on is a fantastic example of how do you partner with the right people to solve possibly the hardest problem in retail. How do you fulfill the ultimate customer experience? Extended range, perfect availability, incredible freshness consistently. And Ocado has been doing this not only as a technology partner, but as a retailer in their own right for 2 decades. The density of the solution here enables us to service a volume of orders on an extended amount of range through a quality of service that no other solution can provide. Yes, the productivity in the facility is more than twice that in-stores. And yes, the last mile component is also optimized through the software. And Ben has already mentioned the fact that we've got more automation coming. When you see the on-grid robotic pick, it is not a PowerPoint presentation with a video. It is a real piece of automation that is enabling item-level picking for consumer and integrates into the rest of the solution. The benefit of this partnership is not only what we get today in solving the hardest problem in retail, but it's the future R&D that comes down the pipe. It's the 2,000 engineers in Sofia, Bulgaria that work for Ocado that are constantly refining the software, that are constantly looking at the advanced analytics to say, how do we get more capacity on a better shape of cost curve? How do we delight the customer even further? And importantly, how do we stay strategically ahead of everybody else in the market? So I'm excited that we are now live. And I'm super pleased that the metrics that Ben talked to are playing out in terms of customer expectation. But what I'm really interested is what comes next. And then on transport, we operate with our third-party providers nationally. We are one of Australia's largest transport operators. 20,000 trucks a week go out from distribution centers to stores. And our longest leg from Somerton in Vic goes all the way to Kewdale in Perth and up to Kununurra in the Kimberly is 6,600 kilometers. That is a long way for a product to go. In that operation, fewer, fuller trucks makes a material difference. It's a material difference to not only the commercial performance of the business, but also the environment and to safety. And we did a great job in the last 4, 5 years of bringing in transport expertise into the business, working closer and more strategically with our third-party partners and growing our Coles Collect business, which is a service that takes our primary transport into DCs and leverages the assets that are already out to stores. 40% of all trucks into a Coles DC now, they come through Coles Collect. They come through leveraging those assets, being more efficient and they are a better service level than the rest and they come through more efficiently. We've now implemented a new transport management system. We partnered with Manhattan, global software provider, and they said to us we know you now know transport. We are upgrading our base product. We would like to work with you on your designs to be bespoke to go into base. And that is exactly what we've just introduced. This gives us revenue and cost visibility, it onboard-s suppliers faster and it also has full tracking and traceability. And for us to continue to grow Coles Collect, drive better availability and better revenue, this asset is absolutely imperative. But we're also investing in technology and data in our store portfolio. Anna talked earlier about the importance of fresh. Historically, our stores were all on central replenishment, a forecast, an order plan system generated shared with the supplier, what you would expect in terms of modern retail inventory control. Produce was the outlier. We finished this a year ago. And what I really like about this is we used our own internal advanced analytics team to build and own and create the forecast. We ran a bake-off with best practice solution providers, and we came on top. Our depth of knowledge over 2 decades in replenishment planning has set us up really well to get control of our fresh supply chain. And so we can now control range. We control the operation, both within store and within the distribution centers. And we can give suppliers more certainty. And what does all that mean? It means that the speed at which we can move fresh produce will be faster than ever. And in fresh, speed wins, the freshest products with the most efficient operation. In our stores, you could think of activity in 3 main buckets: fill, fix, serve. Fill is obvious, stock on to shelf. But fix as a process is maintaining inventory accuracy. It's making sure the layout is right, it's rotating products and code checking. And in the business of our scale, it is a large amount of activity. Historically, we have asked our team members to fix across whole store every day, scan every gap, investigate every low, investigate every high item. Make sure you check for all the things that should be rotated. Work, rework the load out the back twice a day. If it goes on shelf, take it at the back. And what we know is that 15% of all of that activity resulted in an action that drove no value. So we've used advanced analytics to create guided counts and guided fill. And we've digitized the inventory in stores even further. So a team member now is directed based upon data to the activity in the store, and we can now measure that the effectiveness of that activity has gone from 15% to 70%. Again, better availability, better working capital, more efficient. Now the advanced workforce management piece that Leah talked about earlier is a slightly complex problem. Retail organizations tend to engineer a process to the nth degree. It's called kind of efficiency program, but you time and motion, you measure every task. And we are no different. There are 24,000 standards to run a Coles shop in a week and they are measured to 15-minute increments. They reflect the activity by day and department and they reflect the sales we project for you to take through that period. You'd think that's quite optimal. The reality is process alone does not generate value. You have to have people. And so this part of our strategy is bringing data and analytics to a depth that we've never done before. And it takes all those work standards by day, by department, by store by 50 minutes and then at a store level it correlates them against the team. Who works there? What is their capability? And importantly, what hours do they want to do? We're not trying to force the team to an efficiency standard that's a theory. We are bringing for the first time the activity in a store to the desired hours and capability of the store team. It is a fundamental difference. And we've partnered with an organization called Palantir, they are global leaders in data analytics. And we said, can you help us? We have a complex time and motion system and we have a team member rostering capability system. We want to bring the two together, and they've done it. And our team member churn rate has reduced 25%. And 80% of all of our team are now working the desired hours that they have told us are the shifts they want to do. And not only is our efficiency still in place where our team member engagement is up a quartile and our performance improves. This is really powerful. And where there are cost pressures, the ability to drive efficiency with the team, not against them, is a differentiator. And in the next phase, we will look to integrate customer NPS data to then bring the third dimension in: efficiency of process, engagement of team and capability and customer outcomes. And remember, this is store, day, team member, task level. So we've got the ability now to have a way of working efficiently for the right outcomes. The next two have been socialized quite broadly. Service transformation; and I think we probably have not spoken enough about, the customer experience. When I go to Elsternwick, which is a very busy Melbourne trading shop and I talk to the service manager, she will tell me had you not transformed this front end, we do not cope on weekends. The 20% additional throughput we now have is a lifesaver not only for the service team, but for the priority 1 calls that don't come through that take other people off tasks that need to be done. And the team members, they really appreciate the ability to stay focused and work in an environment and the customers have ultimate flexibility. I think this has been an incredible success. But you'll see out in the breakout rooms earlier we're not stopping there. We're working with Ben and the digital team on to what's the next generation of efficient, frictionless assisted checkout. How do we keep that momentum going? It's a key part of the shopping experience and a key part of our operation. And then the final pie is loss. Loss has not gone away as a problem, although have worked really hard together to try and solve it to the extent that we can, and we've made a big difference. The technology we've rolled out in smart gates, in skip scan, in bottom of trolley and the stores we have deployed it has met our business case returns and continues to provide a level of support for the team through some -- frankly, some difficult customer interactions. It's done a great job. The numbers of trolley pushouts in our store is down 60% where we've implemented that technology. And the team member feels safer and arguably our customers feel safe in that environment. But again, out in the breakout rooms you will see we're working on the next generation. We've got weighted shelves that can detect behavior that is more aligned to someone who may not pay on the way out. And we've got virtual curtains that can also intersect and interact with the consumer if we think that they need a bit of assistance. We have to keep the technology ahead of the problem. We have to keep our team members work in a safe environment. And we have to keep making sure that not only is loss a problem in the P&L, it's a problem in availability for other consumers. So that's quite an extensive set of assets and technology investments we've deployed. Here's the part that we are seeing, though, and this is the interesting part. Whilst all of those components have delivered against their stand-alone business cases and the team have done a great job of implementing them on time, on budget and within spec, we're starting to see other benefits. And I'll give you a couple of examples. When the ADC went live in Queensland and the more accurate deliveries, improved availability, on a higher frequency, closer to the consumer, we also started to deliver our friendly pallets that made replenishment in the store easier and reinforced that availability and efficiency beyond the business case. But what we didn't think we would see is that when the FSI team, the ones that measure the fixed part of the store operation, how much activity is going away, they came to me one day and said, "Queensland is now 20% lower in fix than before the ADC." "Have you checked the data?" "We've checked the data because those components of more frequent, more accurate, more fulfilled deliveries are going to store. The store process is better and the inventory drift is lower and the need for that fixed component is reduced." I went to a store in New South Wales a few weeks ago and it had the conversion to Kemps Creek ADC deliveries. And I asked the store manager, Adam, how are your availability gaps? And he gave me a number that was too low. So let's go and walk down the health and beauty aisle, slow moving inventory, highly promoted, always difficult. It looked like a new store. And he was right, they were his numbers. But what I didn't expect is he then said, "We've also migrated our online home delivery to the CFC. And not only is my availability better from the ADC, that online pick now does not disrupt availability through the day and my weekend trade is no longer congested, and my customer NPS is lifted. And actually, we're growing sales in some of these areas." The efficiency and the simplicity of the process is multiplying through these assets. These structural solutions are creating a virtual play. And so we see the next era of being one where we take data and we take this technology and we work with our global best practice partners that we have chosen to work with and we think about the end-to-end operation to over time continuously refine and improve with full visibility and control how we are meeting the cost-to-serve pressures of the new customer. That personalized, tailored digital omnichannel shopper will be serviced through a data-driven, technology-led, digitized omnichannel operation. I'll now hand over to Michael to go through Liquor. [Presentation]

