[Presentation]
Good morning, everyone, and welcome to this Coles Investor Day presentation, which we are of necessity delivering virtually given the current unpredictable ease of movement between and within states which has particularly impacted our Melbourne-based team members and investment professional friends.
In welcoming you to today's briefing, I would like to add my acknowledgment of all aboriginal and Torres Strait Islander peoples, upon whose lands we meet across the country; and to pay my respects to the elders past, present and emerging. At Coles, we are delighted to be one of Australia's largest employers of indigenous people, with more than 4,900 team members out of our total of 120,000, each of whom has gone that extra mile during the many ups and downs of this last significantly COVID-19-impacted year.
At today's briefing, you will hear from and be able to ask questions of our Chief Executive, Steven Cain; and his management team, each of whom are focused upon delivering our corporate vision of becoming Australia's most trusted retailer and growing long-term shareholder value. This simple statement drives how we behave and how we assess opportunities across the whole of our business. We very much see trust at the center of our activities, as this drives our commitment to: keeping team members and customers safe; providing our customers with the fresh food, grocery, liquor and related products they seek across our 2,500 Australian outlets, together with our ever-growing online activities; building our operations in support of our sustainability commitments to ensure we protect our environment for the long term; and ethically and responsibly working with all our suppliers and very many community partners. In meeting each of these criteria, we believe we build the trust essential to support our aim of growing long-term shareholder value.
As you are aware, since our demerger from Wesfarmers in November 2018, we have established a highly experienced management team and have developed a clear strategy to drive our performance. We have seen the Coles Group invest in new technology, new operating processes and new formats as we actively contribute to the growth of this dynamic Australian retail environment. A lot has been achieved and there is a great deal more to be developed. To help update you on our progress and plans, I am very pleased to now hand over proceedings to our Managing Director and Chief Executive, Steven Cain.
Thanks, James. And good morning, everyone, from a partially locked-down Melbourne. We hoped to be able to meet some of you in person today and show you around some of the innovation going on at Coles Group. Instead, we are doing things virtually and hope that you'll feel it has been a useful investment of your time and demonstrate that we are on track to grow long-term shareholder value.
Before we get into the detail today, I would like to thank the leadership team; the Board; and all of our team members, their families; and our suppliers, community partners; and you, our shareholders, for their and your support over the last 2 years. In particular, I would like to acknowledge our Victorian team members, who have now enjoyed 4 lockdowns lasting almost 6 months but are still very focused on sustainably feeding all Australians to help them lead healthier, happier lives.
Today's agenda will give you, our shareholders, an opportunity to see our executive leadership team and some of our general managers in action as well as ask questions live in 2 separate sessions. For your health and well-being, there are also 2 short breaks, when you can stretch your legs, grab a coffee or a kombucha; or place your order for Coles Online. We are planning to finish no later than 1 p.m.
In November 2018, we successfully demerged from Wesfarmers, creating an independent ASX 20 company. As we developed our Winning in our Second Century strategy, we are very cognizant of Coles' heritage dating back to Smith Street, Collingwood in 1914. It's almost exactly 2 years since we announced our refreshed strategy, and we've delivered significant strategic and financial progress. We are, however, also very aware that most of the transformation and investment benefits are still to come. Over the last 18 months, Coles Group has emerged stronger from an extraordinary period. It's been in partnership with our suppliers, supporting team members, customers and the community through COVID, bushfires and floods as now an essential business. I am pleased that we are now one of the most trusted consumer brands in Australia and improving our relationships with the suppliers and farming community. Around 60 dairy farmers across Australia are now supplying milk direct to Coles for Own Brand milk on longer-term contracts, allowing them to invest for the future. Australia itself remains one of the most attractive food and drink markets globally with significant opportunities being created by rapidly changing consumer needs and technology.
With a strong balance sheet, we are today announcing 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. We're announcing acceleration of our Coles Local and Liquorland renewal and new store program focused on high-quality locations and winning formats. And we're investing in sustainability, building on our recently launched Together to Zero and Better Together programs. Our strong cash generation, return on capital and balance sheet, combined with a commitment to our industry-leading dividend payout ratio and associated franking [ credits ], provide a compelling investment proposition for the millions of Australian shareholders who are either directly or indirectly investors in Coles Group.
Coles is an important part of the Australian landscape, representing around 1% of the workforce; approximate 10,000 suppliers, 450,000 direct shareholders and 22 customer -- 22 million customer transactions every week. We now have almost 2,500 stores across Australia. Our eCommerce businesses in Supermarkets and Liquor continue to build on solid foundations, at pace for a sustainable and profitable future. In the current quarter, eCommerce sales penetration has reached 5.9% and 4.2% in Supermarkets and Liquor, respectively, up from 5.5% and 3.4% in Q3. Since demerger, we are tracking ahead of plan for both sales and profit, and we have delivered significant value for shareholders. Australia and our communities also remain front and center of our plans. Many of you would have seen the Big Freeze AFL events on Monday raising money for Neale Daniher's "fight motor neurone disease" research. Coles customers played their part by buying beanies and pork from Coles. We've raised over $6 million, so far, a new record. Last year, we were the second largest community supporter in Australia. And earlier this year, we launched our Together to Zero strategy to drive generational sustainability.
