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ASX Release

17 June 2021

The Manager Company Announcements Office Australian Securities Exchange

Dear Manager,

Coles Group - 2021 Investor Strategy Day Presentation

Please find attached the presentation that will be given today, Thursday 17 June 2021, at the Coles Group 2021 Investor Strategy Day.

The briefing will be webcast live and will be accessible via registration on Coles’ website at www.colesgroup.com.au.

Yours faithfully,

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Daniella Pereira

Company Secretary

For more information:

Investors

Mark Howell Tel: +613 9829 6408 Mobile: +61 400 332 640 E-mail: [email protected]

Media

Blair Speedy Tel: +613 9829 4008 Mobile: +61 431 960 249 E-mail: [email protected]

Lisa Zimmet Mobile: +61 428 857 242 E-mail: [email protected]

This announcement is authorised by the Board.

Coles Group Limited ABN 11 004 089 936 800 Toorak Road Hawthorn East Victoria 3123 Australia PO Box 2000 Glen Iris Victoria 3146 Australia Telephone +61 3 9829 5111 www.colesgroup.com.au

Coles, Collingwood 1914

Winning in our Second Century

Investor Strategy Day June 2021

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Coles Local, Fitzroy 2021

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Disclaimer

This presentation contains summary information about Coles Group Limited (ACN 004 089 936) and its controlled entities (together, ‘Coles’ or ‘the Group’) and Coles’ activities as at the date of this presentation. It is information given in summary form only and does not purport to be complete. It should be read in conjunction with Coles’ other periodic corporate reports and continuous disclosure announcements filed with the Australian Securities Exchange (ASX), available at www.asx.com.au.

This presentation is for information purposes only and is not a prospectus or product disclosure statement, financial product or investment advice or a recommendation to acquire Coles shares or other securities. It has been prepared without taking into account the investment objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own investment objectives, financial situation and needs and seek legal, taxation, business and/or financial advice appropriate to their circumstances.

No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Coles or its directors, employees or agents, nor any other person, accepts liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, any liability from fault or negligence on the part of Coles or its directors, employees, contractors or agents.

This presentation contains forward-looking statements in relation to Coles, including statements regarding Coles’ intent, belief, goals, objectives, initiatives, commitments or current expectations with respect to Coles’ business and operations, market conditions, results of operations and financial conditions, and risk management practices. Forward-looking statements can generally be identified by the use of words such as ‘forecast’, ‘estimate’, ‘plan’, ‘will’, ‘anticipate’, ‘may’, ‘believe’, ‘should’, ‘expect’, ‘intend’, ‘outlook’ and ‘guidance’ and other similar expressions.

The forward-looking statements are based on Coles’ good faith assumptions as to the financial, market, risk, regulatory and other relevant environments that will exist and affect Coles’ business and operations in the future. Coles does not give any assurance that the assumptions will prove to be correct. The forward-looking statements involve known and unknown risks, uncertainties and assumptions and other important factors, many of which are beyond the reasonable control of Coles, that could cause the actual results, performance or achievements of Coles to be materially different to future results, performances or achievements expressed or implied by the statements.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as at the date of the presentation. Except as required by applicable laws or regulations, Coles does not undertake any obligation to publicly update or revise any of the forward-looking statements or to advise of any change in assumptions on which any such statement is based. Past performance cannot be relied on as a guide for future performance.

Non-IFRS financial information

This presentation contains non-IFRS financial information which in the ordinary course, is not subject to audit or review.
IFRS or Statutory financial information is financial information that is measured and presented in accordance with all relevant accounting standards.
Any non-IFRS financial information is clearly labelled to differentiate it from the Statutory/IFRS financial information.
The use of non-IFRS information in the presentation provides readers of these documents with meaningful insights into Coles’ financial performance.

Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

A enda g

	Topic	Time	Presenter
1	Introduction	9:10am – 9:25am	Steven Cain
2	Inspire Customers	9:25am – 10:05am	Lisa Ronson, Greg Davis, Ben Hassing
	Break	10:05am – 10:15am
3	Smarter Selling	10:15am – 10:45am	George Saoud, Matt Swindells, Roger Sniezek, Thinus Keeve
4	Win Together	10:45am – 11:10am	Thinus Keeve, Sally Fielke, Kris Webb, David Brewster
5	Q&A Inspire Customers, Smarter Selling, Win Together	11:10am – 11:40am	Presenters from sessions 1-4, Leah Weckert and Kevin Gunn
	Break	11:40am – 11:50am
6	Liquor strategy update	11:50am – 12:05pm	Darren Blackhurst
7	Express strategy update	12:05pm – 12:15pm	Michael Courtney
8	Coles’ financial framework	12:15pm – 12:25pm	Leah Weckert
9	Q&A	12:25pm – 12:55pm	Executive Leadership Team
10	Closing remarks	12:55pm	Steven Cain

Growing long-term shareholder value by becoming the most trusted retailer in Australia

Rich heritage dating back to 1914, a proud and deeply Australian business, successfully demerged from Wesfarmers in November 2018, creating an independent ASX20 company
Delivered significant strategic and financial progress since announcing ‘Winning in our Second Century’ strategy two years ago – with most of the transformation and investment benefits still to come
As an ‘essential business’, Coles has emerged stronger from an extraordinary period supporting team members, customers, and community through COVID-19, bushfires and floods
One of Australia’s most trusted brands. Improving relationships with suppliers and the farming community: more than 60 Dairy farmers now supplying milk direct to Coles on longer term contracts allowing them to invest for future
Australia remains one of the most attractive food and drink markets globally, with significant opportunities being created by rapidly changing consumer needs and technology
Today we are outlining plans to further drive long-term sales, efficiencies, trust and shareholder value by increasing our investment in:
Group wide data, eCommerce, technology, and automation to deliver market leading omnichannel tailored and unique ranges
Acceleration of our Coles Local and Liquorland renewal & new store program focused on high quality locations and winning formats
Sustainability – building on our recently launched ‘Together to Zero’ and ‘Better Together’ programs
Strong cash generation, ROC, and balance sheet, combined with a commitment to our industry leading dividend payout ratio and associated franking credits to provide a compelling investment proposition for the millions of Australian shareholders who are either directly or indirectly investors in Coles Group

Introduction

Overview of Coles Grou p

~120k

Stores 2,476

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831 Supermarkets

engaged team members

924 Liquor

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721 Express

+9,000 since demerger

Two YoY 120% growth[2] Cash realisation[3] 11.7% sales Net +$38m cash[4] 14.4% EPS Group 16.3% ROC[5]

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$37bn FY20 Group sales revenue

5.9%

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Supermarkets eCommerce sales penetration[1]

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$1.8bn

4.2%

FY20 Group EBIT

Liquor eCommerce sales penetration[1]

$139m worth of community support in FY20

3.5% Dividend yield[6] FY20 +59% TSR since sustainability 1H19[7] strategy launched

Notes: Financial metrics reflect the adoption of AASB16 leases; non-financial metrics are as at 3Q21 unless stated otherwise; (1) Penetration for Q4 quarter-to-date; (2) Two year growth 1H21 vs 1H19 (Retail basis) (3) 1H21 cash realisation is calculated as operating cash flow excluding interest and tax, divided by EBITDA; (4) Net cash excluding AASB16 lease liabilities as at 1H21 (5) Group Return on Capital (ROC) as at 1H21 and is calculated as last 12 months Group EBIT (post-AASB16 and before significant items) divided by capital employed over the same period; (6) Dividend yield calculated as last twelve months (LTM) dividends per share of 60.5 cents divided by the average LTM volume weighted average price as at 11-Jun-2021 of $17.30 (7) Total shareholder return (TSR) is calculated as the change in share price during the period since the commencement of the TSR performance period for management long-term incentives (20-Feb-2019 to 11-Jun-2021), plus dividends reinvested on the respective

