Wesfarmers sets priority on carbon cuts as sales grow

Wesfarmers says reducing carbon emissions and its environmental footprint are among its top priorities as it continues to report positive momentum for its Coles, Kmart and Officeworks businesses.

Managing director Richard Goyder said the supermarket giant was preparing for the introduction of a carbon price on target with a “proactive mitigation strategy.” This plan included cutting energy consumption 11 per cent despite a 20 per cent increase in sales, and efforts to trim energy costs by the 2015 financial year.

In a strategy day briefing released this morning, Mr Goyder labelled its Coles supermarket chain as a “bold turnaround” story. The division has boosted food and liquor sales from $21 billion to an estimated $26.5 billion this year.

Wesfarmers shares were down in early trading, losing as much as 37 cents, or 1.3 per cent, to $28.64 - outpacing the overall market’s decline.

Defence

Wesfarmers also sought to fend off criticisms that its Coles and rival Woolworths are squeezing local produce suppliers with low margins, and choosing offshore manufacturers for their fast-growing private labels.

Coles said it is “supporting the creation of 10,000 new jobs by suppliers through volume growth” - with $1.6 billion in extra fresh food sales per year and a doubling in the value of produce sourced directly from Australian growers.

Furthermore, Coles brands are almost 90 per cent Australian-made, Coles’ newly re-signed managing director Ian McLeod told the briefing. All of its meat and 97 per cent of its fresh produce are Australian grown, he said.

Writing in today’s The Age, Coles merchandise director John Durkan said Coles’ policy of “Australian First” means it pays more to sell a locally sourced product, even when there are cheaper overseas alternatives available.

“Many Australian food processors face headwinds from the high dollar and high labour and input costs,” he writes. “But the challenges are not insurmountable.”

“I don’t deny that we stock private label products that are sourced from overseas. But this is not out of choice. We will always look for a local supplier first, and we only go offshore if local supply can’t be found.”

The investor strategy also follows comments from Heinz’s Asia-Pacific boss, Christopher Warmoth, that Heinz’s relationships with Coles and Woolworths had improved from a prickly one in which Heinz chairman and chief executive Bill Johnson last year described the Australian food market as the “worst” in the world.

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