Good morning. I'm Michael Courtney. I've now been at Coles for just over 5 years -- just over 9 years, and I've just completed my first year as the Chief Executive of Coles Liquor. And I'm really excited to be here today to talk to some of the opportunities that exist within Liquor. Because whilst it's true that we're currently navigating a tough market from a growth perspective, heavily influenced by some cyclical factors, I'm a firm believer that there is significant opportunity for us to be improving our customer offer and improving our competitive position within the market over the short, medium and long term. Before I get into our strategy, I'll start to talk about some market context and what is influencing growth in the market currently. First of all, from the 2 charts that you see on this page, you can see that structurally the liquor market in terms of retail has enjoyed very strong growth over the long term with the compound annual growth rate being 7% over the 40-year history of the ABS data set. But growth is currently constrained. FY '24 was the lowest growth year in over 30 years and that's being heavily influenced by 2 key factors. So firstly, cost of living is driving customers to be more choiceful around their spend, and that is weighing on growth within Liquor. The second important factor is that if you look at spending on alcohol as a proportion of total consumer expenditure over time, that ratio has remained elevated since COVID. You can see on the charts that COVID led to a big increase in spending. What we've seen over FY '23 and FY '24 is that ratio is reverting to its long-term average, which has been relatively stable over the long term, but that mean reversion is causing a short-term headwind to growth. That has continued into FY '25. You can see that from the September release of ABS data that speaks to negative year-on-year growth for the first quarter of FY '25. So in a period where growth remains challenging, where cost inflation remains high, there is downward pressure on margins. But there are reasons to believe that the market will improve from its current low growth position. Whilst it's easy for me to talk about a compound annual growth rate over the last 40 years, importantly, if you look over a shorter period of history and if you look over 5 years to look pre-COVID now, what you will see is that if you take the growth from first quarter FY '25 and compare it to first quarter FY '20, which is just prior to COVID, the compound annual growth rate over that 5-year period is in line with the long-term average of 7%. So what that speaks to is healthy, continued underlying growth in the market over a period of time. So we anticipate that market growth will improve as you see cost of living pressures abate and as alcohol consumption as a proportion of total consumer expenditure stabilizes. So with that in mind, I'll now talk to some evolving customer trends. I've just spoken to the economic headwinds. Leah earlier today spoke about, for customers, value is paramount at the moment. So in response to a more challenging growth environment, we have focused on our entry price points. We focused on our exclusive liquor brands, which offer fantastic quality at tremendous value. And importantly, we've also focused on premium price points where we, as a business, have historically under-indexed, but we're seeing customers trading from some out-of-home occasions to in-home consumption where they are willing to purchase at a premium price point. We've also, over the last year, been able to offer value beyond price through improving our loyalty offer and the performance of our loyalty program customers has been far ahead of our non-loyalty program customers. So when you combine this, what this means is that despite FY '24 being a challenging year, we continue to perform either in line or ahead of the market, depending on which market data set you want to look at. If I move on to the structural trends. So spend per capita is one that has been relatively stable over the last few decades. When you combine that with the fact that there continues to be growth in the drinking age population, this supports the outlook for continued growth in the industry over the medium and long term. Whilst it's true that some customers are choosing to drink less, we have continued to see the industry innovate around this, to be able to bring products to market to continue to engage with customers. And there is a trend for those customers who drink less that they drink better, which is supportive of growth. Customers are also, post-COVID, showing an increased propensity to drink different, so to drink across more categories, which gives us the opportunity to engage them in more occasions moving forward. In terms of the second structural trend, on digital engagement, Amanda and Ben both spoke to the importance of personalization and that's going to be key to the next phase of growth within Liquor. As is digital adoption, which continues to increase and from the perspective of Liquor, I think this is a huge opportunity to improve discovery for customers and give them more confidence in different purchasing occasions. So we're moving with the group in terms of the key digital trends. But importantly, we're going to leverage group assets as we do it. And the recently opened CFCs is a great example of how we've been able to improve our online offer through being part of that solution. The last trend in terms of convenience, again, Leah touched on our preferences for stores that are co-located next to supermarkets because it's where we see the greatest returns. And it's where our network will focus on going forward. But convenience is not just about the location of your stores. In an omnichannel world, if you want to win with customers over the long term, you're going to need to have a superior fulfillment experience. And we aim to have the leading fulfillment experience within the liquor market. So with these evolving customer trends in mind, I'll now talk to our strategy. And as you can see from this slide, our strategy is aligned to the 3 group strategic pillars with a particular focus on the 9 initiatives that you see on this page, and I'll now talk to those in more detail. So firstly, in terms of destination for food and drink, this is led by our need to evolve our customer value proposition. In September, we announced the intention to unify our banners under the Liquorland brand. We think that this is going to enhance our customer offer. We think it's going to simplify our go-to-market strategy. It's going to support better execution and it's going to better allow us to leverage the strength of the Liquorland brand in the market. Following on from this, we've got to focus on right range in the right locations, and moving to a single banner is a great unlocker of this. Historically, the range that we serve in our stores has been heavily dictated by the sign that sits above the store, more so than it has been about the products that customers in a given location want to buy. So we think that by making the master range more accessible to all of our stores, so that our stores can draw down on the stock that is of most relevance to their customers, that we're going to be able to offer greater choice and value in more of our locations. And lastly, in terms of an integrated food and drink solution. We see a huge opportunity over the long term to leverage the ecosystem of Coles to give a seamless fulfillment experience in terms of food and drink. And this is something that we're working closely with our counterparts in digital and in the food space to be able to deliver. In terms of the accelerated by digital pillar, the first initiative in terms of personalization and loyalty remains key for us. As I've already spoken to, throughout FY '24, we had very strong performance in terms of our loyalty customers. In FY '25, we're going to simplify that experience, by converging to one loyalty program within Coles Liquor. And personalization is something that we commenced with in the second half of FY '24 and we'll continue to build on throughout FY '25 and beyond. In terms of retail media, we're on the journey with Coles 360. We've embedded that into our offer throughout FY '24 and that remains a strong opportunity for income growth in FY '25 and beyond, and we'll continue to invest behind that. In terms of accelerating omnichannel development, you saw Ben refer to the 5 building blocks of a great digital experience and they're the same 5 building blocks that we're focused on within Coles Liquor. The change to our approach in digital over the last 12 months has been that historically Liquor has focused on building digital assets for Coles Liquor whereas now our primary focus is leveraging group assets first and only spending on bespoke assets where absolutely needed. This should increase our speed to market and lower our cost of delivery over time to give us greater impact with customers. In terms of our third pillar, deliver consistently for the future. We want to grow and improve our network. FY '24, we saw the acquisition of a network down in Tasmania, which is a great example of the opportunities that still exist for us in the market. And we've continued to renew our stores across the course of the last year. What we're focused on moving forward, first of all, is capitalizing on small box opportunities. But we want to improve our returns, and how we're doing this is we're refreshing the blueprint to make sure that we can achieve better sales density out of smaller boxes at the same time as lowering our cost to build, which when you combine those will improve our returns. In terms of Simplify and Save to Invest, we continue to deliver cost savings as part of the group program. And this gives us the opportunity to keep investing in the growth drivers of our business. And then lastly, in terms of modernizing core systems. This is a huge opportunity within Coles Liquor. In each of the key functions of our business, we are highly, highly manual currently. This is true of replenishment, this is true of price and promotions. This is true of how we do our ranging in stores. And so there's a huge opportunity moving forward to modernize the tools that we have to increase our efficiency and our effectiveness. We're already on this journey with the rollout of automated replenishment already underway in FY '25. So as I turn to the final store -- final slide to look at our strategy outcomes to date. FY '24, in many ways, was a transitional year for the Coles Liquor business in my first year of leadership and as the team look to adopt the new trends of customers in a more challenging growth environment. But what this slide shows is that despite the challenges in the market, we continue to make progress on our 3 strategic pillars. So whilst we are in a tough market currently, market conditions will improve. In the meantime, we're focused on making sure that we're taking the opportunity to accelerate our strategy in FY '25 to ensure that we continue to improve our customer offer and deliver on our ambition to win market share over the short, medium and long term. Thank you for your time. I'll now pass to Charlie.