Introduction

We are trackin well a ainst most ke strate ic metrics g g y g

KPIs	FY191	Current2	Status
Reduced safety TRIFR3	27.4	19.2 (30% improvement)	⚫
Increased team member engagement4	61%	65% (+4ppts)	⚫
Improved customer satisfaction5	88%	90% (+2ppts)	⚫
Sales growth at least in line with the market6	Supermarkets market share 27.2%	COVID-19 related local shopping impacted share in FY21. Current supermarkets market share of 26.7% on improvingtrajectory	⚫
Increased sales density	Supermarkets: $16,704/sqm Liquor: $14,354/sqm	Supermarkets: $17,789/sqm (+6%) Liquor: $16,632/sqm (+16%)	⚫
$1bn cost-out by FY23	-	On track to deliver cumulative benefits in excess of $550m by FY21	⚫
Group EBIT growth	Declined YoY	1H21 vs 1H19: 15.4%8	⚫
Cash realisation >100%	110%	1H21: 120% Expected to unwind in 2H21	⚫

Notes/Source: (1) As at end of FY19; (2) All metrics show improvement from end of FY19 to 3Q21, unless otherwise stated; (3) Total Recordable Injury Frequency Rate; (4) Annual MySay team engagement survey as at Apr-19 and May-21; (5) Based on Tell Coles data; (6) Source for market growth: ABS Retail Trade Figures, Table 11. Retail Turnover, State by Industry Subgroup, Original. Total Food Retail excl. Liquor (Smkt & Grocery plus Other Specialised Food Retailing); (8) Pre-AASB16 EBIT

Introduction

Stron market osition & rowth across Coles Grou since demer er g p g p g

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2-year headline
Market share [1]
sales growth [3]
27% 11%
18% 19%
23% [2] 16%
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Supermarkets and Liquor 2-year EBIT growth[3] exceeds 20%, a strong result relative to global peers

Introduction

Notes: (1) Market share data for 1H21, sourced from ABS releases and IRI. Data sourced from IRI on MAT (moving annual total) basis; (2) Market share is for convenience store market (excludes fuel); (3) Two year growth 1H21 vs 1H19 (Retail basis)

Demerger investment thesis, November 2018

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6
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Operates in resilient and growing markets

Market leading position in an evolving competitive landscape

Established, non-replicable national store network

Making life easier for customers strategy

Strong cash generation, attractive dividend payout ratio and robust balance sheet

Highly experienced Board and Executive Leadership Team

Introduction

Strate refreshed in June 2019 to deliver lon -term shareholder value gy g

Our vision.

‘Become the most trusted retailer in Australia and grow long-term shareholder value.’

Our strategic differentiators

✓ Win in online food and drinks with an optimised store and supply chain network
✓ Be a great value Own Brand powerhouse and destination for health
✓ Achieve long-term structural cost advantage through automation and technology partnerships
✓ Create Australia’s most sustainable supermarket
✓ Deliver through team engagement and pace of execution

Introduction

Grou EBIT ro ress since strate refresh p p g gy

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FY16-18 FY19-21
FY09-16
Industry reset Refreshed strategy,
Investment in management, stores and brand
reducing retail increased investment,
driving strong revenue and earnings growth
profit pool Smarter Selling, COVID-19
~114% EBIT ~26% EBIT ~15% EBIT
growth decline growth [2]
14
1,800
12
1,600
10
1,400
1,200
8
1,000
6
800
4 600
400
2
200
0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1H21
Comparable Food and Liquor sales growth, % (LHS) EBIT, $m (RHS) [1]
Demerger
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Notes: (1) Pre-AASB16, FY09-15 source is WES results release, FY16-18 source is pro-forma Demerger Scheme booklet; FY19-20 excludes Hotels and Significant items; (2) Two-year growth Pre AASB16 1H21 vs 1H19

Introduction

Stron ro ress on strate execution g p g gy

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Inspire Customers

Smarter Selling

Win Together

Increased customer NPS[1] by 6ppt
Recognised as the fastest growing Australian brand for customer trust
Increased EDLP[2] sales contribution by 270bps
Tailored layouts and ranging, delivering 1000+ range changes
Increased Own Brand contribution to 32%, with 58 products receiving awards
Doubled Supermarkets eCommerce sales capacity and launched new immediacy and membership propositions
On track to deliver cumulative benefits in excess of $550m by FY21
Optimised stores and supply chain operations through AI[3]
Progressing 4 Witron and Ocado automation centres
Opened new innovative store formats, A, C and Coles Local, Liquorland and Vintage Cellars
Simplified and improved systems, processes, and implemented agile ways of working in Store Support Centre
Embedded a safety culture, leading to lower TRIFR[4]
Launched Coles Group Values and improved team member engagement
Recognised as an Employer of Choice by GradAustralia
Released new sustainability targets supported by our ‘Together to Zero’ and ‘Better together’ sustainability strategy
Played a significant role through the support of communities, including SecondBite, Foodbank, REDcycle and Redkite
Opened 3 home delivery liquor dark stores

Introduction

Notes: All growth statistics from Jun-19 to Mar-21; contribution statistics are to 3Q21(1) Net promoter score; (2) Everyday Low Prices; (3) Artificial Intelligence (4) Total Recordable Injury Frequency Rate

COVID-19 im acted customer behaviour with si ns of normalisation p g

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Acceleration of Shift to in-home Reduced visits in Preference to online and digital consumption favour of larger shop locally engagement baskets

Reduced immigration and international travel

Online penetration Working from home Customers visited Fear of crowds and Closure of rapidly accelerated arrangements and supermarkets less restrictions led to international borders driven by safety mobility restrictions often and were customers being less impacted considerations and led to an increase in buying more inclined to shop at immigration restrictions in-home shopping centres consumption and busy stores

Introduction

COVID-19 impacts short-term population growth; but recovery expected

National population growth[1] , % year-ended at 30-Jun

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COVID-19 impacts
1.8% 1.7% 1.7%
1.6% 1.5% 1.6% 1.5% 1.5%
1.4%
1.4%
1.3% 1.3%
0.8%
0.2%
0.1%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21F FY22F FY23F FY24F
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Notes: (1) Historical data (ABS) and Forecast is Centre for Population issued as part of 2021-2022 Budget (May-21), Source : ABS National, State and Territory Population (September 2020 release), Centre for Population Budget: Australia’s Future Population

Introduction

Coles market share recovering as COVID-19 induced local shopping unwinds

Coles’ Supermarkets market share, %

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COVID-19 impacts
Refreshed strategy COVID-
Key National Victoria Local shopping
starting to gain 19 pantry
events traction stocking lockdown lockdown beginning to unwind
27.7%
27.2% 27.3%
26.7% 26.7% 26.6% 26.7%
26.4%
FY19 H1FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Apr-21
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Coles’ refreshed strategy was gaining momentum pre-COVID19, with market share increasing
COVID-19 has impacted Coles’ share largely due to local shopping
Structural network factors including fewer neighbourhood stores and more metro and shopping centre stores also impacted share

Source: ABS releases: Retail Turnover

Introduction

The Australian rocer market remains hi hl attractive g y g y

Australian grocery market growth, %

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Dot com GFC COVID
crash -19
6.6%
4.5%
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
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Market growth over the last 20 years despite significant economic disruptions
Significant growth opportunities exist requiring greater capital investment – this has been further accelerated due to COVID-19

Introduction

Source: ABS Retail Trade Figures, Table 11. Retail Turnover, State by Industry Subgroup, Original. Total Food Retail excl. Liquor (Smkt & Grocery plus Other Specialised Food Retailing)

Coles’ strate is more relevant than ever gy

Our vision.

