Coles was acquired by Wesfarmers in 2007 in what was then the largest takeover in Australian corporate history, rebuilt over a decade, and demerged as a separate ASX-listed company in 2018. In FY2025 it comprehensively beat Woolworths — supermarket earnings up sharply, margin ahead of its rival, shares at record highs — and briefly came close to overtaking a competitor that had been larger for its entire modern history. Within two quarters the advantage had begun to reverse.
The Coles story is really two stories: a corporate turnaround and a duopoly dynamic. The turnaround — taking an underperforming retailer, spending a decade fixing supply chain, ranging and store standards, then releasing it as an independent company — is one of the most successful large-scale operational transformations in Australian business. The duopoly dynamic is the reason the reward for that work is permanently contested.
Who owns Coles?
Nobody controlling. Coles Group has been an independently listed ASX company since being demerged from Wesfarmers in 2018. Before that, Wesfarmers owned it outright from 2007.
How big is Coles?
Around 28% of Australian food and grocery retailing and more than 840 supermarkets nationally, second to Woolworths at roughly 36%.
What drove the FY2025 outperformance?
Holding price roughly flat while Woolworths cut, capturing sales during a rival’s supply chain disruption, and margin expansion in supermarkets while Woolworths’ margin fell.
Why did Wesfarmers buy Coles, and why did it let it go?
It bought Coles in 2007 because the business was underperforming a competitor with similar scale, and Wesfarmers believed the gap was operational rather than structural. Coles at the time had inconsistent store standards, a weak fresh food offer and a supply chain that could not match Woolworths. The acquisition was enormous and heavily criticised at the time as an overpayment by a Perth conglomerate into an industry it did not know.
The turnaround took a decade and worked. Wesfarmers invested in distribution centres, rebuilt supplier relationships, standardised store formats, and rebuilt the fresh offer and own-brand range. Coles closed most of the performance gap with Woolworths and became a reliable earnings contributor rather than a problem.
It demerged Coles in 2018 for the reason conglomerates always give: the business had reached a size and maturity where it required large sustaining capital and offered modest growth, which made it a poor competitor for capital against faster-growing divisions. Wesfarmers retained a minority stake initially and shareholders received Coles shares directly. The Wesfarmers conglomerate model depends on exactly this kind of recycling.
What does Coles look like as a business today?
More than 840 supermarkets nationally, a liquor business, an online operation scaling through dedicated automated fulfilment centres, and a data and loyalty capability built around the Flybuys programme it shares with Wesfarmers.
The automation programme is the most consequential capital decision. Coles has invested in automated distribution centres and dedicated customer fulfilment centres for online orders, which is expensive up front and reduces the cost of each online order substantially at scale. Given that online growth outpaces store growth — and that online orders are structurally more expensive to fill — getting fulfilment cost down is the single most important lever in the business.
Own brand is the other. Coles has expanded its own-brand ranges across price tiers, which improves margin, differentiates the offer and gives the retailer direct control over specification and cost. It is also the source of most supplier tension, because a retailer that ranges its own product against a supplier’s brand is simultaneously that supplier’s largest customer and its competitor.
Why did Coles win FY2025?
By doing less. While Woolworths cut prices roughly 1.4% across the basket, Coles held prices approximately flat — a small increase on some measures — and therefore protected its margin in an environment where both retailers faced identical cost inflation. Coles supermarket operating margin ran ahead of Woolworths, at around 5.5% to 5.7% against 5.2%.
It also benefited from its competitor’s problems. Industrial action at Woolworths distribution centres pushed an estimated A$120 million of additional sales to Coles, a direct transfer that required no strategic action at all beyond having stock on the shelf.
Execution mattered too. Coles reported supermarket earnings growth well into double digits, online sales growth ahead of its rival, and a stronger New Zealand contribution. Shares reached record highs while Woolworths fell 14% on results day, and Coles briefly approached its rival’s market capitalisation for the first time.
Why did the advantage reverse so quickly?
Because in a duopoly with two operators of similar scale, nothing is proprietary for long. Pricing, ranging, promotional calendars and store formats are all observable, and each competitor can respond within a trading period. Coles gained roughly 160 basis points of share during Woolworths’ difficulties and then began giving it back once its rival stabilised.
By the third quarter of FY2026 the position had flipped: Coles supermarket sales grew around 4% while Woolworths grew around 6%, ending an extended period of Coles outperformance. Both were still growing; the relative story had simply mean-reverted.
This is the most useful analytical insight about Australian grocery. The combined share of the two majors has been stable at around 65% for years, with Aldi gaining and independent grocers and the IGA network losing ground. Share moves between Coles and Woolworths constantly and away from them rarely, which means the interesting question is almost never who is winning this quarter.
What are the real competitive threats?