Great. Thank you, Michael, and good morning, everyone. It's great to be here and to -- and I look forward to taking you through our store network strategy and the important role it plays in delivering our 3D strategy, but also bring together what our strategy means from a financial perspective and what -- how I look at and how we look at financial performance over the next few years. So why don't we start with the store network and move from there? It goes without saying that our store network is vital to delivering our 3D strategy. Whilst our e-commerce business has grown materially over the last 5 years, and you heard Ben talked about this earlier, Leah did mention that we still expect the majority of our sales through our store network and that's with our customers being delighted by our CFC offering. Our store network underpins our e-commerce offering, whether it's in-store or whether very much the physical shopping by customers in stores. Click & Collect will still be fulfilled out of stores. It supports that particular mission, but also a number of the home delivery aspects as well. So just to recap, our store network is critical to 3D. Firstly, we want our property team to actually deliver stores that actually are destinations for the future, that customers want to shop in, that optimize space that actually ensure the -- that delivers on what our -- the communities in which we actually want to serve. Secondly, we have digital sales that originate from stores. The physical and digital sale becomes even more blurred when you are in stores. And as you see, we are investing in the digitalization of our stores, but also how it supports our home delivery and Click & Collect from our store network. And finally, delivered consistently. Our customers and team members want a consistent experience in-store. And this can only be achieved by continuing to renew our store network, innovate within our existing network and really have a clear blueprint for what those stores look like going forward. Our property portfolio is one of our greatest assets that we have. We have an extensive national, and you heard Leah talk about our national footprint of supermarkets across Australia, as well together with our Liquor footprint. We have 857 supermarkets, which includes 27 Coles Locals. And Coles Locals play a really important part in our network because they can provide infill stores in highly dense -- infill stores in highly dense populated areas where they actually serve those communities, including perhaps more of the affluent locations. We have 991 liquor stores, and you heard Michael talk about the importance of the store network and the renewal of their store network within Liquor. A clear plank of our strategy is to actually target space growth in excess of 1.5% per annum, which is underpinned by population growth. Our new stores have consistently delivered strong returns. We love investing in new stores. They are high returning and they support the in-store customer mission of shopping, but also our digital experience. We actually have a large property team who use data and analytics and AI to actually forecast population trends, demographic changes in order to provide us with the confidence around where to invest and what the stores need to deliver in the particular locations for long-term growth. When it comes to new space, our focus is on growth corridors, greenfield sites, but also infill stores in more densely populated areas of Metro Melbourne, Metro Sydney, Brisbane and where we see a network gap and the Coles Local format that I spoke about earlier that plays an important role in actually dealing with space constraints, but also where the demographics of their area actually support that format. We're excited about the growth opportunities in the catchments, which actually are served by the CFCs. As we have seen, the CFCs have reduced the congestion within those stores, really picked up the shopping experience. Our customers love those stores at the moment, Matt spoke about the congestion in the afternoon, which has been sort of taken away as those stores are now supported by the CFCs. It's a better customer shopping experience. And not only that, the optionality, what it has done, is opened up more and more slots for in-still fulfilled digital orders like Click & Collect, like same-day and immediacy offers. These were previously restricted in some of those most busy and congested stores. We're taking a more innovative approach to new store development to offset the rising cost in construction without compromising what the store outcomes are. We've actually dedicated a lot of time over the last 12 months around value engineering, redesigning the blueprint to not only take cost, get bigger bang for our buck from what -- where we are deciding to invest, but also improve that customer experience. All of this is all about how do we actually move -- make the process simpler, faster, increase the end-to-end process for our team, enabling more store openings for our customers sooner. In terms of store renewals, we're focused on optimizing existing fleet of 850-plus supermarkets. Similar to new stores, our renewals generally deliver an improved customer experience, leading to higher sales, higher NPS, our improvements in NPS and the customer experience, but also attractive returns on capital. In addition, our renewal and maintenance programs are designed to ensure that we maintain our critical infrastructure. So we do invest in the efficiency and productivity improvements as well as the effectiveness of our store operations. Other key areas that we renew -- other key areas, sorry, that are a focus of ours is actually around how do we renew the right stores at the right time, right, and certainly, with a higher frequency, optimizing the level of investments. And this depends on the age profile of the stores and ensuring that we have the right look and feel and services that our customers want in those stores. Over the last 5 years, we've actually opened 70 new stores across our network. We've actually renewed close to 300. So 70 new stores, 300 renewed stores. Importantly, we've touched a lot more than this, though, in terms of general maintenance and efficiencies. So for example, our renewal program, we've invested in upgrading our refrigeration, our transcritical, cool rooms, HVACs, electrical systems. So in the last 3 years, over 175 stores have actually received in addition to our renewed stores, significant critical infrastructure improvement. So when you actually look at the number of stores that we generally touch, we think about, on average, 50-plus stores, 60 stores a year from a renewal perspective, 14 new stores on average. And there's 15 to 20 stores a year where we're actually making significant investment changes to the critical infrastructure. We're actually touching over 100 stores a year or close to 100 stores a year quite significantly. As we look forward, generally speaking, we'll look to renew a large or core trader, some of those very large traders that we see every 5 to 7 years, with the balance more in that 10- to 15-year time frame. And what a renewal in tools, they're not all the same. Renewals are going to be very dependent on the age profile of the stores, the experience that we want to deliver for the customers in the store, but also the physical attributes of that particular store and location. Our focus is that we have