What you need to know:

• As of today, Coles is officially in market with dedicated retailer media unit, Coles 360, bidding to overhaul Woolworth’s Cartology.
• Boss Paul Brooks, working in tandem with Jess Torre, thinks second mover advantage and hybrid sales and ops team via Redworks – plus analytics from IRI, closing the loop with scan, card and transaction data and enabling optimisation on the run – will enable a rapid sprint.
• But the two aren’t going all out to squeeze brands for ad dollars. They claim there is no tension between “multiple dozens” of Coles business units, merchandise and media because they all sit together, and the set up was “co-created” with suppliers, who appreciate the “humility” now in market.
• Coles 360 unlikely to target agencies until 2024, instead working solely with large FMCG brands before broadening out.
• Phase two of a screen and in-store overhaul is underway, before pulling together Coles' broader media assets and then aiming to build out off network partnerships.
• Some of those deals could include arrangements with screen providers in shopping centres to counter Cartology’s acquisition of Shopper Media.
• Meanwhile the broader Coles group is undertaking a major customer and digital overhaul, which will ultimately feed through to the media business.

Coles is playing catch-up with Woolworths on retailer media. But Paul Brooks, head of Coles 360, reckons the supermarket has learned from its arch-rival's mistakes and advanced international markets – and can sprint faster as a result, though with a level of humility some suggest has been lacking locally.

It’s not a land-grab for additional ad revenue, but a model built with suppliers for suppliers, said Brooks and supplier media chief Jess Torre, who has spent a decade working within Coles business units from bakery through frozen goods to medicinal products. That is material, say the duo, because it underlines that the media, business and merchandise teams are aligned – not always the case within the big supermarkets.

Officially in market as of today, Coles 360 has partnered with Redworks, which will handle sales and operations, and media analytics outfit IRI to close the reporting loop. The circa 50-strong team is embedded so that “media specialists sit with category managers and different commercial teams”, said Brooks, of which there are “multiple dozens,” per Torre.

The media unit won’t be hitting up agencies “for the foreseeable future”, Brooks told Mi3, focusing solely on suppliers, though it has been briefing agency groups when requested directly for big FMCG clients.

It’s also focused on building out an in-store screen network, with 500 stores live by Christmas, before the 360 plan enters phase three. That may include screen partnerships with media owners within shopping centres to counter Woolies' Shopper Media buy – which Brooks thinks could ultimately play into Coles’ hands.

Trolley dash

"If you look versus our typical competitor, we're playing catch up, with Cartology being in existence for two or three years. If you look at what's happening overseas, UK and the US, retail media has been in play for longer. So we are playing catch up,” admits Brooks. “But that's why we needed to be able to move quickly.”

Hence bringing in Redworks, a specialist retailer media agency set up by Mark Rodgers, who had a big hand in launching Cartology after setting up in-store media for Woolworths-owned BWS, and extending Coles Group work with IRI to nail analytics from the get-go.

“Internally, Redworks for all intents and purposes, doesn't exist. It's Coles 360. Management have created a team and integrated and ingested that within the business – and all of them are essentially seen as Coles employees,” said Brooks. “So the partnerships team sits down physically and metaphorically with the merch and the business unit teams and work through whatever a brief would look like together and respond accordingly.”

Mi3, said Brooks, “has well-documented the growth opportunity that sits in this new sector”, which McKinsey reckons could nudge $100bn in ad spend in the US alone by 2026.

“I think we can definitely realise our ambitions and there is some value in terms of not going first. Second mover advantage means we can learn from some of the mistakes made overseas and locally,” said Brooks, with Coles connecting with overseas counterparts on how to structure the operation in order to avoid those mistakes – which ultimately led it to bring Redworks into the new unit for “speed and capability,” per Brooks. Plus, he adds, “we have actually got people that have moved from and understand the Cartology business into Coles 360”.

Supplier multiplier

Retailers setting up a media business – and there are many mulling market entry – will struggle if the rest of the business is not fully connected, suggest Brooks and Torre, which is why the merchandise and business unit teams that previously handled supplier media as part of trade deals are now under the Coles 360 umbrella.

“Traditionally [supplier media] was done off the back of trade conversations, where you had commercial teams dealing in media assets and probably not understanding the full scope of what we were able to deliver. Whereas the team we've got in place now comes from all facets of this industry and they're working alongside our commercial category teams,” said Torre.

“The Coles 360 teams are embedded within our business units and therefore they're embedded with an understanding of our category plans, our business objectives, and in turn joint business plans with our suppliers. So they are right at the heart of the conversation with suppliers.”

As a result, the feedback from suppliers has been positive, added Torre.

“They’ve been talking to us for a long time about our need to lean in [to retailer media], and the way we’ve approached it, we’ve co-created a lot of the ways of working with suppliers, even what reporting would look like,” said Torre. “And suppliers are definitely feeling it. The feedback has been that this feels different to how things have been done elsewhere [in the market] … What we’ve heard is that we are doing things openly and transparently, and we’re doing it with humility as well.”

Loop closer

Extending Coles’ existing relationship with IRI brings ready-made data analytics capability, meaning Coles 360 can close the loop – based on the same template it is using with more advanced retailer media operators overseas.

Per Brooks: “They'll give us insight and intelligence around pre-campaign, which give us strategy and planning in flight.”

What does that actually mean?

