FITZGIBBONS, Mr Adam, Head of Public Affairs, Coles Group SWINDELLS, Mr Matt, Chief Operations and Supply Chain Officer, Coles Group [14:31] ACTING CHAIR: Welcome. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided to you. Do you have a short opening statement you'd like to make before we move to questions? Mr Swindells : I do. First of all, thank you for the opportunity to appear before this inquiry. As Australia's third-largest private sector employer, Coles welcomes any opportunity to work with the Australian parliament to improve national productivity in aid of this purpose, particularly where it can help ease the cost-of-living pressures faced by Australian households at the checkout. Across Australia, Coles operates more than 860 supermarkets and 950 liquor stores, and we process on average around 18 million customer transactions per week. Our operations are supported by a sophisticated supply chain including distribution centres across Australia in Melbourne, Sydney, Brisbane, Adelaide and Perth, and they are further supported by store support centres in these locations. We have a track record of investing in productivity-enhancing initiatives, many involving the use of world-leading technology that allows us to meet evolving customer demand in relation to both in-store experience and, increasingly, fast, efficient online delivery. Since 2019 alone, Coles has invested $2.58 billion in capital in productivity-enhancing and efficiency initiatives, the largest program in our 110-year history. This includes more than $1 billion to develop Coles automated distribution centres in Redbank, Queensland, and Kemps Creek, New South Wales, and these were opened in April 2023 and August 2024. Using state-of-the-art technology, these automated distribution centres have been purpose built to create safer and more sustainable outcomes for team members and suppliers and better on-shelf availability for customers. In October 2024, Coles announced a further $880 million investment to build a third automated distribution centre in Truganina, Victoria. Currently under construction, it is expected to open by 2030. In addition to these major investments, Coles has made a significant $400 million productivity investment in the construction and operation of two world-leading customer fulfilment centres in Truganina, Victoria, and Wetherill Park, New South Wales, which both opened in 2024. A CFC is a highly efficient, automated facility designed for picking and packing online customer orders. It uses cutting-edge Ocado technology, using artificial intelligence, advanced robotics and automation to transform the way customers' online orders are picked, packed and delivered. Coles CFCs have redefined the customer experience in online grocery shopping, providing customers with improved availability of fresh products, a broader produce range and a seamless digital experience. Coles will be pleased to give committee members a tour of one of these facilities to see firsthand this major investment in productivity, and I promise you they're worth looking at. They're pretty cool. Although Coles continues to invest in cutting-edge technology and infrastructure to enhance productivity, there remain many government led factors outside of our control that restrict our ability to invest in and increase productivity. I would classify them in three buckets. The first is a lack of standardisation of application of either rules or the permits that are required to move around the nation. The second is the need for investment in infrastructure that continues to fail, thinking particularly about east-west rail and Far North Queensland rail—and not only rail but also bridges and infrastructure that repeatedly flood and become real problems disconnecting communities from supply. The third is the need to collaborate on future infrastructure. As population expands and areas grow, we need to have the networks in place ready to meet the demand of the population. Think about areas like the Gold Coast, where I know everybody wants to live; we could do with a few more roads and more infrastructure. Our submission outlines some of these key challenges which, if addressed, would improve productivity outcomes for our operations and the wider sector and, ultimately, alleviate the upward pressure government led decisions are placing on grocery prices at the checkout. ACTING CHAIR: Thank you. Senator McKenzie. Senator McKENZIE: Thank you for your comprehensive submission, Coles. It's got some really good ideas to improve productivity. That east-west rail link, the flooding events—keeping people supplied with food and groceries, which Coles does, is incredibly important, so I will dig into the harmonisation of our heavy vehicle permit system. I think that drives everyone nuts, so if you could give some specific examples that I can quote in the report, that would be really helpful. In light of the Four Corners program this week, I want to ask about the integrity of country-of-origin claims of the processed tomatoes sold. You've obviously said you're contesting the claims of that show on the ABC, but, regardless of the outcome, doesn't it highlight the need to strengthen the traceability of our supply chains through the food system? I'm just wondering if you have any comments to make on getting that balance right between accuracy on traceability and ensuring a productive supply chain. Mr Swindells : I'd add security of supply, too, because it's not only the accuracy or the continuity where, at times, we've had challenges. Think about eggs; think about frozen