Aldi is the most persistent. Operating a limited range of predominantly own-brand products in smaller stores with minimal staffing, it has built a share of around 9% and sets the price reference point that constrains what the majors can charge on comparable items. Its model cannot be copied by a full-range supermarket without dismantling the full-range proposition.
Costco is small at under 2% but structurally different, earning much of its profit from membership fees rather than product margin, which allows it to price merchandise close to cost. That is a fundamentally different economic model competing for the same weekly shop.
The quieter threat is category leakage. Chemist chains taking health and beauty, Kmart and Bunnings taking household goods, meal-kit and food delivery services taking share of dinner occasions, and specialty grocers taking fresh. Each takes a small slice, and collectively they erode the assumption that a supermarket captures the whole basket.
What does the regulatory environment mean for Coles?
It caps the upside. The ACCC’s supermarkets inquiry found that Coles, Woolworths and Aldi rank among the most profitable supermarket businesses relative to global peers and that average product margins rose over five financial years, and made 20 recommendations on pricing transparency, supplier dealings and planning laws.
Coles also lost the most significant consumer law case brought against an Australian supermarket. In May 2026 the Federal Court found that Coles made false or misleading representations in 13 of the 14 “Down Down” tickets considered at the liability hearing, in proceedings covering 245 products where prices had been raised at least 15% before being promoted at a level at or above the original price.
The practical effect is a permanent constraint on promotional practice. Discount claims now need to be defensible against a documented reference price, which reduces the effectiveness of the promotional mechanics both majors have relied on for fifteen years. Our full analysis is in our guide to the supermarket inquiry and the duopoly.
How do supermarket supplier negotiations actually work?
Through annual or periodic trading terms covering cost price, promotional funding, rebates, listing arrangements and payment terms. For a supplier, access to Coles or Woolworths shelf space is access to roughly two thirds of the Australian grocery market, which is why the negotiation is so asymmetric and why the Food and Grocery Code of Conduct was made mandatory.
The most contested mechanism is promotional funding. A retailer running a discount typically expects the supplier to fund some or all of the price reduction, on the theory that the supplier gains volume. Whether that volume is incremental or simply pulled forward from future full-price sales is rarely resolved, and it is the single most common source of supplier grievance.
Own brand raises the stakes further. A supplier negotiating with a retailer that also sells a competing own-brand product at a lower price is negotiating with a customer and a competitor simultaneously, and it has limited ability to walk away. This structural imbalance, rather than any individual bad behaviour, is what the ACCC’s supplier recommendations were designed to address.
What does automation actually change for a supermarket?
It changes the cost of an online order, which is the variable that determines whether e-commerce growth is good news or bad. Picking a customer’s online order manually from supermarket shelves is slow, occupies aisle space during trading hours and competes with in-store customers for stock. An automated fulfilment centre performs the same task at a fraction of the labour cost per order.
The trade-off is capital and rigidity. Automated facilities cost hundreds of millions, take years to build and commission, and are optimised around an assumed order profile. If customer behaviour shifts — toward smaller, more frequent baskets, or toward rapid delivery from local stores — a facility designed for large weekly shops becomes less efficient than it looked on the business case.
For Coles the bet is straightforward. Online is the fastest growing channel, it is structurally more expensive to serve, and the retailer with the lowest cost per online order will eventually have a decisive advantage. The risk is timing: commit too early and you build for the wrong order profile, commit too late and you spend years serving growth at a loss.
One further point on the demerger worth noting for corporate finance practitioners: Wesfarmers structured it so shareholders received Coles shares directly rather than the group selling the business for cash. That avoided crystallising a taxable gain at the company level, preserved franking capacity, and let each shareholder decide individually whether to keep the retail exposure. It is the same in-specie logic BHP applied to its petroleum exit, and it is consistently the least value-destructive way for a large Australian group to release a mature division.
Frequently Asked Questions
Is Coles owned by Wesfarmers?
No, not since the 2018 demerger. Wesfarmers acquired Coles Group in 2007, ran it for over a decade, then demerged it as a separate ASX-listed company, initially retaining a minority stake.
How many Coles supermarkets are there?
More than 840 stores nationally, making it Australia’s second-largest supermarket chain with around 28% of food and grocery retailing.
Did Coles lose the ACCC ‘Down Down’ case?
The Federal Court found in May 2026 that Coles made false or misleading representations in 13 of 14 sample ‘Down Down’ tickets considered at the liability hearing. A parallel case against Woolworths had judgment reserved.
Is Coles more profitable than Woolworths?
In FY2025 Coles achieved a higher supermarket operating margin, around 5.5% to 5.7% against Woolworths at 5.2%. Woolworths remains larger by sales and market share, and the relative performance gap narrowed again through FY2026.
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