‘Become the most trusted retailer in Australia and grow long-term shareholder value.’

Updated since last strategy refresh

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Our values.
look ahead energise deliver with Customer Passion and Responsibility Health and
everyone pride obsession pace happiness
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Inspire Customers	• Customer obsessed • Tailored offer with trusted and targeted value • Own Brand powerhouse • Destination for convenience and health • Leading anytime, anywhere, anyhow shopping • Accelerate growth through new markets

Smarter Selling	• Technology-led stores & supply chain • Strategic sourcing • Optimised network and formats • Efficient and agile Store Support Centre

Win Together	• Safer choices together • Great place to work • Together to Zero to drive generational sustainability • Better Together through diversity and stakeholder engagement • Innovation through partnerships

Introduction

Driving our strategy with investment acceleration in three key areas

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i
Customer exploring the Coles digital catalogue
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ii iii
Cheese nook at Coles Moonee Ponds, VIC Recently opened Coles Local at York Street, NSW
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Invest in omnichannel experience, and embed technology in stores and supply chain, with an increase in technology spend of ~2x (FY18 to FY22)

Invest in tailoring our range with a focus on locally relevant and unique offers

Invest in Coles Local and Liquorland renewals and new store roll-out with a focus on high quality locations and winning formats

Introduction

Ex erienced & diverse Executive Leadershi Team p p

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Steven
Cain
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Leah
Weckert
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Chief Executive Chief Financial Officer Officer

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Greg
Davis
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Matt
Swindells
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Chief Executive Chief Operations Commercial & Express Officer

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Darren
Blackhurst
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Chief Executive Liquor

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Ben Daniella
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Hassing Pereira Chief Executive Company Secretary eCommerce

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Kris

David

Webb Brewster

Roger Sniezek

Lisa

Ronson

George Saoud

Thinus

Keeve

Sally

Fielke

Chief People Chief Legal & Safety Officer Officer

Chief Information Officer

Chief Marketing Officer

Chief Executive Emerging Business & Smarter Selling

Chief Sustainability, Property & Export

General Manager Corporate Affairs

Introduction

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Ins ire Customers p

Lisa Ronson – Chief Marketing Officer Greg Davis – Chief Executive Commercial & Express Ben Hassing – Chief Executive eCommerce

Strategic elements

Customer obsessed
Tailored offer with trusted and targeted value
Own Brand powerhouse
Destination for convenience and health
Leading anytime, anywhere, anyhow shopping
Accelerate growth through new markets

Customers can now access inspiring recipes, tips, news and more relevant and timely specials through coles&co which was launched in August 2020

Inspire Customers

Customers’ references and behaviours are ra idl evolvin p p y g

Adoption of eCommerce Digital engagement Convenience & value Health & sustainability

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•
Rapidly growing online Increasing exploration of grocery sales digital in-store experience
Increasing customer demands on delivery • Growing uptake of digital speeds and windows payment methods
Improving online offers across the industry
Increasing use of digital sources for meal
- inspiration
On-demand delivery platforms expanding into grocery delivery
Growing consumption of fresh and high quality ready-to-eat meals
Rising number of small format and local stores
Increasing focus on seeking value , through both price and quality
Rising demand for healthier foods and products
Increasing focus on sustainability
Accelerating adoption of sustainable practices
Increasing desire to support Australian

producers and reduce food miles

Inspire Customers

We are increasin l customer obsessed g y

Our NPS has improved significantly

We are now one of Australia’s most trusted brands

Future areas of focus

Net Promoter Score, 12-week rolling average to end of quarter[1]

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+610bps
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Q1 FY19 Q3 FY21
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In February 2018, Coles was in
the top 10 most distrusted
brands. In September 2020,
Coles was ranked as the
second most trusted brand in
the country2
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Redefine value at Coles
beyond price , linking it to sustainability, health and promoting through Own Brand
Increase loyalty through flybuys and advanced

analytics to enable more personalised experiences

Shift marketing investment mix towards digital media

channels and touchpoints

Inspire Customers - Customer obsessed

Notes: (1) Market Experience Tracker (MET), (2) Roy Morgan Trust survey ranking

Lo alt and data will drive customer value and additional revenue y y

flybuys program enables us to reward our customers

Increased revenue from data commercialisation

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flybuys is the #1 loyalty program[1] in Australia, with 6.3m active households and drives increased sales for Coles through targeted campaigns:

Coles delivers value to customers through flybuys points, with the aim of attracting incremental sales but also rewarding customers for their loyalty
Customer data is also used to provide personalised information for customers

Data provides incremental revenue for Coles, while enabling suppliers to better engage with customers:

Personalised targeted marketing through flybuys platform allows suppliers to send promotions to members
Customised audiences enable suppliers to reach customers in their preferred web or media channel with a targeted offer
Insights on customers behaviour to inform merchandise, new product development and marketing decisions

Inspire Customers - Accelerate growth through new markets

Notes: (1) Ranking Australian loyalty programs – ‘doing a very good job’, The Point of Loyalty (May21)

We continue to tailor our offer across our network

On track to tailor 40% of stores by FY23

Customer satisfaction has improved with increasing range activity Future areas of focus

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27% of store layouts tailored, and on track to tailor 40% of
layouts by FY23
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Tailoring through innovation, e.g. concessions, pet treat bars,
refill stations, Best Buys
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Utilising advanced analytics to tailor range and layout based
on store demographics
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Customer perception of Coles grocery range, %
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+400bps
Jul-19 May-21
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Number of range changes [1] , #
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565
459
367 380 387 364 +55%
2015 2016 2017 2018 2019 2020
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Investments in new technology and processes enable increased rate of customer range activity

Continue to invest in range across key customer growth categories
Range tailoring at scale to lower cost and improve availability, enabled by continued system investments
Accelerate roll-out of tailored formats and innovation (e.g. International Cuisine)
Execute plans for online range expansion enabled by Ocado CFCs – focus on new and high penetration online categories

Inspire Customers - Tailored offer with trusted and targeted value

Notes: (1) Including range reviews, updates and category acceleration activity

Deliverin trusted and tar eted value remains a ke riorit g g y p y

Improved effectiveness of promos & better communication of value

Building strength in price and value perception

Future areas of focus

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Improving promotional effectiveness through AI to increase
price competitiveness and volume
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19.1% growth in EDLP on a 2YOY basis [1] , with over 1,800 new
EDLP lines launched in FY21 to date
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Competitively priced customer metric[2] , %

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+500bps
1Q20 3Q21
EDLP sales contribution, %
+270bps
21.0
18.3
1Q20 3Q21
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Continue progress towards EDLP and optimise promotional mix
Lower the price of shopping and differentiate through a tiered Own Brand offer
Leverage brand and marketing assets to redefine value at Coles
Drive differentiated value through digital channels (including digital catalogue) and more targeted promotional activity

Inspire Customers - Tailored offer with trusted and targeted value

Notes: (1) 3Q21 (2) Average of monthly metric for each quarter

Drivin trust and lo alt throu h our exclusive Own Brand ortfolio g y y g p

OB continues to inspire customers Delivering higher customer satisfaction and drive trust through innovation and award winning products

Future areas of focus

Coles’ OB is a $10bn+ brand portfolio

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Inspiring customers with exciting tailored innovation
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Introduced 4000+ new products since FY19, many
focused on convenience and health
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Customer NPS

Continue to differentiate, innovate and develop unique products that can only be found at Coles
Customers who shop at Coles because of Own Brand

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All customers
•
+24ppt
•
Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21
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Provide a value offer for customers by delivering products across price tiers
Continued, uncompromising quality via leading technical standards
Support our ambition to become a ‘ Destination for convenience and health’ in Australia