the right blueprint that seeks to maximize the outcomes of the renewals while maintaining the cost. We know from our customer feedback that the look and feel of sport is the greatest driver of positive cost or sentiment, but also the disruption. So in a renewal, if we can minimize the disruption to a customer over a period of time, we know that delivers a higher NPS and a better customer experience. And that's what we've been doing in value engineering. It's not all about cost, it's about process, it's about time. It's about delivering an efficient and effective renewal for our customers, growing NPS. NPS lease the better sales and obviously, our better returns. In the past, we've sort of perhaps taken a bit of a standardized or peanut butter approach to renewals. Going forward, it's going to be smarter. We're going to work smarter and make our investment dollars actually go further. Getting us right, provides us -- getting this right provides us the bandwidth of doing more renewals, for at least the same amount of money, if not less. So, in summary, our ambition is to open more stores through a simpler and cost-effective store design that takes -- sorry. So if I can then move on to our financial framework. And this is what I really want to touch on, how our strategy comes together from a financial perspective, but also what are our financial priorities. So as Lee mentioned earlier in the day, our vision is to become the most trusted retailer in Australia and grow long-term shareholder value. In order to do this, our financial priorities are clear. Firstly, we want to deliver top line growth, supported by those macro trends that we spoke about, including delivering on our customer proposition that Anna touched on earlier with Amanda and Ben. Secondly, our profitability is underpinned through initiatives that look at range and space, productivity improvements, efficiency programs and new earning streams. And finally, we'll look at delivering shareholder returns underpinned by strong cash flow conversion and also a disciplined capital allocation. You can see from the slide here, and I'll touch on each one of these in the next few slides, but how we think about our earnings pathway over the next few years. So let's start with top line growth. As we said in the past, Australia has one of the highest forecast population growth rates of any developed market. And you can see on the chart here, this underpins the long-term growth of the sector. We're also seeing a shift back to in-home consumption. What you see in the second chart is that the food services market share remains above pre-COVID levels, but we're starting to see early signs of a reversion back to in-home consumption, in-home dining and entertaining. And this is driven primarily by the cost delivering pressures that customers experience today. In addition to these 2 tailwinds through the effective delivery of our 3D strategy, we aim to grow at or above market. And hopefully, we had a sense today of all from all the presentations that we -- that my fellow ELT members have delivered that we're trying to do this from a strategic point of view, whether it would be our focusing on improvements in the customer experience, focusing on availability, focusing on the execution of the value campaigns, the innovation through our exclusive brands, there are many ways that we, as Coles differentiate ourselves in the marketplace. In addition to growing the top line, we intend to invest in value and increase profitability supported by a range of productivity and efficiency initiatives. Matt spoke about a lot of these earlier. We have a history of delivering growth and a history of delivering solid returns. As you can see from the slide here, we're aiming at do this through optimizing our range and space, continuing to improve our loss rate, drive continuing improvement availability, realizing the full benefits of the investments that we have made in the ADCs and the CFCs and certainly deliver on our cost savings in our Simplify and Save to Invest program. From a gross margin rate perspective, we're also seeing the tailwinds of an improvement in the GM rate because of the decline in tobacco sales, which are obviously at a lower margin. And Amanda spoke about the growth opportunity that we see in Coles 360. In FY '26, the major project implementation costs relating to the ADCs and CFCs, they will go away. So this year, we talked about $130 million of implementation costs in FY '25. They go away going forward. And there's significant benefits in earnings in that year that we don't expect. And in addition, we don't expect any notable implementation costs from the Victorian ADC until FY '28. As we have flagged, we're continuing to reinvest in the value for our customers. At the same time, we feel we have the right building blocks in place to deliver strong returns for shareholders. Finally, as you've heard us say before, in the past, we've actually got a very disciplined approach to capital allocation. At its core is that we want to maintain a solid investment-grade balance sheet, generating sustainable operating cash flow and converting 100% of our earnings and over 100% of our earnings into cash. We'll use our cash flow to maintain our business through essential and maintenance CapEx and pay down our debt obligations. The excess cash is then used to create value through capital investment and growth initiatives where we choose to invest in some of the transformational areas that we have already spoken about historically. These initiatives provide great returns and are an attractive use of our balance sheet capacity. We also know that dividend is really important to our shareholders, and it's a key differentiator for Coles as an investment proposition. As such, excess cash is also used to pay a dividend to our shareholders in line with our dividend payout ratio, which we have stated 80% to 90%, which we have consistently delivered on since the merger. And then if we have surplus capital at point in time, we'll continue to look at optimal ways of returning this to shareholders but rather than just talk about the principles here, I think the best way to look at this approach is actually on our track record in terms of our financials, our return on capital and where we have been from a dividend perspective. In terms of ROC or return on capital, you can see we have delivered a consistent growth over the last 5 years. And this has been done at the same time that we have invested $5.7 billion in CapEx. So it's a really strong outcome relative to our CapEx investments. We've also seen solid growth in group sales, growth in EBIT and our annual dividend at the same time has resulted in a consistent dividend yield of over 4%. So to summarize and bring this all together, we actually want to be the most trusted retailer in Australia and grow long-term shareholder value. That's our vision. Through the macro trends that we are seeing, in addition to the operating levers that we have in the business that I discussed earlier and my fellow ELT members have talked about, I believe that we can grow our top line, grow our profits, deliver returns on our investments and that we're making and deliver long-term shareholder value. And with that, thank you. I'll ask my fellow ELT members join on the stage, but we're going to play a short little video of our CFC facility that you all get to see this afternoon. [Presentation]

