CHANGING IT UP: Express service stations to move into new energy space while continuing with oil based fuels.
COLES supermarket chain has divested itself of 710 Coles Express service stations in a $300 million deal with fuel supplier Viva Energy, the company behind Shell-branded servos nationwide and supplier to Coles Express.
The move follows Coles’ main competitor Woolworths selling its service station interests in 2019.
The actions of both companies are thought to be partly based on a desire to boost environmental, social, ethical and governance credentials, along with public perceptions and follows Woolworths earlier divestment of its liquor, hotels and gaming business for similar reasons.
Financials that didn’t stack up also no doubt influenced Coles’ decision to sell with the huge fuel business booking $1.13 billion in sales in financial year 2022 on earnings of about $42 million.
This is against $816 million worth of lease liabilities, which will be transferred from Coles’ balance sheet to Viva’s if, as expected, the deal gains approval from the Australian Competition and Consumer Commission and the foreign investment review board sometime next year.
The supermarket will continue to supply products to the rebranded servo convenience stores, and a four-cent-per-litre fuel discount deal for customers of Coles supermarkets will continue.
Intended sales driving ‘customer discount dockets’ do not seem to have been enough to generate the required level of trade Coles needed to stay in the fuel game.
They may have served an important role in promoting customer loyalty but discount limits imposed by regulators eroded their value down to a meagre four cents a litre. At the start of the scheme, discounts of up to 40 cents per litre were at times offered.
The supermarket will continue to supply goods to the Viva-owned convenience stores, and fuel discount deals with Coles supermarkets will continue.
Coles boss Steven Cain said: “Viva was keen to buy the business and Coles wanted to prioritise investment in its existing supermarket business.”
“Selling the petrol stations would help Coles achieve its climate change targets, including net zero carbon emissions by 2050.
“Viva is well-placed to make the most of opportunities to grow the Express business into the future, while we will strengthen our focus on our omnichannel (a multichannel approach to sales that seeks to provide customers with a seamless shopping experience) supermarket and liquor businesses and our ambition of becoming Australia’s most sustainable supermarket group.”
From Viva’s perspective chief executive Scott Wyatt said: “Buying the service stations would enable us to expand investment in the store network, while an ongoing deal with Coles and Flybuys would create a ‘seamless’ experience”.
“We have enjoyed a strong partnership with Coles over the last 20 years and this is an exciting next step.
“The acquisition means we will be able to accelerate our plans to grow the integrated fuel and convenience business while our customers continue to enjoy the excellent customer service provided.”
The acquisition strengthens Viva’s position as the major operator in the fuel convenience network and facilitates plans to expand their fuel distribution business beyond just being an oil-based fuel supplier moving into the new energy space catering for hydrogen and electric powered vehicles.
Viva will rebrand Coles Express but has not confirmed a new name or timeline for the change.