berries. It can be quite difficult for us to procure those products. Clearly, the recent article is somewhat concerning for us, and we're taking that very seriously. I'm not able to comment too much upon the specifics of it because we are in a thorough investigation, but we do take both our traceability and ethical sourcing extremely seriously. The team are going to work through— Senator McKENZIE: Do you contest the findings? Mr Swindells : We're reviewing them at the moment. I think we want to get to a good understanding of what the facts are around the tinned tomatoes, specifically, so we can understand exactly what has happened. This is a supplier we've worked with for two decades; it's not a new entrant into our business. We'll work through that with diligence and detail and then we'll review what has happened. Senator McKENZIE: How do you manage and assess your compliance with the modern slavery risks in global supply chains? You aren't just operating domestically. Mr Swindells : That's right. We do have a modern slavery policy and an ethical sourcing policy. There are dedicated Coles team members that will go through and review parts of our internal supply chain. There are also systems that track and trace all of our suppliers committed to that. We don't take them just at their face value. There are protocols and processes where we go and explore to understand exactly what has occurred, and at times in the past that has led to decisions where we no longer continue with supply. It's not a paper document; it's a very real part of how we work in terms of policy and our operations. We'll continue to review that in line with the rest of our commitments towards both ethical sourcing and traceability. Senator McKENZIE: Your submission goes to a $2.6 billion investment from Coles into productivity-enhancing investments since 2019. Yet it then goes on to say government regulation is increasingly constraining further productivity investment. Where is that balance? What regulations are actually stopping you from further investing in making your business more productive? Mr Swindells : It varies depending upon what the investment is. If I think about our automated distribution centres, they are significant capital outlays, and we require infrastructure to support the flow of goods from suppliers into them, as well as infrastructure to enable us to then distribute products to our stores. The volumes that these facilities can process mean that the number of vehicles that we would then have through that location is relatively large. This comes to my point really around how we can collaborate on planning infrastructure in advance of some of the population growth that we then want to service. With our customer fulfilment centres, there are smaller vans. The way to think of this is that an automated distribution centre is a supplier into our business, so full pallets, and our customer fulfilment centre is a single item that you would normally purchase as a customer, a unit that you would consume. The vans and the fleet and the infrastructure is different for both of those, but they do require things like power and amenities. They also require significant investment in construction. When you think about some of the policies and protocols around not just trades and services but also about how we make sure that those environments are safe and are working in the appropriate way, there's a lot of thought and a lot of work that goes into them as opposed to just partnering with a solution provider, starting construction and putting a facility down. I think the other part here is we do see variability in different states. The cost of construction, the level of union involvement and the level of regulation or oversight from areas like fire and rescue can be highly variable, and what you're looking for with a significant investment is certainty of process. What I mean by that is that we don't, at any point, want to not be completely across and in line with whatever regulations and rules there may be for construction, for approval, for certification and for operation of any facilities. But at times it can be variable. We've had construction costs change and scope change as a result of the need to meet requirements in some of those areas, and that's after we have started on a project. When we look at the global benchmark in other markets that some of our vendors work with us in, they would suggest that Australia has probably got more of that bureaucracy and regulation than all of the other markets they work in. Senator McKENZIE: I am wondering what role AI is going to play both in your supply chain piece, customer management, inventory management et cetera. I want to understand what barriers there are in the uptake of AI and what are some of the risks for Coles when it comes to adopting AI through your business. Mr Swindells : We've had machine learning and AI in our business for almost a decade with the systems that we've been utilising. It's not necessarily new, although clearly the capability is growing exponentially with the new large language models. Think of things like how we forecast consumer demand and manage inventory. A long time ago, we would have had team members in our stores place manual orders for products based upon how empty the shelves were. Today we have got 60 million store SKU combinations that are calculated every day to reset what the sales demand has been and what the inventory position is. It understands the lead time, not just from the distribution centre but also from the supplier. There's lots of data