We are one of Australia’s leading retail businesses with brands including Coles and BI-LO supermarkets, 1st Choice Liquor Superstores, Liquorland, Vintage Cellars and Coles Express.

We are an integral part of the Australian retail sector, employing more than 113,000 team members and operating more than 2,200 outlets. On average, more than 11 million transactions take place in our supermarkets each week.

In 2008, we commenced a major programme to rebuild our business and restore pride in the Coles brand. Our focus was to get the basics right for our customers and our store teams.

For more information on Coles view their online 2009 Community Report Card.

This year, we completed the first year of a five-year turnaround programme, which is designed to create a sustainable business for the long-term. Our progress is described in this report and in our online report at www.coles.com.au.

Local sourcing

During the year, as part of the renewal of Coles, we piloted a number of retail concepts with customers to develop a new supermarket format. With the rollout of new supermarkets at Claremont (Western Australia), St Agnes (South Australia) and Balgowlah (New South Wales), we have increased local sourcing of produce where this is consistent with consumer preferences. Where possible, we have adopted this approach for other existing Coles stores such as at Shepparton (Victoria) and Bundaberg (Queensland).

We introduced the ‘Australian Made, Australian Grown’ green and gold triangle/kangaroo icon to our weekly catalogues and in-store signage to increase customer awareness of the origin of our fresh food.

Daily Intake labelling

We are providing consumers with more nutritional information that shows low or reduced fat, sugar, salt and kilojoule options. By March 2010, 75 per cent of our Coles brand range will feature front of pack Daily Intake (DI) labelling. The remainder of our Housebrand products will have DI labelling by the end of 2010.

Unit pricing

In August 2008, the Australian Competition and Consumer Commission (ACCC) released its report to government on the level of competitiveness of retail prices for standard groceries. One of the key outcomes of the report was the introduction of unit pricing for groceries. Coles commenced a progressive introduction of unit pricing into its supermarkets in June 2009 and this will be fully implemented by 1 December 2009.

National Packaging Covenant

Together with other Wesfarmers divisions, we renewed our commitment to the National Packaging Covenant (NPC) during the year. A key initiative will be the development of a packaging information panel for our Housebrand products that provides consumers with clear information about their disposal and recycling options.

Store building design

We opened our fifth environment supermarket at Ropes Crossing (New South Wales) in September 2008, which features a natural refrigerant system, and incorporates twin air screens and manual night blinds in the refrigeration cases. Another environment store opened in August 2009 at Flemington (Victoria) with further energy and water efficiency initiatives.

Biodegradable shopping bags

Following the introduction of a ban on lightweight single-use plastic bags in South Australia in May 2009, supermarkets announced a new range of reusable shopping bags, including a biodegradable cornstarch bag, which complies with the Australian Standard AS 4736 – 2006. This bag and our other reusable bag options were available in stores nationally from September 2009.

As at 30 June 2009, Coles employs 113,311 team members of which 99,232 work in supermarkets, 8,405 work in liquor stores and 5,674 work in fuel and convenience stores. Fifty-six per cent of our team members are female and 44 per cent are male.

Safety performance

Our Lost Time Injury Frequency Rate fell 11 per cent to 15.55 from 17.45 and our All Injury Frequency Rate was slightly lower at 95.28 compared with 98.53.

Our Average Lost Time Rate was 12.27, which is 9.6 per cent lower than that of the previous year.

There were 596,134 hours spent on improving the health and safety skills and knowledge of our team members through formal training.

We also now report significant near miss incidents and during the year, we had 12 near miss incidents, of which six involved injuries. In all cases, corrective actions have been identified and have been or are in the process of being implemented.

Workers’ compensation

During the year, the number of workers’ compensation claims fell slightly to 5,482 from 5,547. The majority of claims relate to manual handling injuries. Training programmes were undertaken to improve manual handling techniques and processes in stores to reduce workplace accidents and injuries.

Last year we reported prosecutions brought by WorkCover NSW in relation to two incidents in February 2006 at BI-LO Vincentia. BI-LO is pleading guilty to three charges in relation to the two incidents and we are awaiting the court’s findings.

Risk profile

For our three main areas of operation – supermarkets, convenience stores and liquor stores – we have completed risk profiles to understand their key hazards and risks. Activities to mitigate these risks are now included in business-specific National Strategic Health and Safety Plans and driven by the respective National Health and Safety Committee or Team.

Safety days

Over the last two years, Coles Express and our Alliance Partner Shell Australia have held safety days. As part of our June 2008 safety day, the Robbery Refresher Awareness DVD was launched to site teams and over 200 audits were conducted to review team member security and contractor management awareness.

Training

Over the past year, we have undertaken numerous initiatives to improve our delivery execution and enhance team member knowledge in areas that can have a positive impact on our customers.