Right. Well, I hope everyone has enjoyed the presentation so far. We have got a lot of questions through from our Slido site. So we may run out of time to answer all of them, but our ELT members will be circulating during the lunch break, so you can ask any additional questions that we don't get through today at that point in time. And obviously, you can always reach out to the IR team, and we'll follow up on any additional answers as well.

So maybe if we kick off, maybe one for you, Leah, to start with. I didn't see a strategy scorecard in your presentation. Are you able to give us a sense of how you measure success?

Well, thanks for the question. Yes, we haven't provided one this time around. As you would expect, when we work on our 5-year strategic planning process that we do with the board each year, we focus on key set of financial metrics, which cover our sales, EBIT and PAT and ROC. And then in addition to that, we have a set of more strategic measures that we look at as well. Many of them are aligned to the KPIs that are in the scorecards for the individuals sitting on stage right now and they would cover things like customer MPS, market share as well as particular milestones associated with many of the initiatives we've discussed today.

And maybe one for you. Can you please give more clarity about the proportion of SKUs on EDLP. Will there be less SKUs on promotion? How does Coles limit the impact on sales?

Yes, of course. I think it's worth noting that all of our own brand SKUs are already on EDLP, and we have a quite a significant proportion of our business and that is on EDLP. We will look to do this in the categories that matter most to customers and where it's more appropriate. So you won't see big EDLPs you would expect in impulse categories because that's not how we're going to win. It will be around the categories that matter most to build trust for customers, and we'll continue to do that. And we will look to grow the share. In terms of promotions, it's about putting promotions where it matters most to customers and making them meaningful. So in terms of you may see an absolute reduction in tickets, but in terms of how we optimize that and really capture for customers to make sure that we've got promotions on the products that matter most to drive both incrementality, but also value and delight for customers is where we're going to focus.

Just a follow-up one for you, Anna. Is Coles looking to rationalize total SKU count? If so, what's the rationale for that and how much will be cut?

Yes, we are. And it will be double-digit rationalization. And even if I went hard year after year for 2 years on the trough and did double-digit rationalization, I would still have more rains than I had in 2019. So the context behind that would be, this is about removing duplication, but adding choice. To give you an example, we have 13 basic table sales. We don't need those. We might go to 5, and we might add 3 different types of sorting to give customers more choice. Take 1 of our leading hair care brands. We have 6 different pack sizes ranging from 80 mL to 1.1 liter. Now that drives huge complexity. We might not need 6, we might have 3, and we'll work with that leading manufacturer to say, what's the right architecture and how do we pull that through in the same space, so that we improve availability, we improve efficiency end-to-end. And actually, the most important bit is how do we make it easier for customers? Customers tell us when we book too much range and lots of duplication is incredibly hard. So we will be simplifying overall, but we're reinvesting in the categories in the space that makes the most amount of difference to customers. So yes, a net reduction, but it will be reinvestment in categories and removal of duplication that we think we can have more choice to customers and be very data-driven, thoughtful and purposeful around how we do that to make sure it's tailored to the right categories.

Along the same lines, but maybe one for you, Amanda, will Coles explore member pricing for flybuys shoppers?

Thank you for the question. So about 18 months ago, we did trial member pricing. And what we are doing is really focusing on personalized value. What we're finding is that customers are most interested in participating and engaging with our programs when they receive relevant offers that are personalized to their specific shopping behavior. So that is where we're focused with our loyalty and customer engagement is to that personalized value relevant based on that purchase behavior data I spoke to earlier.

One more for you, Anna. In 2014, Coles had 30% of customers, said 30% customers bought no fresh. Is that still the case? Has it fallen or where is it now?

2014 is obviously a long time ago and things I'm pleased they have moved on. I think that without giving specifics, we still have a big proportion of customers that don't do their full fresh shop or any fresh shop with us. So we are making good progress over that. But actually, what we're really pleased about and focused on is making sure we're seeing improvements in quality satisfaction, in our range satisfaction on our over offer. And actually, we believe we focus on the stuff that really matters to customers by default, that will come through. And we think there is significant headroom for us in fresh over the coming kind of decades, we think, to really drive significant growth for customers. So we're focused on the things that matter to customers most. And with that, we have penetration and share will grow.

Great. Matt, taking on more sourcing capability, for example, [indiscernible] milk, maybe increases reliability, but does it dilute returns and increase risk by being a producer?

Look, I think those moves are very small in the relative scale of our overall business. So I don't think that is an indication of us now expanding our ambition and capability. And in both instances, I think there were very unique circumstances whereby we're looking to make sure that our customers will still be -- they need to still be [indiscernible] or operations could continue. So, to answer, no, I don't think so.

The only bill that I'd give to that, as we look to the longer-term partnerships with people, we'll look to partner upstream. That doesn't mean that we will manage those assets. So take MAP in WA. We have done a long-term partnership. On the back of that, they've been able to invest GBP 35 million into the facility. It gives us security, it gives them security and actually what that really does is enables us to transform the customer offer. So there -- the kind of partnerships we'll be looking to do, not necessarily using our capital to invest, but through long-term partnerships, enabling other people to have the confidence to invest in capital further up the supply chain, which differentiates for both of us and give security.

And for those of you who don't know what Math is, they do our meat processing for us in WA.

They do a great job.

They are very good. And a great example of our preference, which is to contract with great partners on that front versus investing in our capital.

But to put into context, what Matt spoke about, the role or the meat processing facility was about -- an investment about 10 years ago. The shift fresh facility was actually a distressed asset that we actually acquired in that regard. And then I think the third aspect from the mill facility, clearly, that was an asset [indiscernible] was selling. And again, from a security supply perspective, we thought that was an important element of why that was an important part of why we made that investment.

Speaking about investments, Charlie, what are Coles plans around the smaller format local stores. This was a bigger plan. It appeared to be a bigger plan previously, but seems to have less focus now.

We're absolutely focused on the Coles Local formats, Anita. I think they have a role to play. As I said in my presentation, yes, we look at it is like they can play a really good role in an infill capacity where we have a network gap in some of the more highly densely populated areas or where the demographics are really support that sort of Coles cycle format and the local customers. So that's very much, they're a very important part of our portfolio and we will be looking at rolling out more of the Coles local smaller formats going forward. There really is going to depend, it's for the right store, for the right location and the right size.

Are you enrolled, Tally? Based on the number of renewals that you've reported over the last few years, it looks like you're running behind in renewal program. Should we expect to see a step up in renewal CapEx going forward?

Great question, and thank you for that. Look, we love the renewals, as I said, why renewals are great. They deliver a fantastic customer experience. They do deliver an uplift in sales, and they're one of our higher returning investments. So we like the renewals. In fact, what we have done over the -- if you look at the last 5 years, we have stepped up our renewal spend. It's almost doubled over that 5-year period. As I said earlier, we've done 300 of those, right? So on average, about 60 a year. But we've also opened new stores about on average 14 or so a year, but we touch 15 to 20 stores every year meaningfully from an infrastructure perspective. And some of those are customer facing on slightly refrigeration, right, the doors, replacing some of that sort of key infrastructure, which is really important in terms of the performance of the stores, vitamin efficiency effectiveness and cost perspective. So we are actually touching up 90 to 100 stores yet in a very, very meaningful way, whether it is our new store, whether it is renewal or whether it is that critical infrastructure. So look, what we are focused on now is, yes, we do acknowledge the rising cost of construction, which has meant that we've had to look at how do we value engineer, our store, blueprint's a little differently. And really, it is about doing more with the same amount of money that we do have. So we are spending a fair bit in renewals, and you can see that on the -- our capital split. But we do -- you do need to look at also the efficiency and maintenance CapEx lines, which actually contain an element of renewals, as I spoke earlier. So the value engineering element is about reducing costs, trying to look at the time to minimize disruption to customers, but also how do we improve that customer experience?