now, and where AI really helps is it's the ability to take that data and turn it into decisions that we can make that improve the flow of products—better availability, less waste [inaudible] fresh and more efficient flow. When you think of more efficient flow, that is fewer fuller trucks and therefore less congestion on the road, fewer emissions, less cost. That can be the frequency of deliveries we put through to our supermarkets and whether we need to go every day to every store. AI really plays a vital role in taking all of those supply chain assets and data points and optimising for the right customer outcome at the right cost. Senator McKENZIE: You've got a workforce of 115,000 people. I pack my own groceries these days, as do most of your customers. Is the adoption of automation and AI allowing your workers to move into higher paying roles, of different sorts of initiatives, or are you simply replacing jobs? Mr Swindells : The checkout experience is a great start for the shift in our workforce mix. Senator McKENZIE: Maybe for you it's a great start. It's a return to the seventies for me. Mr Swindells : It depends whether you do online shopping as well. We do have checkouts, and if you want to be served in a checkout you can. When we have put the assisted checkouts in our stores, the throughput of a front end, as we would call it, is 20 per cent greater. So whilst you may be packing your own bags, at times, you're not still in a queue. And what you don't see are the vast number of team members that are picking online orders or delivering online orders directly to customers. If it's taken 25 years for the adoption of assisted checkouts, it's taken about four years post-COVID for us to become personal shoppers for grocery items. That is a significantly growing part of our overall business and operation. That adds cost and complexity, because being a personal shopper in grocery, particularly in fresh, has a much higher standard to achieve. So whilst you might not see as many team members on checkouts, I assure you, there are lots of team members in our business, just in different roles. AI absolutely helps those team members to be more effective and more efficient. It is a support mechanism to ensure that we are managing issues by exception and that we are managing our efficiency and our productivity as well as can be, because online grocery fulfilment is a very hard business to be in and still make money. Senator McKENZIE: But the price of the groceries doesn't come down, does it? You've stated in your submission that you're subject to more than 220 laws and regulations, with more than 65 new or amended laws introduced since the beginning of 2025. Which three regulations could be removed tomorrow, without reducing consumer protections, that would materially benefit productivity? Mr Swindells : Do you have a view on which three? Mr Fitzgibbons : You've already touched on some of them. I think those that really cause a friction point in our business you've already touched on, particularly around the heavy vehicles and the way that we move those across the country. Harmonisation across that fleet would be a really significant driver toward a more efficient system for ourselves. That would be the first one. There are quite a number. It's easy to say the top three, but the challenge that we face and the reason we refer to— Senator McKENZIE: Is it easy? Give me your top three. Mr Fitzgibbons : It's a cumulative effect over time. That's what one of the challenges is. Another example of regulatory fragmentation that causes a fair bit of friction and complications with our own business is something as seemingly simple as the container deposit schemes that vary across jurisdictions. You have this fragmentation, whereby we have to do a reconciliation of moving individual bottles across borders, because we may procure a bottle in Victoria but sell it in one of our stores in New South Wales. You have to do a reconciliation to ensure that the container deposit scheme is consistent and that people aren't double paying for that. Senator McKENZIE: I don't think the deposit scheme is the one you could get the biggest productivity uplift from. On notice, maybe, pick your top three. I know that Coles is a member of the BCA, which wants a 25 per cent reduction in regulatory costs by 2030. What assessment has Coles done, that a 25 per cent in regulatory cost would translate in productivity improvements for your business? Mr Fitzgibbons : In terms of that target, we absolutely support that target but that's, naturally, across the entire economy. We haven't necessarily done the analysis of a broad 25 per cent application and what that would mean for our business. We're very happy to take it on notice and come back to you on what we think that would look like for us. Senator McKENZIE: I wanted to go to that disruption for the east-west rail corridor, the Bruce Highway and the Great Northern Highway. How do we build resilience? Whether it's that bridge or trying to barge stuff in from Darwin—what do state and federal governments need to do to build resilience into these supply chains, not just talk about it? Mr Swindells : Where we run spurs alongside single track, that obviously creates an element of resilience. If it is just single track over long distances, then we're always exposed to a point-sensitive failure. The amount of ongoing investment and maintenance needs to also be coordinated between industry. We're far more planned and organised, particularly with Queensland Rail now. We have outages that prioritise passenger traffic