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39 award wins for Own Brand products in FY21, including
Choice, Canstar Blue, Product of the Year, Nourish,
and Vertex Awards
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Lead the way in sustainability, delivering on industry leading commitments
Build long-term partnerships (e.g. Laurent)

Inspire Customers - Own Brand powerhouse

Source: MET

Establishin ourselves as a destination for convenience & health g

Healthy living inspiration

Destination for convenience

Future areas of focus

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Own Brand helps deliver healthier alternatives in every aisle;
3,000 SKUs now with Health Star rating and hundreds of tonnes
of salt and sugar removed from products, including
in-store baked bread
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Inspiring Customers to shop healthy in- store and online
through Coles’ Health Hub
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Delivering Healthier products (e.g. free from, plant based
meat alternatives, sport nutrition)
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Landed fresh convenience offer in over 250 stores
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Partnering with recognised and local brands including Sushi Sushi, Boost, and Tremila Pizza
Better integration, strong innovation and improved commercials from acquisition of Chef Fresh (formerly Jewel Fine Foods)
Coles Kitchen now a $350m brand
>250 convenience destinations front of store
Convenience destinations offering customers 3x the core convenience

range

Further expand and innovate in convenience to become a compelling omnichannel destination for convenience
Champion ‘health in every aisle’, making it easy and affordable to shop healthy
Continue convenience development with the right demographic stores
Increase digital engagement via coles&co, digital catalogue and Health Hub, offering customers personalised health offers and meal solutions

Inspire Customers - Destination for convenience and health

Customers who sho online and in-store s end more with Coles p p

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2.3x
Omnichannel
spend vs.
in-store
only
In-store Online
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Inspire Customers - Leading anytime, anywhere, anyhow shopping

eCommerce metrics continue to im rove p

2.1x improvement in NPS +110bps growth in omnichannel customers

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4.2x improvement in Perfect Order Rate +203bps growth in eCommerce penetration of total sales

Inspire Customers - Leading anytime, anywhere, anyhow shopping

Notes: All metrics are year-on-year increase for 3Q21

We continue to invest in Click & Collect…

Click&Collect

Click&Collect Rapid

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Converting >300 service desks stores to drive up

90-minute order to pick up service

Inspire Customers - Leading anytime, anywhere, anyhow shopping

…and ex and our home deliver service p y

Same day home delivery

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Regional delivery network expansion

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Will be available in over 400 stores

Will increase regional delivery capacity and reach

Inspire Customers - Leading anytime, anywhere, anyhow shopping

Increasin omnichannel lo alt with Coles Plus and fl a g y y yp y

Coles Plus

flypay

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Membership benefits will continue to expand

flybuys’ customers can now redeem points online

Inspire Customers - Leading anytime, anywhere, anyhow shopping

Unif in di ital channels to enable Coles’ omnichannel strate y g g gy

Unified website

Shoppable app

Omnichannel experience

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Merge content with commerce

Leverage growing use of mobile devices

Frictionless digital in-store experience

Inspire Customers - Leading anytime, anywhere, anyhow shopping

Our Ocado artnershi enables a ste -chan e in eCommerce p p p g

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Expanded Range

Doubling the online product range with new-to-Coles premium and local range
Complete Coles product offering, including extended Liquor range
• Quickly change overall range through test/learn approach

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World-class perfect order rates
Superior Service Transparent and accurate fresh product life • Expanded delivery slots and locations

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24/7 automated, intelligent fulfilment capability
•
Operating Efficiency Best-in-channel economics and operating cost
Integrated intelligent delivery planning that optimises efficiency

Our Ocado partnership also provides us access to ongoing global retail innovation

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Inspire Customers - Leading anytime, anywhere, anyhow shopping

Ocado ex erience with other retailers has been encoura in p g g

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In the first six months post-launch

In first three months post-launch

In first month post-launch

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Net promoter 87 score 98.6% on time delivery score

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99.6% products ordered are delivered

‘Our partnership with Ocado has been second-to-none. Together through collaboration, we have accomplished creating the next stage of Kroger’s ecosystem ’

Chairman and CEO of Kroger - Rodney McMullen

Inspire Customers - Leading anytime, anywhere, anyhow shopping

Source: Company presentations

Anytime, Anywhere, Anyhow: summary

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✓ Strong omnichannel positioning
✓ Positive leading indicators
✓ Growing customer offerings
✓ Leveraging industry-leading partnerships

Inspire Customers - Leading anytime, anywhere, anyhow shopping

Inspire Customers: summary

Use loyalty data and advanced analytics to provide more personalised customer experiences
Continue to invest in range, both in-store and online, to provide a tailored offer across the network
Provide trusted value through everyday low prices, optimal promotional mix and a differentiated and innovative Own Brand offer
Expand and innovate in convenience and health
Provide a seamless, unified omnichannel customer experience

Coles ‘Healthier Living’ magazine

Inspire Customers

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Internal construction is progressing at the Witron automated distribution centre in Queensland
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Smarter Sellin g

George Saoud – Chief Executive Emerging Business & Smarter Selling

Matt Swindells – Chief Operations Officer

Roger Sniezek – Chief Information Officer

Thinus Keeve – Chief Sustainability, Property & Export Officer

Strategic elements

Technology-led stores and supply chain
• Strategic sourcing
Optimised network and formats
Efficient and agile SSC

Smarter Selling

Stron ro ress on Smarter Sellin ro ram to date g p g g p g

$1.0bn FY22/23[1] FY21[1]

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FY20
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Key purpose of Smarter Selling program is to offset cost inflationary headwinds and enable strategic re-investment back into the business
On track to deliver cumulative Smarter Selling benefits in excess of $550m by FY21
Continue to target a total of $1bn by FY23, excluding COGS benefits
Capex investment will be required in FY22/FY23 to achieve remaining Smarter Selling target

Smarter Selling

Notes: (1) FY21 & FY22/23 forecast

Smarter Sellin benefits are re-invested in strate ic initiatives g g

Efficiencies achieved by transforming our operating model

Enabling us to productively re-invest in the business

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Above Gross Profit Store CODB Admin CODB
Admin remuneration,
expenses and other
Logistics
22%
25%
Store
10%
expenses
& tenancy 13%
Stock loss
& waste
30%
Store remuneration
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Offsetting underlying inflation headwinds in CODB, while re-investing in:
store and online customer service
accelerating eCommerce to grow omnichannel sales
advanced analytics team to drive better decision making
transitioning technology to cloud and SaaS[1] reduce maintenance capex over time
digital catalogue and coles&co to provide recipes and promotions for customers

Smarter Selling

Notes: (1) Software as a service

Strate ic sourcin deliverin COGS benefit & im roved en a ement g g g p g g

Driving value through strategic sourcing partnerships

Improving supplier relationships and procurement processes Future areas of focus

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Sustained focus on category planning, joint business planning,
frequent and consistent communications, and improved
agility and responsiveness have led to enhanced supplier
relationships
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SAP Ariba Source to Pay enables Coles to digitally manage sourcing, contracting, buying and invoicing of our GNFR[1] spend improving commercial, sustainability and risk management outcomes.