“What they will provide for us is rich data, which enables us to be able to get visibility on scan, credit card and transactional data to help us with channel attribution – so which channels are working and how hard they're working,” said Brooks. “So when we're working with suppliers, they can genuinely understand how hard their actual investment and media is working. IRI will give us automation for end-to-end campaign optimisation and we can make decisions based on that.”

Growth targets

Cartology won’t confirm the media money it is pulling from suppliers, but $300m has been mooted. Likewise Brooks won’t put a number out there for Coles.

“That feels a bit self-serving. We’d rather take a position where we if can deliver – genuinely – we're looking not to be just the best in market, we want to set some global standards here.”

Which is why taking the time to build a three-way operating model between trade and merchandise teams, suppliers and media is central to Coles’ ambition.

“If we can do that, we will build trust and credibility. Partnering with IRI will help us prove what we do works and we know that growth will come from that," said Brooks. “If we look what's happening overseas, you can see there's a significant amount of dollars that are moving into retail media. So to be honest, if we build that trust and proof, the growth will come. Otherwise it feels like a bit of an arms race.”

Going all out for revenue growth and pushing suppliers hard for incremental dollars to support media also risks straining supplier-trade relationships, the exact opposite of the unit’s intention, said Torres. Which is why, she claimed, there has been zero friction between trade and media.

“I keep going back to it, but the way we have structured the business means that we don't feel that tension. We're very focused on delivering what we need to deliver for our suppliers in a sustainable way, doing the right thing by not just their business but also our business. So there isn't that tension or that chase to get to the next [revenue] bucket. We are very focused on just getting the basics right.”

Brooks underlines that view – and suggests competitors may be squeezing too hard.

“Our plan over the next year or two is just to do a way better job in how we work with trade, give them a better experience and prove that it works,” said Brooks.

“I think if we were to go aggressively like some others into other [advertising] demand sources, you won't be able to do that authentically and to be able to grow sustainably. Brand and non-FMCG will ultimately come at some stage, but we'll do that when we've delivered what we need to for our current demand source, which is trade. And then we'll move into other demand sources as and when we're ready.”

Agencies later

Agencies have suggested there has been little engagement from Cartology to date as the unit prioritises existing supplier relationships. Brooks said Coles is taking the same tack – though has engaged agencies that have asked.

“No, absolutely honestly [we haven’t been out pitching]. To your point, there’s some tension with the way Cartology has gone to market with agencies,” said Brooks. “If an agency is looking after a Unilever, a P&G, a Goodman Fielder, and they ask us to come in, we will go and talk to them about what we’re doing in retailer media. But we’re not going after it proactively at this stage.”

That time will come, said Brooks, but probably not until 2024.

“To be honest, it will be an 18 month to two year horizon. But the point is, if P&G is trying to understand what they're doing in brand and what they're doing in trade – at the moment they've got this gap in the middle, which is retail media. So if they ask us if we help with that, we will come in and give our point of view and advice. But proactively, we won't be setting up big agency teams or brand teams,” he said. “Not for the foreseeable.”

Shopper dropper

Brooks questions Cartology’s recent acquisition of Shopper Media and its screens in 450 shopping centres (although 211 of those centres don’t actually house a Woolworths store). Cartology boss Mike Tyquin told Mi3 that it won’t be making any changes to the Shopper set-up this side of Christmas for obvious reasons, but will start to integrate the business from February onwards. Brooks thinks that could prove challenging.

“We wouldn't have made the same decision in terms of buying Shopper. I think when you make an acquisition, you've got to genuinely integrate it right the way through into the business to be able to deliver the one plus one equals more. I don't know how they're going to do that, integrating seamlessly, but that's their challenge,” said Brooks.

Coles is already working on countermeasures and eyeing partnerships.

“If [Cartology] is more present in some of those shopping centres, we need to think about how we cut through in some of those centres. That might be how do we extend our footprint beyond store, how do we build out more digital screens within our store base,” said Brooks. “We're going through the second iteration of our digital screens rollout, so we might be able to be a bit more bullish after that. There is an opportunity for us to potentially move off network and partner with somebody to be able to look at that sequencing so you go from in-centre, to in-store.”

In the meantime, phase two of the in-store rollout will see 500 of Coles circa 800 outlets fitted with store-front screens by Christmas with the rest of its stores in the new year. Phase three looks beyond screens into segmentation, targeting and the broader media assets.

“Coles radio has existed for a while, but how do we uplift that and deliver a better proposition? How do we do on-site better and look at more formats, more products? Then where we have got any potential gaps, whether that be a format, an audience or an extension, who and how do we potentially partner to deliver an off network solution that sits within 360?” said Brooks. “So the long story is, we are looking at everything to be able to deliver a genuine holistic model that can continue to deliver growth and importantly, deliver on the demand expectations that sit within suppliers and within the market.”

Customer overhaul

There’s an army of consultants from Accenture and Deloitte inside Coles working on transformation in pretty much all its forms. Brooks said that includes Coles’ retailer media unit in terms of customer data platform [CDP] development alongside a broader customer experience overhaul.

“We are on a bit of a journey with transformation … and that is plugged into what the broader business is doing from a CDP perspective,” he said. “So we are working internally around how and what that looks like. Timelines are moving – and confidential – but we are definitely on that journey.”

So there is definitely a revamped customer programme coming to market?

“At some stage.”