through the rail network but at times have been in our peak trade periods. We then have to move significant amounts of freight onto road because we can't stop a supply chain that deals in food. The Bruce Highway is one of the most dangerous parts of infrastructure for roads in the country. We understand that there are challenges in moving off rail into road for cost, but there's also a safety aspect here too. I think the three things would be: coordinated plans for maintenance and an increased level of maintenance, particularly across the east-west, and then contingency with spurs that can run in parallel with the track itself so that we're not point sensitive on all those points. We have around 100 days of outage a year from either east-west or north-south rail challenges, so it's not an insignificant amount. The team are actually very experienced now in handling those outages, but that probably speaks as much to the frequency of the issues as it does to the capability of the team. We've had a lot of practice. Mr Fitzgibbons : In a really practical sense, speaking about resilience and recovering quickly from disruption—you mentioned the road that goes out in north-west Australia. From a very practical standpoint, one of the things that prevents us from recovering as quickly as we could is some of the regulatory delay that is involved with moving certain freight across state borders. If the road up to northern WA is out, we will usually divert trucks from WA from our Kewdale site into South Australia up through the Northern Territory and then come back into WA. As a result of various regulatory requirements for trucks crossing borders from in many instances a biosecurity perspective, we're required to get additional permits, which takes a lot of time. They genuinely delay our ability to get that product, which is from WA back into WA, without stopping. That's something that we're working with a couple of jurisdictions on streamlining. Mr Swindells : Senator, the comment that you made around heavy vehicles or larger vehicles needing to get multiple permits from multiple councils—that is the difference between a 40-to-60-pallet B-double or an 80-to-100-pallet B-triple. It is significant. Some of these issues in isolation are a challenge. But, when you ladder them up—if the rail goes out, we have to go to road and we can't use the larger vehicles. Everything gets compressed. Then we have too many vehicles on the road, we have too many drivers and the safety profile changes. It is more so scenarios where the collective assets come under pressure, as opposed to specific challenges around where the permits, the regulation or the investment isn't quite there. We live these on a cyclical basis every year. We could almost set our watch by the January-February period, when weather starts to disrupt and we have to bring in contingency plans. Senator McKENZIE: It's just insane. On notice, could you give a little case study or example, please. One of the things I've also heard from independent transport businesses is on going through multiple councils and, the next week, having to ask to do it again instead of 'I've already applied for this route to take this level truck through'. We are being told that that's been fixed, but I've been the shadow infrastructure minister now for four or five years, and it's the same issue. That is an easy fix, it would seem to me. Mr Swindells : One of the reasons people may think it's fixed is that the carriers stop applying. There's actually no point. Senator McKENZIE: Right. Could you give me a couple of case studies on how frustrating and annoying that is. I don't know if Coles has actually done any work on quantifying the cost to Coles. Ideally, that then increases the price of food. Mr Swindells : Absolutely. Senator McKENZIE: So I really would love that relationship to be a little more explicit—less about the shareholder price or the profit being returned and much more on the price of food and the impact when we drive up the cost of delivery. What is Coles doing to work with their suppliers on farm to not increase their burden of regulation and compliance? Mr Swindells : I couldn't comment upon how we're supporting farmers in the regulation and compliance burden. Senator McKENZIE: That one might be on notice for you, Mr Fitzgibbons. Mr Swindells : We'd have to take it on notice. What I would like to add to the last point, though, is that, when we have these periods of disruption, yes, we incur cost—at times, significant cost. We don't then pass that through, in terms of price inflation. We manage that within the overall cost of our operations. We know how much that costs and we have a runway through it, so we don't then flow that through to the consumer. But it is a material cost. Senator McKENZIE: You know that every 12 months you're going to have an outage here. You said it yourself: a hundred days in certain areas. That is built into your business model, so it is built into your pricing model. I hear you. It means where that particular load is being delivered won't see groceries go up, but it is built into your overall pricing model. So I would like to understand the impact on Australian shoppers of the failure of local, state and territory governments to get their permit systems sorted. Thank you, gentlemen. I have no further questions. ACTING CHAIR: Thank you for that. That concludes our session with you. You have taken a few questions on notice. They are due back by five o'clock on 13 August 2026. We will suspend for a short break. Proceedings suspended from 14:57 to 15:18 .