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Advantage supplier survey – Net
Favourable score [2] , #
+39%
FY18 FY19 FY20 FY21
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Stronger supplier partnerships and improved perception despite challenges from COVID-19, while delivering YoY COGS benefits
Improved GNFR purchasing performance with 1400+ suppliers digitally invoicing >76% of spend, and 98% of spend under Coles contractual agreement
Continue to save costs via shift to smarter, multi-year end-to-end buying plans
Rebuild primary supplier interface, driving efficiencies and making it easier for suppliers
Further deepen and integrate supplier relationships , by better understanding each suppliers’ role within Coles’ programs of work and providing support for embedding change
De-risk Coles’ supply chain through closer supplier collaboration and technology enablement
Leverage suppliers innovation and capability to deliver on ‘ Together to Zero’ sustainability targets

Notes: (1) Goods Not For Resale; (2) Advantage supplier survey interviews and surveys 500 suppliers to rank 20 retailers in Australia; Net Favourable score focusing on partnership approach, team capability and alignment of Merch and Operations. Source: Advantage Group

Smarter Selling – Strategic sourcing

Our stores are utilisin technolo to continue to drive efficienc g gy y

Introduced new technology & selfserve solutions in-stores

Bringing benefits to our customers, team & bottom line Future areas of focus

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Fresh Produce Easy Ordering enables improved product
freshness and availability for customers, and better
planning for suppliers
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Introduced a variety of self-serve solutions to improve
customer experience
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Leveraging advanced analytics to
improve waste and markdowns
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Delivering fresher produce , improved availability , tailored ranges, and more accurate forecasting for Coles and suppliers

A newly designed main lane enables greater choice at the checkout, enabling customers and team members to pack simultaneously

Dynamic Markdowns use advanced analytics to calculate an optimal markdown in real-time

Expand Smarter Forecasting to further support future growth & supplier engagement
Continue to transform through customer self-service and accelerating frictionless technologies, e.g. Trolley ACO
Accelerate the Advanced Analytics journey through deploying Dynamic Markdowns into all categories

Smarter Selling – Technology-led stores and supply chain

Our su l chain continues to be transformed via technolo pp y gy

Major transformation and cost saving programs on track

Coles Collect improved customer metrics and delivered cost savings

Future areas of focus

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Coles Collect provides transport solutions and other value add services to suppliers, unlocking significant value from our network

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Paperless operations (left) provide significant annualised labour savings through efficiency and speed. Faster Fresh Flows (right) allows us to get from paddock to plate faster to deliver increased product life to our customers, by changing the way we order and process items through our supply chain.

Coles Collect

Delivered 35% increase in pallets moved[1]
Consistently better service outcomes than non-Coles Collect carriers
Reduced over 1 million kms p.a.[2]

Faster Fresh Flows

Delivering customers increased product life , by reducing store order lead time by 20 million days[2]
Paperless Operations
Inbound and outbound self-serve rolling out to 10 sites
Driver induction and chain of responsibility moved to online platform
Embedding a fully integrated transport management system to improve efficiency and service
Expanding Coles Collect to improve customer availability and freshness, and increase revenue
Explore next phase DC automation and eCommerce fulfilment solutions

Smarter Selling – Technology-led stores and supply chain

Notes: (1) Between FY19 and FY21 (2) Between FY19 and FY21 YTD (May’21)

Witron automated DCs will create a owerful advanta e p g

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Witron site in Redbank, QLD
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Witron site in Kemps Creek, NSW
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Witron benefits

Safer working environments with improved service at a lower cost
Reduced lead time for better availability, with both sites providing full ambient range in each state
Doubled the volume on half the footprint
Approximately two-thirds operating costs of a standard site
Integration of Witron automated DCs and Ocado CFCs[1] will create a powerful advantage
Solar panels are expected to deliver almost half of the site’s power requirements

Smarter Selling – Technology-led stores and supply chain

Notes: (1) Customer Fulfilment Centres

Coles’ technolo strate su orts ‘Winnin in our Second Centur ’ gy gy pp g y

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Technology Foundations Smarter Technology Technology Innovation
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Cyber security
Data centre, network & infrastructure
Enterprise tools
Stability and resilience
AI and Machine Learning
Foundational future capabilities
Cloud migration
Enterprise data platform
lab288
Innovation with partners
Proof of concept in stores/DCs
• Edge compute

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Continued journey to agile
Strategic partnerships

People, Culture and Operating Model

Tools to work from anywhere

Partnerships and Procurement

Smarter procurement
Training in new technologies
Global innovation

Business technology roadmaps

Our technology strategy enables us to deliver the extensive business technology roadmaps

Smarter Selling – Technology-led stores and supply chain

Increasin investment in technolo g gy

Group technology investment (capex & opex)

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1.9x
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1.9x planned investment in technology spend in FY22 vs FY18. Key programs of work:
eCommerce customer experience
Ocado solution
Supply chain automation
Store operations optimisation
Advanced analytics enablement

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FY18 FY22F
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Smarter Selling – Technology-led stores and supply chain

Smarter Forecastin showcases the technolo strate g gy gy

What is Smarter Forecasting?

How we have achieved it?

Platform for the future

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Forecasts sales by SKU, by store, by day for supermarkets
Improves availability , reduces cost and waste
Utilises a large set of AI models
Model features include historic sales, promotions, weather and events
Productionised into core technology platforms
Built by our internal Advanced Analytics team
Partnered with Microsoft to deploy in Azure
Computational scalability provided by the enterprise data platform
IP owned by Coles and models are continuously improved
Single version of the truth
Multiple further applications
already utilise Smarter Forecasting (e.g. dynamic markdowns)
This ‘engine’ will also be deployed to:
Coles Express

Liquor

Fresh Produce Easy Ordering

Smarter Selling – Technology-led stores and supply chain

Innovation at scale in the right format, delivering higher returns

Description	Format A	Format B	Format C	Coles Local
	Innovation stores Top traders Transformational stores to trial structural innovation Premium, foodie offer with extended range	Core traders Mainstream offer, with selected range	Focus on efficiencies – simple to shop

				Premium offer focused on local, in small format
Store examples	Tooronga (VIC), Moonee Ponds (VIC) Croydon (VIC), Inglewood (WA)	Noarlunga (SA), Sunnybank Plaza (QLD)	Springfield (QLD), Old Bar (NSW)	Rose Bay (NSW), Fitzroy (VIC)

	Rapid innovation enables us to continuously roll-out new concepts into other formats(e.g. Sushi Sushi, Deli undercases, Sendai berry cases)

Smarter Selling – Optimised network and formats

Coles will kee rowin and transformin the network p g g g

Coles stores network , #

Coles Local Format C New Format (A&B) Previous format

Coles’ innovation process helps:
Transform the fleet including the roll-out of Coles Local

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FY19 FY21F

FY30F

Improve customer experience; and
Improve return on capital
Transforming the physical network also enables improvements in eCommerce fulfilment operations
Coles will target net new space growth of ~1.5% p.a., while investing in the right store at the right time with a tailored format

Smarter Selling – Optimised network and formats

Smarter Selling: summary

Progress to deliver $1bn cumulative Smarter Selling benefits by FY23, excluding COGS benefits
Transform in-store customer service and operations through an increased use of technology, data and AI
Progress automation in DCs and fulfilment centres, and expand Coles Collect to deliver efficiencies and better service
Deliver further COGS improvement by building enhanced supplier relationships
Target net new space of ~1.5% p.a., and invest in our existing fleet delivering innovation at scale and pace
Simplify and transform our ways of working in the SSC, empowering decision making

Coles Local Rose Bay, opened May 2020 – Fruit & Vegetable aisle

Smarter Selling

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Win To ether g

Thinus Keeve – Chief Sustainability, Property & Export Officer

Sally Fielke – General Manager Corporate Affairs Kris Webb – Chief People Officer

David Brewster – Chief Legal & Safety Officer

Strategic elements

Safer choices together
Great place to work
Together to Zero to drive generational sustainability
Better Together through diversity and stakeholder engagement
Innovation through partnerships

Queensland team members at Brisbane’s Big Gay Day in May 2021. Coles is committed to championing inclusion for our LGBTQI+ team members, customers and the community

Win Together

Our ambition is to become Australia’s most sustainable su ermarket p

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Sustainably feed all Australians to help them lead healthier, happier lives
Win Together
Acting together now for generations ahead
Coles’ Purpose
What we are doing and why
Sustainability pillars
Major ambitions
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Win Together – Together to Zero to drive generational sustainability