Would it be worth, Anna maybe give you a couple of examples on that. Anna's team is actually the team that it does allow renewals for us. And this has been a big focus for us over the last 12 months working on this value engineering program. So that capital that we have got allocated, we can actually do more stores with it.

Yes. I want to be more stores with more customer-facing activity and putting innovation and in new ranges in stores that make a meaningful difference for customers. So actually, we are putting a significant amount of innovation through fresh, through deli, through bakery and really focusing alongside that, how do we do more on our macro space and our tailoring store. So the store feels very different from a customer perspective. And actually, we have to do more of those, and we have to find a way to make sure we're spending more or making more of an impact. So the team have been value engineering. And actually, what we've also found is that we have to reduce the disruption to stores. So to give you a sense of what we are doing even in the deli, historically, we have closed the deli predominantly for kind of anywhere between kind of a week to 3 weeks on average maybe 10 days. We've actually reduced the cost by it's nearly 10% of what it was costing us to do that, and we can do that turnaround the deli now in 24 hours. We close M&I, we open the next day and actually it's a meaningful step change. So our aspiration is to do more with the same amount of capital coming up, and we feel that actually, we've made some really good inroads this year to do that. So you should see an acceleration in that space, but not on the capital spend, but more impact to customers as we do them as well and less disruption.

Leah? Coles has invested in deep projects which on track to deliver results. However, what does Coles see as its competitive advantage in the market?

It's a good question. So in my introductory remarks, you would have heard me talk about a few of these. So I think the first big one for us as a team is focusing on execution. So the consistency of the offer is just the best of any of the retailers in the market. And one of the big areas you've obviously heard a talk about a lot on that space is availability. We know that an enormous pain point for customers is when you come in with a list of products and you can't actually get everything that you've got on that list. And so the ability to have that reliability of when a customer comes in, we do have everything there that we believe can be a real point of difference for us in this market. The other one you heard me talk about was own brand. We know customers already see that as a point of competitive advantage for us. We have a very wide range that spends a wide range of tiers. And as Anna really showed in her presentation today, we have built out real strength in a number of brands now in particular areas like [indiscernible] and the Perform range, which is higher protein products and things like that. So that's another big one for us. And then the third one I would call out is probably is just around our demonstrated ability to drive efficiency and the capacity that, that then gives us to put money back into the investments that we have for customers. And so if you look at the partners that we partner with, the likes of [indiscernible] and they are world leaders in their area, and they are helping us to actually deliver some of these big investments really reliably and to business case on time and to scope. And that means the consistency then that we have to be able to take the returns that we're expecting from those business cases and invest them back into the business or return it back to shareholders. That's an important part of what we would consider to be a point of difference in our culture, which is the ability to drive that cost out, which is a core part of getting that flywheel going. A couple of things we talked about in the presentation that I would say are not competitive advantages today but are on our radar of areas that we wanted to develop into. One is the integration of liquor and food together and how we can do that going forward. And CFCs, as we've said, has been a good step in that direction, but we're not there yet. And then the other one I'd say is fresh quality. So we certainly have competitors in the market, but because of their positioning over many decades, would have an edge on us in this space at the moment. But by using technology, data, processes, great partners in terms of the suppliers that we're using. That's an area that we are pushing towards to actually create that as a real point of difference that we can have. And hopefully, some of you have tried things like the Eureka blueberries that you had on your on your desk today. They are a great example of where having a genetic in the product, which is exclusive to Coles, it's really giving you something which is quite unique. So please go ahead and try them if you haven't. The Grandma Heirloom tomatoes are another great example where we're using genetics that we have exclusivity on which really do create a point of difference. So that leaning into that fresh quality and lifting that, I've created a mass try of Eureka blueberries but...

You mentioned delicious food just before lunch.

Sorry, sorry, you bet, but that's the other area. So I'd say just to summarize that, we think execution own brand and our cost culture are the ones that we've got at the moment and then driving forward from here, the integration with Liquor and what we can do on fresh quality.

Great. Maybe one for you, Michael. What are the cost savings that you see coming from consolidating our 3 brands?

So If we move to consolidating the 3 brands, there are some above-store savings that are available because naturally, we have people working to support each of the 3 banners and we've already engaged the team on what that looks like when we announced the pilot in September. Marketing is an area where you might think that there is some savings available, but I think this is probably an opportunity for reinvestment. So currently, we support each of the 3 banners in the market with separate marketing spend, but I actually think over time the Liquorland banner needs a higher share of voice in the market than what it's got at the moment. So we may not realize savings in that area. We may choose to reinvest it. E-commerce and digital is an area where we currently support different websites. We spend money on different websites. So obviously, if we consolidate to one, that's an opportunity going forward. And I think that, that -- when you talk digital -- it's an area where we need to increase investment going forward. And so there's also a cost avoidance perspective to it as we move forward because if we maintain 3 banners in the market, for every good idea we have, we have to think about, well, how do we do that 3 different ways? And often in the digital space, that will require incremental spend if you're doing it 3x. And so simplifying moving to one banner creates some capital avoids moving forward also.

A couple of more follow-up questions for you, Michael. Do you have any loss-making stores?

Yes. Yes, we do. We're a retailer. Most retailers with the national coverage would have loss-making stores. I mean if you look, over the history, we've continued to close stores every year like Net, we're opening new space. But I think moving forward, we continue to assess each store on its merits and we'll continue to close stores at expiry where it makes sense. I think whilst I'm here today talking to some cyclical headwinds, that's not changing our view on property because property will take a very long-term outlook on, and we still think that the outlook for growth within the industry is a positive one moving forward.

I think you just answered it, but I might just ask in a different way, Michael, how do you think about the higher rates of abstinence and moderation impacts on the liquor market longer term?

