Woolworths and Caltex say a new chain of stores selling fresh food, groceries and fuel will raise the bar in the $8.5 billion convenience sector and change the way people shop.
Australia’s largest supermarket chain and leading fuel retailer have unveiled the first of about 250 Caltex Woolworths Metro stores slated to open over the next few years under a long-term supply agreement.
The first pilot store, in Sydney’s North Ryde, carries about 2500 packaged grocery products as well as food to eat now, such as sandwiches and salads, and food to eat later, including fruit, vegetables, meat and prepared meals.
The stores, a mini Woolworths Metro in a Caltex service station, are designed to appeal to time-poor customers who can shop for food and fuel on the way to or from work.
“We’re disrupting the experience a customer typically has had when they come to a service station,” said Caltex’s executive general manager of convenience retail, Joanne Taylor.
“As Australians lead busier lives, people need to meet their needs as quickly as possible and as easily as possible, so to be able to pull in off the road and pick up food for now or food for later is an important need state that we can tap into,” she toldThe Australian Financial Review.
The co-branded Metro stores are key to the success of Caltex’s strategy to reduce its reliance on fuel retailing by growing its convenience retail business, which also includes a chain of more than 50 Foodary outlets.
Caltex was originally forecasting a $120 million to $150 million increase in earnings from convenience retailing by 2023. However, after a 47 per cent drop in convenience earnings to $85 million in the June half, Caltex conceded in August the target would not be met and has yet to set new targets.
The agreement with Caltex is also a key part ofWoolworths’ strategy to build a $1 billion a year grocery wholesale businesssupplying strategic partners such as Caltex, Marley Spoon and Foodbank and independent retailers such as ‘mom and pop’ stores.
Woolworths signed a long-term wholesale supply agreement with Caltex in July last year, five months before selling its fuel retailing business to EG Group for $1.7 billion.
Under the agreement, Woolworths and Caltex plannedto establish Metro stores in as many as 250 Caltex sites over six years, with 50 sites to open within two years, while also supplying about 700 Caltex sites.
Ms Taylor said the 250-store target was intact but the target for 50 stores in two years was unlikely to be met because of the time taken for Caltex to buy back franchised sites and get supply chains right.
A second Caltex Woolworths Metro pilot will launch in Kingsford in NSW later this month and between five and 10 stores are expected to open in calendar 2020.
All the stores are operated by Caltex, which will pay Woolworths a royalty to use the Metro brand. Customers will also be able to earn Woolworths Everyday Rewards points and receive 4¢ a litre off fuel purchases.
“We’ll use the results of those [pilots] to ensure we are getting the right returns … to inform the future rollout,” Ms Taylor said.
Woolworths and Caltex’s renewed focus on convenience comes at a time when BP is also expanding its food offer after signing a partnership with David Jones, which will supply prepared meals and gourmet groceries to selected BP sites.
Ms Taylor and Woolworths general manager wholesale and convenience Ian McDonald said the convenience sector was growing at a faster rate than food and groceries and there was room in the market for all players.
“We believe we’re disrupting the convenience experience and in turn that’s going to grow the opportunity – we welcome others in the industry seeking to do the same thing, together we’ll change the expectations of customers,” Ms Taylor said.