Our new sustainabilit icon y

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The dots , as used in the art of Northern Aboriginal Australian people, reflect the notion of community with many different groups circling around a larger collective goal

The cross hatching designs, as used in the art of Southern Aboriginal Australian people, represent the weaving technique used to create tools to hunt and gather food Combined they represent the importance of working together to protect and sustain life

Artwork created for Coles by Bundjalung/Biripi artist Nikita Ridgeway of Boss Lady Design and Communications

Win Together – Together to Zero to drive generational sustainability

Committed to reduce environmental im act throu h ‘To ether to Zero’ p g g

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Coles Group signed an agreement with Lal Lal Wind Farms for the A concrete slab carpark made partly from recycled soft plastics at
purchase of large-scale generation certificates for renewable Coles Horsham, made possible by Coles’ partnership with REDcycle,
electricity until the end of 2030 Replas and RMIT University
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Net zero greenhouse gas emissions by 2050
Divert 85% of waste from landfill by FY25 and continue our focus on reducing food waste
100% renewable electricity by the end of FY25
Support Australian Government’s 2025 National Packaging Targets including:
Reduce combined Scope 1 and 2 greenhouse gas emissions by more than 75% by the end of FY30 (from a FY20 baseline)
All Coles Brand packaging 100% recyclable, reusable or compostable by 2025

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Coles has donated the equivalent of more than 58 million meals to
SecondBite since FY19
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Continue and enhance our program to provide unsold edible food to people in need through our work with:
SecondBite through Coles supermarkets and fresh produce DCs
Foodbank through ambient DCs
All Coles Brand packaging to contain 50% average recycled content by 2025
Stop selling single-use plastic tableware products from 1 July 2021

Win Together – Together to Zero to drive generational sustainability

Better To ether throu h diversit and stakeholder en a ement g g y g g

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Celebrating diversity and inclusion
Coles recognised as Gold tiered employer at AWEI[1] awards

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Fostering key community partnerships: feeding Australians in need, helping sick children and supporting healthy lifestyles
Supporting communities in times of need

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Offering quality, safe and trusted products sourced ethically, transparently and responsibly
Continue to support independent certification of Coles Brand products with higher environmental and labour risks

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Providing Australian-grown produce as a first priority
Supporting farmers with the $50 million Coles Nurture Fund
60 dairy farmers supplying Coles own brand milk on long term contracts that allows them to invest for the future

Win Together – Better Together through diversity and stakeholder engagement

Notes: (1) Australian Workplace Equality Index

Our strate to be ‘A Team that is Better To ether’ gy g

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We’re all different. And at Coles, we know that’s a good thing. Just as we have for over a century, we’re making Coles somewhere everyone feels like they belong. So that we can all live healthier and happier lives.

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Foster an open and Achieve a gender Recognise and enable Champion LGBTQI+ welcoming culture balanced workforce to people with all kinds inclusion in the workplace where everyone feels benefit all of us of abilities and beyond valued

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Provide more opportunities for Aboriginal and Torres Strait Islander peoples, suppliers, customers and communities to engage with our business

Future areas of focus

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Achieve ‘Employer of Choice’ recognition and build an open and welcoming culture

Achieve 40% of women in leadership roles and achieve pay parity

Provide more opportunities for Indigenous peoples, suppliers and communities

Win Together – Better Together through diversity and stakeholder engagement

We are makin ro ress on ‘Great lace to work’ g p g p

Delivered on our key strategic pillars

Future areas of focus

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Our values.
Customer obsession Passion and pace Responsibility Health and happiness
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Launched and embedded Coles Group values across the organisation
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Launched new payroll and HR system (myhub) across all of Coles Group
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Recognised #1 in GradAustralia’s ‘Top retail, sales and consumer goods
graduate employers’ in 2021
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Year-on-year progress to grow team member engagement
Invest in learning, development and team member enablement to deliver outstanding customer experience in-store and online
Communicate our employer brand to attract and retain the best talent
Deliver major capability programs : automation, eCommerce and
technology, reskill and reshape our workforce

Win Together – Great place to work

We continue to make ‘Safer choices to ether’ g

Delivered numerous safety initiatives

Resulting in significantly lower TRIFR

Future areas of focus

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Refreshed safety capabilities for our team members
Enhanced safety and hygiene measures to keep team
members and customers safe during COVID-19
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39.0
34.4
27.4
22.7
19.2
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Smarter safety through data, technology and innovative engineering controls
Creating a mentally healthy workplace and Board positions on ‘Corporate Mental Health Alliance Australia’ and ‘Healthy Heads in Trucks and Sheds’

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Delivered wellbeing campaigns, including The Resilience
Project’s Gratitude, Empathy and Mindfulness (GEM) program
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FY17 FY18 FY19 FY20 Q321
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Continue to foster a culture where safety decisions lead to improved safety performance

Win Together – Safer choices together

Win Together: summary

Develop a pathway through to Zero waste, Zero emissions and Zero hunger
Support Australian communities, producers and diversity of team members
Foster a culture of belonging to make Coles a ‘Great place to work’
Cultivate a safety culture across Coles, inspire and help team members to focus on their physical and mental wellbeing

Harvey Citrus, WA recipient of financial support from the Coles Nurture Fund

Win Together

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Liquor strategy update

Darren Blackhurst – Chief Executive Liquor

New B&W Liquorland at Merrifield, VIC

Liquor strategy update

Elevated Liquor retail market, with evolving customer preferences

Overall market elevated, online accelerating

Importance of local, craft & boutique

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Liquor retail market was impacted by panic buying, lockdowns and the closure of on-premise throughout the year driving more consumption in home
Increased demand for local, premium, on-trend products and healthier alternatives . Customers seeking more local wines, craft beers and boutique spirits
–
Big box, online, spirits and suburban/regional stores the key drivers of elevated sales
Team member friendliness, knowledge and availability are fundamental to the customer experience
Online and on-demand is the fastest growing channel, accelerating under COVID-19, growing by 90% in 1H21
Ease of shop, value and choice remain key to the overall offer . During the last 12 months customers have shown a stronger preference for trusted value and local brands

Liquor strategy update

Li uor strate launched in Au ust 2020 is drivin our lon -term lan q gy g g g p

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“To help (adult) Australians lead happier and healthier lives,
Our Purpose by drinking in a responsible and sustainable way”
Our Vision “Be a simpler, more accessible and locally relevant drinks specialist” Smarter Selling Inspire Customers Win Together
6 Priorities • Simplify the • Differentiate our offer & • Build capability operating model serve our customers better • Engage safely, responsibly
• Refocus the business • Be more relevant, & sustainably accessible & local
3 Horizons • Simplify & Refocus • Differentiate • Grow

Liquor strategy underpinned by investment in team, systems, online, new stores and format renewal

Liquor strategy update

Our 6 ke riorities are ro ressin y p p g g

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Simplify the operating model

Decluttering and reducing cost

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Differentiate our offer & serve our customers better Creating locally relevant ranges

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Build capability
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Investing in team, systems and online
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Refocus the business

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Resetting commercial and operation agendas

Be more relevant, accessible & local Investing in formats and the estate

Engage safely, responsibly & sustainably Proactively engaging our community

Liquor strategy update

Three distinct banners, relevant to customers’ evolving needs…

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The local, convenient specialist
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The warehouse
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The spirit of an independent
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Shop anytime, anywhere, anyhow
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…available online and through Coles

Liquor strategy update

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Coles Express site at Keilor Park, VIC
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Express strategy update