So I mean, I think it goes back to what I was talking about per capita consumption, right, which has been stable over the long term. Moderation in terms of spend is not a new phenomenon -- sorry, in terms of drinking is not necessarily a new phenomenon within the liquor market. We've seen that our suppliers have continued to innovate around changing customer trends over time. Beer is a great example of this, right? If you look at mid-strength compared to full strength, the share of mid-strength now is higher than it was 10 years ago, right, which means not necessarily less liquid being consumed, but it's a way where people are moderating their alcohol consumption. But still, if we stay with beer, what I was talking to before about when people drink less, they drink better. Craft beer is a great example. It's often sold in 4 packs and 16 cartons rather than 6 packs and 24 cases like mainstream beer, but it's at broadly the same price point. And so that's not a new trend for the industry. And I think the industry has done a great job at innovating around moderation to meet the customer needs, and we'll continue to do so. I think in terms of abstinence, abstinence is a harder one to get some longer-term data on like there has been moved to more abstinence in recent years. But you've got to keep in mind that over the last 5 years, that's following a real increase in consumption throughout COVID. So part of that, I think, is an unwind. I think each of these trends, if I go back to -- if you ask what my view is on it, if I go back to what I was saying earlier, which is that over the long term, the liquor market has enjoyed strong growth. We're currently at a cyclical low. So I expect that it will improve from here. Exactly where that ends up, we'll come down to the different views on how much of the current landscape is structural and cyclical.

Maybe this is Charlie and/or Matt. Initially, the Ocado announcement indicated about $750 million turnover per CFC. Is this still correct? And how much scope is that a lift capacity?

Great. Thanks, Anita, and I'll get back to sort of expand on this a little as well. Look, when we announced Ocado, it was back in 2019. And obviously, $750 million was in those -- in 2019 type dollars. So with inflation, you'd expect sales to be a little higher. But I think what's exciting is some of the potential in terms of upside and efficiency in CFCs and capacity. So Matt, did you want to touch on the

I think both Ben and I just shown up in our presentations, you've got further automation, some of which those of you who go today, you will see. But the actual smarts that make the robots work their way they do. That software is continually being optimized. And it's been optimized to get more capacity and more throughput and more range from that [indiscernible] structure. So I think from 2019, yes, there's an inflationary shift that would make the number change. But we can already see in the fine partners how much more volume and throughput from the same box is now being delivered. And I would expect that to continue. And it's quite exciting to think about how far could that really progress over time, knowing that in a supply chain world, volume broadly fixes most things.

Speaking of CFCs, maybe one for you, Ben. With the move towards immediacy, do you see a risk that the Ocado sheds won't be filled over time.

No. No, I don't. In fact, we talked about we served 3 shopping missions through e-commerce. And what we see when customers shop weekly stock -- weekly stock up, in fact, more than half of them are doing 1 plus 1, so they'll do in week or they'll do an immediate need. So the 2 aren't cannibalizing one another. They're actually accretive. Then, I think the overall early signs that we're seeing based on customer feedback, going through the transition, they're on track. They're on track to meet our expectations and customer rates are responding positively, and we all look forward to showing you those in person this afternoon.

And I think, Ben, I think some of the improvements, I think, in some of those future elements that we spoke about is potentially immediacy and same day being delivered out of the CFCs. And I think that is an exciting development where we see that additionally coming through. And certainly, the CFC is playing a much greater role in that going forward.

Charlie, while you're on the topic of CFCs. CFC open costs are expected to be about $40 million in FY '25 based on comments of the FY '24 result. How should we think about the operating cost of CFCs in FY '26? Is there likely to be a step up?

Look, I think as we talked about, and certainly, when we announced this back in August. So the 40 -- yes, I put the context, the $40 million this year is what we say the, if you like the operating cost or the cost of the CFCs or the earnings impact of the CFC is coming in line in the year one. The CFCs love volume, right? Our focus this year has been -- and certainly this half, has been transitioning the volumes to out of store into the CFCs. And as the volumes continue to grow through CFCs would expect that operating leverage to actually improve. So the cost per order comes down significantly. So as the volumes increase, we do certainly expect that $4 million to reduce over time. And I think as we said back in August, and I think there was an answer to a question back then as well, around this. I mean, what we see with our partners, and I know some partners have talked about it taking up to 5 years for these things to break even or sort of generate a return or make money. And I think we are different, right? One of the things that we are different is a number wise, the first thing is we have that meaningful day 1 volume, right, today. And that has a huge impact. Secondly, range here, an extended range. And we do have, I think, Ben said up to about 10% more differentiated range in the CFCs we have before. That is a real advantage of CFCs sort of going forward. So we are a little different to some of the retail partners do. So we would expect that $40 million to reduce significantly.

I might just add, just one small example, too, that's where we're different from any other partner is. When we started the buildings, the team members are coming from stores. So they were also the CSAs, those that delivered to customers that drove the vans. What changed was the fulfillment. And if you think about just even having things like exposure to management, like in a store, you're not going to have as much exposure. When you're in a CFC, you have a lot more management, but the culture really thrives in the building. And what we're actually seeing that we didn't call out, too, is when the CSA is delivering, the ratings unfriendliness of the driver are exceptional. And I think that just comes with, we have people that work for Kohl's before. They delivered for Kohl's before. Now they're just doing it from a different location, and that's playing through.

Matt, how does the 20% to 25% improvement in availability post ADCs play out in store? Does this mean 20% to 25% less gaps on shelf, sales implications in these?

In simple terms, we measure availability across a range of metrics and in-store gaps is one of them. And yes, it is a reduction in gaps in store. Of course, as we ramp the facility. If I marry up to the last comment as well, these ADC, CFC implementations are significant multiyear investments. And the way in which we have been able to execute the go-lives and then execute the ramp-up, both of the transition of existing stores into ADCs and existing catchments into CFCs, in line or ahead of the plan and in line or ahead of the benefits, I think, is also a credit to our execution expertise. And we don't rush these things. So we're not trying to optimize at the same time as build scale. And we are super mindful of the focus on delivering the right activity at the right point in the journey of each of these facilities. If it's ramp, we're focused on ramp, we will get to optimization at a later point in time. So I think that needs to be understood. The availability benefit we see is really structural. So having the slow lines and they are the ones that historically have been stocked in New South Wales and distributed to Queensland and New South Wales stores all ranged in Victoria and then distributed to Western Australia and South Australia. Particularly where there is high promotional activity, we struggle to maintain great availability by having all the range in Queensland and all the range in New South Wales for those stores, we are one day closer, but we are also 20% more frequent. And it is the culmination of those 2 factors that gives us a structural advantage and availability. The multiplier effect I talked to earlier is then how that also helps the team maintain better inventory accuracy fill the shelves and process the load more efficiently and effectively and how we can then, in that process, have better on-shelf availability, fewer gaps. Yes, of course, more sales over time through that but also a better forecast accuracy, less cannibalization of the offer from other suppliers, more supplier stability, like that multiplier effect just from the change has been quite a surprising -- pleasantly surprising aspect of this go live. So I think our aim now is how do we optimize. And when I say optimize, we've got to keep improving not just that availability but the business case that we signed off for the ADC. That is not our bar. We have ambition to go way further and we are already engaged with Witron to say, as a partner using data, how could we be the foster child for optimization of your solution? And how do we take efficiency and service and availability even further over the next few years and just keep working that solution and maximizing the benefit? So I think, yes, it is availability in store, but there's so much more value that we believe we will get from these investments.

I think most people can say how passionate you are about...

No one else is really doing this stuff because you have to have had a history of implementing large data-driven and technology-enabled capabilities to then have the ability to leverage those assets. Lots of people will talk about GEN-AI in retail or data analytics in retail, unless you have the kit to work with and importantly, the capability in the teams to understand how you then leverage those assets, you can't do it. We can't. And so this is 2 decades of investment really coming together across the end-to-end supply chain. So yes, I am quite passionate.

