By Eli Greenblat
IAN McLeod is wearing a fluorescent vest and a hard hat with ''Coles'' neatly stamped across the brim as he directs workmen, builders and sparkies at the supermarket chain's half-constructed store in a leafy eastern inner suburb of Melbourne.
The Coles boss didn't like some of the fixtures in the frozen-food section - they were promptly changed - and small black paw prints have been stencilled on to the shelving where pet food will be stacked. He is particularly pleased with that creative-design motif.
At any other company of Coles' breadth and turnover this would be considered a foolish level of micro-management. But at Australia's No. 2 supermarket group, it's a necessity as McLeod and his team go about the logistical and managerial nightmare of refurbishing old stores, building new ones and resuscitating Coles from its near-death malaise of five years ago under its previous owner.
''When I arrived, the trolleys had wonky wheels, were probably a bit rusty, the deli scales didn't work, there were huge ugly barricades at the front door preventing customers from getting in and getting out, we didn't trust the customer and it was all very heavy-handed right down to the fixtures,'' McLeod says.
''It's very easy to forget just what we inherited. This business was in decay, it lacked any investment for the best part of a decade and really what we had to do was just get the nose of the airplane up, and that was the first task and then we can start to build on a more solid platform of improvement.''
For McLeod, now halfway through Wesfarmers' planned five-year turnaround of the Coles business, it's all about the customer - and what better way to understand what motivates them than to walk in their shoes, to traverse the supermarket aisles himself, wander around the checkouts and sail through the car parks.
''One of the things we talk about internally is creating a great in-store experience and that's something that we believe we have to create for the customer,'' he says.
The new store McLeod is inspecting, a showcase for an array of special improvements to the standard Coles model, is of huge cultural importance to the Coles group because it sits next
door to the company's national headquarters in Tooronga.
The once dark, creepy and ominous monolith was jokingly referred to as ''Battlestar Galactica'' by staff and visitors alike, and legends about its private elevators for executives so they could dodge pesky subordinates were rife in the business community.
But the imposing marble and waterfalls of the corporate headquarters have gone, as well as the stifling corporate atmosphere. It's not clear what happened to the fabled lift, but certainly missing are many of the managers and executives who got Coles into trouble in the first place, opening the way for Wesfarmers to gamble $19 billion on turning its fortunes around.
Former Battlestar resident John Fletcher, Coles Myer's last chief executive, famously said, just before taking on the job in 2001, that he had not been in a supermarket for 25 years.
''I have heard that,'' remarks McLeod in his Western Isles Scottish accent. ''I haven't been out of them for 20 or 30 years.''
The 20-year veteran of British supermarket chain Asda keeps tightly to the Wesfarmers mantra of this being a five-year turnaround timetable for Coles. It's a script that comes down directly from his boss, Wesfarmers CEO Richard Goyder, and is so frequently used at Coles events that it should be printed on its business cards.
That line was again in action this week when Coles released its fourth-quarter and full-year sales numbers. For the third straight quarter, Coles reported faster
sales growth than its bigger rival Woolworths, giving McLeod and Goyder something to crow about.
''Slowly but surely over the last few quarters, we have been seeing improvement,'' says McLeod.
''And when the team members
in the store see that progress and the headlines are a bit more positive about Coles, it gives them a bit more of a lift and they feel
they are part of that and want
to serve the customer more.'' Not that Woolworths, or its chief executive, Michael Luscombe, are worried. After all, Woolworths has swept the floor with Coles for more than a decade.
And as Luscombe was quick to remind analysts and investors when he put out his quarterly sales figures the week before, Woolworths' supermarket business is still roughly
50 per cent bigger than Coles'. Woolies' Australian supermarket business pulls in $34.7 billion a year in sales, or $44.3 billion when including its New Zealand operations and petrol. Coles is certainly the junior, with annual supermarket sales of $23.5 billion.
Analysts also point out that
while Coles has closed the gap, Woolworths is still more profitable. In terms of productivity, Coles' sales per square metre rose 5 per cent in 2009-10 but remain 21 per cent below Woolworths'.
McLeod is pedalling fast to further close that gap with the market leader, and despite bags of cash on offer from Wesfarmers' conglomerate headquarters in Perth to refurbish old stores and open new ones, he is mindful that every dollar spent on the supermarket chain must make an adequate return. But in a break with the old days of Coles, when he asks for capital, he gets it.
In fact, the Coles boss had his hand out for money within two weeks of taking the reins and only shortly after Wesfarmers had already shelled out $19 billion for Coles and the Target and Kmart businesses.
''When we walked into the business, some doors were hanging off their hinges and the checkouts weren't working,'' he says. ''I was told that within two weeks of arriving that a third of the checkouts were going to break down this year, 50 per cent were going to break down next year and that if you don't do something about it the year after that 80 per cent will be breaking down.
''So I had to sign off on a project within the first two weeks of being here running into tens of millions of dollars just to fix our checkouts.''
A point of difference from Woolworths is a push by McLeod to have greeters at the entrances of Coles supermarkets. Sporting the Coles uniform, name tag and holding a basket ready for the shopper, they are a cost of doing business, as well as a drain on staff numbers, but all worth it.
''If customers are coming in through your doors and spending their hard-earned cash with you … you treat them with a degree more of respect, and that broad level of welcome is important.''
McLeod adds to that list of new goals for in-store staff fewer queues at the checkout.
''That is a huge task that we have undertaken behind the scenes. It's driving better levels of efficiency about what we do but also making sure that as a result of that efficiency the customer doesn't suffer, in fact gains.''
Apart from the greeters, something new Coles shoppers will have seen this year is the massive floor-to-ceiling advertising of MasterChef Australia, the runaway ratings juggernaut that drew more than 4 million viewers for its grand final this month.
For McLeod it's not just the extra bump in sales that comes from being the official supermarket sponsor of the TV show, although that is always welcome; it's part of a strategy to understand the consumer better.
''The most important factor for us is that we are aligned to what the consumer needs are, and which consumer needs are changing. The fact that we have gone in and sponsored MasterChef has been something which we felt was aligned to where the consumer in Australia was looking to change their behaviour.
''We believe MasterChef is firmly working for us, helping to evolve, develop and build our brand in a consistent way.''
But while Coles' turnaround calls for some micro-management from the top, McLeod might decide to leave the cooking demonstrations to former contestants of the reality TV show, or high-profile chef and Coles personality Curtis Stone.
''We had (former MasterChef winner) Julie in here cooking for team members for a MasterChef challenge. I made a pasta and managed to slice my fingers at the same time, so there was the odd Band-Aid in there.''