Michael Courtney – Executive General Manager Express

Express strategy update

Im roved our underl in convenience ro osition p y g p p

1 2 3 4 5	Key priorities Improve convenience store profitability	Achievements so far
		• Offset fuel headwinds, presented through COVID-19, with top-line delivery and robust cost management • Better partnering with our supply partners
	Leverage Coles Group capability	• Extended Supermarkets ranging where appropriate (e.g. convenience range) • Participated in Coles initiatives that differentiate in the channel (e.g. collectibles and MND1 campaigns)
	Invest in store formats	• Invested in a store refurbishment program, being rolled out to ~130 sites • Reset coffee offer and delivered fast-lane fridges
	Better engagement with team	• Launched the ‘Express Yourself’ Learning and Development Program • Improved team engagement
	Build a strong basis to be channel- leading in sustainability	• Delivered sustainability roadmap • Delivered several channel-leading initiatives in ethical sourcing

Express strategy update

Notes: (1) Motor Neurone Disease

Maintained fuel market share and out erformed in sho sales p p

Fuel volumes are gradually recovering from COVID-19 related impacts

Despite lower fuel volumes, strong shop sales have driven an increase in market share

Despite improvements, fuel volume remains below pre-COVID-19 levels
The convenience channel has seen increased growth since COVID-19
Victoria fuel volumes continue to lag the rest of Australia
Express has consistently delivered above market growth through improvement in the customer offer

Comparison of average weekly fuel volumes to pre-COVID-19 by period, % of pre-COVID-19 period[1]

Quarterly convenience shop sales growth, Coles and competitors, % YoY growth, 3Q20 – 3Q21

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Australia Victoria Australia ex. Coles Express Competitors
Victoria
Pre-COVID-19
average 10.3% 10.4%
weekly volume
7.7% 7.4%
5.9% 6.3%
5.0%
4.1%
-1.7%
-2.2%
March-20 Mar-21 3Q20 4Q20 1Q21 2Q21 3Q21
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March-20 Mar-21
Start of COVID-19
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Express strategy update

NOTE: Compared to 4 weeks pre-COVID-19 from 17-Feb-20 to 15-Mar-20. Source: Market data provided by IRI; Coles Express sales are headline growth numbers externally reported

Addressin ri ht strate ic riorities to row our otential g g g p g p

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Coles Express award winning Urban Coffee Culture offer
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Coles Express site in South Morang, VIC
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Coles Express team members participating in Movember
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Inspire Customers

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Smarter Selling

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Win Together

Increased tailoring to provide a more relevant convenience offer
Segment the Express network through format investment
Enhance our channel-leading selling and service programme
Embed Coles Express in the Coles digital ecosystem, leveraging the group’s assets to remove barriers
Re-platform core systems to increase capability and enable simplification
Drive channel leadership in sustainability in line with Coles Group’s objectives
Leverage Coles food credentials to provide differentiated range solutions
Leverage technology to further enhance our commercial efficiency
Continue to grow community and strategic partnerships

Express strategy update

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Coles’ financial framework

Leah Weckert - Chief Financial Officer

Coles Kalgoorlie store in WA – opened May 2021

Coles’ financial framework

Coles’ financial framework ali ns with our vision g

To deliver attractive returns with disciplined approach to capital allocation while maintaining a strong balance sheet to drive long-term shareholder value

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1. Focus on achieving attractive returns

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2. Disciplined approach to capital allocation

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3. Maintain strong balance sheet

ROC hurdles well above longterm WACC[1]
ROC incentives for management
Strong cash conversion
Structured approach to capital allocation
‘Stay in business’ capex to maintain safe operations
Competition for growth and efficiency capex balancing returns and strategic importance
- Commitment to solid investment grade ratings
- Maintain financial flexibility to take advantage of future investment opportunities
Post-implementation reviews
Maintain attractive dividend payout

Coles’ financial framework

Notes : (1) Weighted average cost of capital

Focus on achievin attractive returns g

Reported Group ROC (Underlying Group ROC[1] ), %

Key comments

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Pre-AASB16 Post-AASB16
35.2% (36.6%)
32.5% 32.9% (33.5%)
16.3% (16.8%)
15.3% (15.6%)
FY18 FY19 [2] FY20 FY20 H1FY21 [3]
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Management LTIs[4] equally balanced between ROC and TSR
Capital spend categories/projects have differing rates of return but are all expected to reach hurdle rates well above long-term WACC and achieve an attractive blended return
Witron and Ocado automation capex and project implementation opex have and will continue to impact ROC prior to benefits materialising

Coles’ financial framework

Notes : (1) Excluding Witron and Ocado; (2) Calculated on a 53-week reported basis; (3) Calculated on a rolling 12-month basis; (4) Long-term incentives

Disci lined a roach to ca ital allocation p pp p

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Essential & maintenance
capex
‘Stay in business’ capex
Sustainable
operating
Debt obligations
cash flow
Relating to bank debt,
Forward view of bonds and leases
earnings and operating
cash flow
Ordinary dividend
80-90% dividend payout ratio and
3.5% dividend yield [1]
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Growth, efficiency
(‘returning’) & net
property capex
Focus on strategic
Excess priorities and sustainable
earnings growth
cash
Recycle property capital
flow post
target
capital
structure
Surplus capital
+
Return surplus capital
to shareholders
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Coles’ financial framework

Notes : (1) Dividend yield calculated as last twelve months (LTM) dividends per share of 60.5 cents divided by the average LTM volume weighted average price as at 11-Jun-2021 of $17.30

Coles is a hi hl cash enerative business g y g

Cash flow realisation, %

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Operating cash flow (excluding interest and tax) Cash realisation Key comments
EBITDA (pre-significant items)
Pre-AASB16 Post-AASB16 • Strong EBITDA growth
120%
• Coles has achieved cash
110% 111%
107% realisation well in excess of 100%
since demerger
$3,485m
$3,257m •
Focus on improving working
capital management and
operating costs
$2,188m $2,240m $2,157m
$1,982m $2,021m
$1,802m • Strong operating cash flow
supports dividends and growth
capex
FY19 FY20 FY20 FY21 H1
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Coles’ financial framework

Coles is investin for further rowth and efficiencies g g

Gross operating capex[1] , $m

Key comments

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Operating capex Witron and Ocado capex
•
Demerger Average ~$940m Historically lower capital
investment prior to
~1,400 demerger
Average ~$640m
~1,100
•
Disciplined and rapid
893
833
deployment to capture
619 650 645
organic opportunities to
create future value for
shareholders
FY16 FY17 FY18 FY19 FY20 FY21F FY22F •
Balance sheet strength
Gross operating capex rate to sales, % supports acceleration of
strategic projects to drive
1.8% 1.9% 1.9% 2.5% 2.2% long-term earnings growth
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Coles expects gross operating capital expenditure in FY22 to be up to ~$1.4bn

Coles’ financial framework 72

Notes : (1) Excluding property acquisitions and divestment

Prioritisation framework assists in allocation of capex

Capital prioritisation framework

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Prioritise Allocate Minimise
ROC
High
6 3 1
Med
8 5 2
Low
9 7 4
Low Med High
Strategic importance
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Key comments

Competitive allocation of returning capital (i.e. not essential and maintenance) determined by capital prioritisation framework
• Capex allocated toward growth & efficiency initiatives with highest returns and strategic importance (i.e. strategic differentiators and alignment with strategy)

Coles’ financial framework

2 Coles has shifted its ca ex to rowth and efficienc initiatives p g y

Group capex profile, %

Key comments

Growth Maintenance Efficiency Network optimisation (new stores/renewals)