We have simplified and designed specific induction programmes to assist our team members to learn the right skills for their roles. We have also added specific retail skills programmes. For example, the Liquor Product Training Framework (with more than 40,000 course completions over the past 12 months), Fresh Produce Back to Basics training, and our Retail Leaders Programme (RLP).

The RLP was launched in Coles supermarkets to provide team members with an understanding of their role as a trader, our business and the core knowledge, skills and behaviours needed to be successful.

We have also extended the graduate programme to provide broad retail experience to 70 graduates working in a range of areas including retail operations merchandise, logistics, marketing, human resources, information technology, finance, property and procurement.

Disability placement

Our disability employment programme operates in conjunction with Disability Works Australia and has grown from strength to strength since its launch. Approximately 2,000 people with a disability have been placed in a wide variety of store-based roles, such as checkout operators, day/night fill assistants, apprentice butchers and bakers and in-store presentation teams.

Biofuels

Coles Express and Shell Australia are committed to meeting government biofuels targets which can be demonstrated through our roll-out of E10 fuel (unleaded petrol with 10 per cent ethanol) to 63 per cent of our network in the Australian Capital Territory, New South Wales, Queensland and Victoria.

Currently, New South Wales is the only State that has mandates in place. During the year, legislation in New South Wales increased the amount of ethanol that fuel retailers are required to sell – from 2 per cent to 4 per cent – from 1 January 2010. The intention is to replace all regular grade unleaded petrol with E10 from 1 July 2011 in that State. In order to further meet these requirements, Coles Express converted its sites at Brighton
Le-Sands and Thornleigh into E10-only sites.

Waste

We continue to look at ways to reduce our waste sent to landfill and increase recycling. Overall, 122,570 tonnes of waste was sent to landfill and 125,363 tonnes was recycled. We recycled over 111,000 tonnes of cardboard and 2,900 tonnes of plastic.

We introduced organic recycling for food waste at approximately 30 per cent of our supermarkets, resulting in 10,000 tonnes of food waste being recycled.

Over the last 12 months, supermarkets introduced a metal recycling service for redundant shop fittings and equipment. This is a service from stores and equipment warehousing facilities direct to metal recyclers. Total recycled content this year was 476 tonnes.

Water

Over the last 12 months, we installed water meters at over 30 supermarkets to help us to better monitor water consumption and conserve water. Our water consumption for the year across our 763 supermarkets is estimated to be 2.17 gigalitres, with an average consumption of 2.85 megalitres per store. This data has been extrapolated from actual water usage across more than 120 supermarkets nationally.

We also partnered with South East Water and Yarra Valley Water to participate in the ‘Support 155 Business Program’ in Victoria. The programme promoted water saving initiatives for our supermarkets and provided them with an audit by a qualified plumber. Leaky taps were fixed, water saving flow control devices were installed in toilets and pre-rinse spray guns were installed to delicatessen areas to minimise water usage.

Coles Express operates 62 car wash sites around Australia. Sixty of these offer auto car washing and meet the five star water efficiency rating set by the Australian Car Wash Association in Victoria and equivalent water efficiency standards operating in other States. This means they use less than 40 litres of fresh water per wash.

Trolleys

Abandoned trolleys continue to be a concern for our business and, during the year, we received 201 individual infringements relating to approximately 2,250 abandoned trolleys. As part of our efforts to ensure our trolleys are secured safely and collected in a timely manner, we launched a national 1800 TROLLEY (1800 876 533) freecall number for the public to report abandoned Coles trolleys. We also launched a trial of a Carttronics wheel lock perimeter system at our Mount Annan and Chatswood Chase stores in New South Wales. The system has been successful to date with positive feedback received from both local councils.

Greenhouse gas emissions

Our total greenhouse gas emissions were estimated to be 2,978,518 tonnes of carbon dioxide equivalent (CO2e), up 1.4 per cent on last year, and this equates to 103 tonnes of CO2e, per million dollars of revenue. The greenhouse gas emissions were largely due to electricity consumption at our stores, distribution centres and support centres (approximately 60 per cent), and emissions related to refrigerants from our refrigeration and air-conditioning systems.

During the year, we undertook a range of initiatives to help reduce our emissions and impact on the environment. For example, at approximately 200 Coles Express sites we turned off decorative canopy fascia lighting and at another 200 sites replaced fluorescent lights with longer-life LED lighting. We also installed LED lights into Shell logos at 400 Coles Express sites. As a result of these actions, we expect to reduce our fluorescent fascia lighting emissions by 67 per cent over 10 years.

This year, we also rolled out network cabling for refrigeration controllers so that we can manage temperature alarms, maintenance alarms, energy data and product temperatures via the internet. As at 30 June, 400 stores were connected and active, with the remainder of stores expected to be online over the coming year.

Total energy consumption for the year was estimated to be 7,294,950 gigajoules, up 3.7 per cent on last year. Our total energy consumption per million dollars of revenue was estimated to be 253 gigajoules.