That is exactly the detail that sits below that competitive advantage that we believe we have in this cost culture, efficiency culture and the use of technology and data to really underpin that.

Right. We've only got time for a couple more questions, maybe one for you, Anna. Obviously, own brand, is a big focus for us. Previously, we had a target of 40% penetration. Do you still have that target?

No, we don't. We are in, as I said, in our food business, further growth than our total business. But we're going to make sure that we target white spaces that we are doing the right thing by every single category. And yes, we do want to grow our participation every single year, but we want to do that through meaningful innovation that makes a big difference for customers and that works in harmony with our proprietary brands so that actually it becomes really purposeful, but we will see participation grow, and we'll be really thoughtful around how we do that.

And one last one, I think we'll just sit in Charlie. With this significant growth in online, do you think you can still continue to improve margins over time?

Thanks, Anita. Well, let's look at our track record. So 5 years ago, I think e-com was -- I mentioned earlier or digital sales were they're about 1/3 or less than 1/3 of what they are today. Over that time, we've actually seen an improvement in our earnings profile. We've actually seen a growth in profit the e-com business grow significantly. And at the same time as investing something like $5.7 billion, we've been able to grow our return on capital. So I'm actually quite excited about that we can continue to grow e-com and grow our profits and grow our returns and deliver our dividends to our shareholders.

Great. Now I'm sorry to all those who have asked questions because I think we've got quite a few still in the chain here, but we are going to have to break for lunch because we have other things we want you to see and do and -- but at the ELT will be out there. So if you haven't had your questions asked, please do come up to one of the ELT members during the lunch break, but also, obviously, chat to the Investor Relations team, and we can follow up that as well. So we might just hand over [indiscernible] just for some closing remarks, just to send us to lunch.

Well, thank you very much for taking time out today to hear a bit more detail about our strategy. As I said at the start, we do believe that this is a strategy that is going to set us up long term. And in addition to the 3 Ds, the 3 areas that we're really focused on as a team every day is focusing in on the core and execution, making sure that we're listening to customers and adapting the offer but also ensuring that we've got great financial discipline as we go through this and make decisions. And you can expect to continue to hear us to reiterate that as we go through our engagements with you over the next couple of years. Now we're super excited to get you out to the CFCs to see about 700 robots. But, in between here and then, we've actually got lunch. And given we've talked this morning about the competitive differentiator that we have in own brand, we are really looking forward to showcasing that for you today over lunch. And I believe Michael is going to cover. Michael is one of our development shift here at Coles. He's an ex Master Chef contestant. And I think you're going to talk us through a little bit of what we can expect to find out there, yes. You want to come in the middle?

Yes, absolutely. I'm very excited to run you through our own brand food market that we set up just in the room next door. While you guys have been in here this morning, we've got a some of our really exciting products to show up. You've already seen a couple of them at Morning tea and at breakfast. We had daily street coffee, our finance customer stuff we're really proud of. But next door, we're showing you a big range of a big selection, you can go through and try lots of its if you'd like, we can have one big plate really whatever is up to you. I thought I'd take you for a 2 of the market. I can't talk through every dish, but I'll take you through the highlights. Just -- we've got a carve station showing off our finest Coles' -- finest carbon-neutral [indiscernible]. We've posted that. We got a little finest role to put that on you make that with whether you like gravy or some horserace cream. And then we have our carbon-neutral Coles finest lamb as well, lamb brakes roasted whole against [indiscernible]. And then I recon our Christmas star this year, which is our cracking [indiscernible], like a hand and then with cracking on the outside. So it's the best of rose, pork and hand together, and it's going to be one of the favors this Christmas. Next up, we've got a little bit of seafood down and we're doing our prawn cocktails with our Black Tiger prawns from Queensland, and they're about to really take out our shelves and again to be a really starring [indiscernible] our Christmas. And next to that, we have our salad station. And where you mentioned the Grandma's Heirloom tomatoes. It's there on there for you guys to try and which [indiscernible] salads or Basel, a bit of [indiscernible] really taste happy if they are my favorite tomatoes [indiscernible] submarket. So we're really proud of those. And then we'll move to sort of some sweet treats. So we have a little ice cream stand -- an ice cream cart with all our new flavors of ice cream and [indiscernible] try with little many coins. If you want one for me, it will be the brown butter and [indiscernible] that's our Christmas star, I reckon, but they're all absolutely beauty. And then we have a Christmas [indiscernible] product. So we've got our Sicilian finest Christmas pudding . So this year, we've gone away from the traditional fruit -- buying fruit flavor hasn't got [indiscernible] pudding a little [indiscernible] on top, and it's a real winner. So hopefully getting hungry. We've got a new cheese too that we're really proud of. It's our French wash raw and cheese. That's sitting on a little cheese and wine station, you can go and have a look at -- get that a good try. Yes, it's just hit shelves and we're really, really proud of that one as well. And then we have our global food station so with combined a few of our favorite international cuisines that we're really focused on. So we've got our [indiscernible] pasta inside of [indiscernible] you get that classic [indiscernible] pasta sauce with it. And Jason described that [indiscernible] live for you. And then we've also got other [indiscernible] to finish you off. And we've got -- I think the start-up station is our chocolate and hazelnuts inspired by [indiscernible], 3-tier layer cake. So if you [indiscernible] chocolate cake yet, we're going to [indiscernible] can do a little tiny slice. And on every station, we're really proud to have part of our team. I'm a very small part of the team. We've got shifts in the room and also developers and technologies to actually work day in and day out on our own brand range and we put a lot of pride in feeding our customers in Australia. And I think the guys in there can tell you all about the trials and relations what they're doing, how we get [indiscernible] prices on shelves. So they're really proud about them. So if you do have any questions about any of the products, anyone in a red polo or a Coles Chef jacket, ask many questions you like and if they can't answer, come to me, and I'll be at a find the answer for you. But yes, we've got lots of Yummies delicious things. If you can't find anything you like, I think you'll be losing, there's so much good stuff to try. So enjoy and have a lovely afternoon.

Great. So just before we let you out. I think you mentioned one. Unfortunately, we can't drink [indiscernible] today because you're all heading out to the CFC, it's a 0 alcohol site. So there are people there to talk about it. So if you'd like to ask some questions about the one today, you can, ideally participate on. Now so you'll be heading up to these doors to lunch and as Michael said, but -- sorry, no, you'll be heading out through the back doors to lunch and around. -- as you walk through, you'll also see that there's 2 showcases on either side. One is a showcase around our new smart tabs and some of the digital technology that we've got. And the other side, there are some [indiscernible] technology that we're trialing in store. So during lunch, we encourage you to go back into those 2 rooms and talk to the people in those rooms who will take you through some of those showcases to give you a bit of an insight into kind of the next leap in our journey. So over to everyone else, we will be back in here in an hour for a very short overview of CFC just before we head out on the buses to CFC. So if everyone can gather back here in at 1:45 that would be great.

And let's go try some food, which is delicious, easy and affordable. Enjoy.