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FY17 FY22F
• Category acceleration
• Omnichannel initiatives
• Ocado
~20%
~60%
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Witron DC automation
• Service transformation
Fresh Produce Easy Ordering
Shift to growth and efficiency capex with expected greater spend in FY22
~50 renewals and ~20 new stores expected in FY22
~$290m capex for Witron expected in FY22
Project implementation opex for Witron and Ocado is expected to be up to $75m in FY22 and up to $160m in FY23
Depreciation and amortisation is expected to be between $1.67bn - $1.72bn in FY22 impacted by increased capex, as well as increased AASB16 leasing impacts including the Witron Queensland site being recognised on the balance sheet as a ROU[1 ] asset
Depreciation will be further impacted in FY23 as the Witron and Ocado assets (ROU and PPE[2] ) begin to depreciate

Coles’ financial framework

Notes : (1) Right of Use; (2) Property, Plant and Equipment

Coles has an industr leadin dividend a out y g p y

Delivering strong underlying dividend growth

Key comments

Dividend, cents per share

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Dividend payout ratio [1]
82.0%
Full year dividend
Interim dividend 80.1%
Special dividend [2]
57.5c 78.6%
27.5c
35.5c [2]
33.0c
14.6%
24.0c
30.0c 10.0% 33.0c
11.5c [2]
FY19 FY20 H1FY21
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Coles retains its annual target dividend payout ratio of 80-90%
Dividends franked to maximum extent possible
Dividend policy and capital management to be considered by Board periodically

Notes: (1) Dividend payout ratio is calculated as dividends per share divided by underlying retail earnings per share (pre-AASB16 basis for FY19), excluding special dividends); (2) Coles demerged from Wesfarmers in November 2018. Wesfarmers paid an interim dividend in March 2019, which reflected in part, Coles’ earnings up to and including 27 November 2018. Coles paid a special dividend in FY19 of 11.5c per share which reflected earnings for the interim results period post demerger (28-Nov-18 to 30-Dec-18) and the 53rd week in FY19.

Coles’ financial framework

Maintain stron balance sheet g

Coles has significantly de-levered since demerger[1] …

… and extended tenor and lowered cost of debt

Net debt/(cash) ex-lease liabilities, $m

Post-AASB16 leverage ratio[2] Net debt/(cash) ex-lease liabilities

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$1,685m [3]
3.1x
2.9x
$520m
$362m
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($38m)

Pro-forma at

FY19 FY20 1HFY21

demerger (Nov-19)

Weighted average maturity on drawn debt, years

Weighted average cost of debt, %

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-96bps
+4.5 years
3.05%
7.2 2.09%
2.7
At demerger [4] At Q3 FY21 At demerger [[4]] At Q3 FY21
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At demerger[[4]] At Q3 FY21

Debt funding framework - commitment to solid investment grade rating

Flexibility

Liquidity

Sufficient immediate funding capacity available to support future growth

Maintaining minimum undrawn committed liquidity

Access and diversity

Security

Access to appropriate debt markets to optimise diversity of funding sources

Staggered maturity profile with refinancing completed well ahead of maturity

Notes: (1) Excluding AASB16 leases (2) Leverage ratio calculated as gross debt less cash at bank and on deposit, plus lease liabilities, divided by LTM post-AASB16 EBITDA; (3) Gross debt of $2bn less cash at bank and on deposit; (4) At 30-Dec-19

Coles’ financial framework

Summar of ke financial u dates y y p

Smarter Selling benefits expected to be in excess of ~$200m in FY22
Witron and Ocado opex expected to be up to ~$75m in FY22 and ~$160m in FY23
Net EBIT benefits from Witron expected to commence from FY25. Sales benefits from Ocado expected from FY24 as the customer fulfilment centres build their volumes
Capex of $1.4bn expected in FY22 with investments in a number of key growth areas:
Witron and Ocado automation programs
Omnichannel and offer expansion for customers
Smarter Selling, including front end transformation
Fresh Produce Easy Ordering
Coles Local and Liquorland renewals and new space
Depreciation and amortisation expected to be between $1.67bn - $1.72bn in FY22 as a result of increasing investment, as well as increased AASB16 leasing impacts including the Witron Queensland site being recognised on the balance sheet as a Right of Use asset

Coles’ financial framework

Delivered significant strategic and financial progress since announcing 2019 strategy
Emerged stronger from an extraordinary period through COVID-19, bushfires and floods
One of Australia’s most trusted brands and improving relationships with suppliers and farmers

Summary of today

The Australian food and drinks market remains one of the most attractive globally
With a strong balance sheet, we are committed to driving growth by increasing investment in:
Group wide data, eCommerce, technology, and automation
Acceleration of Coles Local and Liquorland formats
Sustainability – building on our recently launched ‘Together to Zero’ and ‘Better Together’ programs
Strong cash generation supports commitment to our industry leading dividend payout ratio

Wrap-up

AI assistant

COLES GROUP LIMITED. — Investor Presentation 2021

64687_rns_2021-06-16_15d550ba-460f-4e4d-8b40-4038a70f9e78.pdf

ASX Release

Coles Group - 2021 Investor Strategy Day Presentation

Daniella Pereira

For more information:

Investors

Media

Winning in our Second Century

Disclaimer

Non-IFRS financial information

A enda g

Growing long-term shareholder value by becoming the most trusted retailer in Australia

Overview of Coles Grou p

We are trackin well a ainst most ke strate ic metrics g g y g

Stron market osition & rowth across Coles Grou since demer er g p g p g

Supermarkets and Liquor 2-year EBIT growth[3] exceeds 20%, a strong result relative to global peers

Demerger investment thesis, November 2018

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Strate refreshed in June 2019 to deliver lon -term shareholder value gy g

Our vision.

‘Become the most trusted retailer in Australia and grow long-term shareholder value.’

Our strategic differentiators

Grou EBIT ro ress since strate refresh p p g gy

Stron ro ress on strate execution g p g gy

Inspire Customers

Smarter Selling

Win Together

COVID-19 im acted customer behaviour with si ns of normalisation p g

COVID-19 impacts short-term population growth; but recovery expected

Coles market share recovering as COVID-19 induced local shopping unwinds

Coles’ Supermarkets market share, %

The Australian rocer market remains hi hl attractive g y g y

Australian grocery market growth, %

Coles’ strate is more relevant than ever gy

Our vision.

‘Become the most trusted retailer in Australia and grow long-term shareholder value.’

Driving our strategy with investment acceleration in three key areas

Ex erienced & diverse Executive Leadershi Team p p

Kris

David

Webb Brewster

Roger Sniezek

Lisa

Ronson

George Saoud

Thinus

Keeve

Sally

Fielke

Ins ire Customers p

Strategic elements

Customers’ references and behaviours are ra idl evolvin p p y g

Adoption of eCommerce Digital engagement Convenience & value Health & sustainability

We are increasin l customer obsessed g y

Our NPS has improved significantly

We are now one of Australia’s most trusted brands

Future areas of focus

Lo alt and data will drive customer value and additional revenue y y

flybuys program enables us to reward our customers

Increased revenue from data commercialisation

flybuys is the #1 loyalty program[1] in Australia, with 6.3m active households and drives increased sales for Coles through targeted campaigns:

Data provides incremental revenue for Coles, while enabling suppliers to better engage with customers:

We continue to tailor our offer across our network

On track to tailor 40% of stores by FY23

Customer satisfaction has improved with increasing range activity Future areas of focus

Deliverin trusted and tar eted value remains a ke riorit g g y p y

Future areas of focus

Competitively priced customer metric[2] , %

Drivin trust and lo alt throu h our exclusive Own Brand ortfolio g y y g p

OB continues to inspire customers Delivering higher customer satisfaction and drive trust through innovation and award winning products

Future areas of focus

Coles’ OB is a $10bn+ brand portfolio

Customer NPS

Establishin ourselves as a destination for convenience & health g

Healthy living inspiration

Destination for convenience

Future areas of focus

range

COLES GROUP LIMITED. Investor Presentation 2021

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