Health

Targets have been set for our Housebrand products in areas such as salt and fat reduction. From 1 January 2008 to 1 January 2009, we achieved a four per cent salt reduction across the Housebrand range and aim to minimise the use of added salt by 25 per cent over five years. We also aim to remove unwanted food additives from Coles’ products. Our new Housebrand product standards do not permit the use of tartrazine and challenge the use of other artificial colours.

Product stewardship

We took a number of steps to develop more sustainable products for customers during the year. These included the launch of a new environmental range of cleaning and laundry products and energy efficient light globes to replace our traditional range. More information about these initiatives and others can be located in our online report at www.coles.com.au

Ethical sourcing

This year, Housebrand product specifications were entered into the ColesPLUS (Product Life Cycle User System) database, which provides transparency and visibility of product and supplier information. The updated database will be used to help monitor and develop reports on ethical sourcing. Next year, we will commence auditing suppliers who manufacture Coles’ Housebrand products in factories operating in high-risk countries, with the purpose of having them audited and certified to the Coles Ethical Sourcing Code or a mutually recognised code.

Packaging

In March 2009, we received Environment Victoria’s Golden DUMP (Damaging and Useless Materials in Packaging) Award for our lemon trays wrapped in unrecyclable plastic packaging. We have ceased packaging lemons in this way and accept that this was an example of unnecessary and unsustainable packaging. We are using this experience to promote more environmentally friendly packaging options. In the coming year our product technologists and developers will be trained in implementing the National Packaging Covenant’s Environmental Code of Practice for Packaging.

Environment protection and Coles Express

As required under New South Wales legislation introduced during the year – The Protection of the Environment Operations (Underground Petroleum Storage System) Regulations 2008, Coles Express and our Alliance Partner Shell Australia developed individual Environmental Protection Plans for sites.

Coles Express is jointly responsible, with Shell Australia, for the protection of the environment in relation to the operations of the network of Alliance retail fuel sites. Coles Express Mooroopna and Bundaberg are not Alliance sites and therefore Eureka Operations bears the environmental responsibility on behalf of BI-LO.

In 2003, a soil and groundwater contamination issue was identified at a Coles Express site in Mooroopna, Victoria and an adjoining property. The site is being monitored and groundwater testing continues to show a reduction in hydrocarbons, which are breaking down naturally. The site will continue to be monitored until contaminant levels no longer pose a risk to public health and the environment.

Tobacco

We take our tobacco compliance responsibilities seriously and this year ensured that our store teams in New South Wales and the Australian Capital Territory were updated on the recent changes in tobacco legislation. Last year we reported that the NSW Department of Health had commenced proceedings against Eureka Operations, alleging that a verbal multi-buy offer at 26 Coles Express stores was a breach of the tobacco advertising prohibition in the Public Health Act. We ceased the offer immediately upon being notified that the Health Department considered the offer to be a breach of the Public Health Act. The Supreme Court determined that the conduct at three sites did constitute an offence and Eureka Operations pleaded guilty to the remaining 23 charges. A penalty of $107,000 was decided on 13 August 2009.

Liquor and gaming

As a major liquor retailer and hotel operator in Australia, we have a duty to act ethically and responsibly in the service of alcohol and gambling. We operate more than 770 licensed liquor outlets and 95 hotels (82 with gaming rooms) and strive for best practice in these areas. We require our liquor and gaming team members to undertake Responsible Service of Alcohol and Responsible Service of Gaming training.

In May 2009, Liquorland (Queensland), the licensee of our Bribie Island Hotel, was fined $20,000 and licence conditions were imposed for a range of incidents occurring between 2004 and 2007. The matters related to: failing to maintain a safe environment in and around the premises, having patrons causing a disturbance in the locality and behaving in a disorderly fashion in and around the premises and neighbourhood. We have taken steps to correct these issues.

Our total community investment for 2009 was $19.7 million. This represents contributions made directly and indirectly through financial and food donations, customer and office fundraising, in-kind support, team member volunteering and workplace giving.

In February, with the generous support of our customers, we came to the aid of those tragically impacted by the Victorian bushfires, contributing close to $10 million to the relief effort.

For more information about our bushfire relief effort and our many other community programmes, please see our Community and Sustainability Report.

Our total sales revenue for the year was $28.8 billion and our earnings before interest and tax was $831 million.

During the year our network grew to 2,258* outlets which created 6,344 new roles, bringing our total workforce to 113,311.

Next year, we expect to roll-out up to 50 renewal stores (supermarkets) creating further new roles, including butchers, bakers, fishmongers, green grocers and apprenticeships.

* Following our 30 June 2009 balance date, we announced the sale of 45 supermarkets to FoodWorks. These stores will be divested between September 2009 and April 2010.