Now on to our 2-year strategy tracker. As you know, we present this back to you every 6 months. It's an important scorecard for us as a management team. And as you can see, we have made good progress on safety, on customer satisfaction, on sales densities with Smarter Selling efficiencies, profit growth and cash realization. Whilst we've improved team engagement since demerger, we were targeting a higher result this year. Kris will talk to further initiatives we are taking to become a great place to work for everyone at Coles. With regards to market share, we said at the outset that we intended to hold or grow our position over the long term. This remains the case, and I will talk to more about this later.
Looking at our portfolio companies. We have strong market share, strong sales growth and strong sales-to-profit conversion. In fact, it compares favorably globally partially driven by COVID but also as a consequence of our strategy execution, including Smarter Selling. There were 6 components to our demerger investment thesis back in 2018. The team and I will talk to all of these today. As you may recall, there was some skepticism as to whether we would be able to maintain our increased levels of CapEx and dividend policy. I am delighted to say that we have.
1 of the 6 components I referenced earlier was our strategy. One of the first things we did as a management team was to spend a significant amount of time together, 4 sessions, 2 days each, to refresh our strategy to ensure that we were aligned not only around the vision and purpose but the detail behind it. Our values of customer obsession, passion and pace, responsibility and health and happiness were established in 2020 to support our lead behaviors; and we hold each other to account on these. We agreed that we would differentiate ourselves online with Own Brand, with technology and automation, with sustainability and with team engagement and pace of execution. I'm excited about our automation plans. Our 2 Witron and 2 Ocado centers represent one of the largest technology investments in the southern hemisphere and, along with our other upcoming investments, will make Coles a retail technology leader not just in Australia but globally. The first Ocado and Witron sites are expected to be completed next year. Whilst we are making progress on all fronts, the key focus for me is increasing our pace of change relative to our customers and our competitive set. That will always be work in progress, but I want to let you know it's always on my mind.
We presented this EBIT and comp sales chart at demerger and have updated it to show the progress we are making. Our strategy is delivering. However, as previously discussed, some of the COVID demand tailwinds will turn into cycling headwinds in FY '22.
I want you to know that we are making real progress on our strategies of inspiring our customers, Smarter Selling and winning together. I won't go into a great deal of detail here, as most of these points will be covered later by the team. COVID has created some of the biggest changes and impacts we have ever seen both generally and in retail: online, digital, working from home, schooling from home, bigger baskets, local shopping, state and international travel restrictions, increased hygiene, QR codes, to name but a few. Depending on vaccine rollout and efficacy, we now appear to be nearer the end than the beginning here in Australia; and consumer trends are beginning to normalize.
As we've mentioned previously, population growth has been important to demand generation and economic growth in Australia. On average, population growth has fueled around 1/3 of the total growth in food over recent times. Whilst migration has been restricted in FY '21 and '22, most forecasts are predicting a longer-term return to normal. I referred to our market share aspirations earlier. It is unchanged. Here we can see that our share was improving heading into COVID and that the national and Victorian lockdown restrictions have impacted Coles. This is because Coles has fewer stores and is more metro and shopping center focused than the competition. We have discussed this local shopping trend for some time. And I'm happy to report that, as restrictions have eased, Coles' market share has improved. Many of us are lucky to live in Australia, where most of our food and drink is produced in volume and in quality locally. Australia is one of the best food and drink markets in the world with consistent market growth and investment driven by economies of scale. Our strategy has served us well over the last 2 years. The team will today take you through what we've learnt and what needs to change in the future.
In my past, I've heard that, when retailing gets too complicated, always go back to buying and selling. We are now reaching a tipping point where that is still true, but technology and longer-term partnerships are becoming more important. Our ecosystem is both global and local. It includes our team; our suppliers; our community partners; and you, our shareholders. As I mentioned earlier, we are today announcing increased investment in our business to drive long-term growth and efficiencies. You'll hear later from Leah that our investment programs are yielding good returns and that we have a strong balance sheet. In short, we are planning to invest in technology, tailored unique ranges and our new Coles Local and Liquorland formats.
The leadership team at Coles is both experienced and diverse. There are now more women on the team since demerger. We have a balance of long-serving team members and new and a balance of Australian and international expertise. It's a privilege to lead this team. I would particularly like to call out Matt Swindells, here with us today, who is completing his third and final month of the Harvard Advanced Management Program on the online night shift. Kevin Gunn, who you will hear from later, has done a great job for filling in for Matt over the last 2 months; and I thank him.
Now over to Lisa to detail how we are inspiring customers.
Lisa?
Thank you, Steven. And good morning, everyone.
My name is Lisa Ronson, and I am Coles' Chief Marketing Officer. Together with Greg Davis, our Chief Executive, Commercial and Express; and Ben Hassing, our Chief Executive, eCommerce, we will be taking you through the first pillar of our strategy, Inspire Customers.
Customers' behaviors are always evolving, particularly as technology continues to impact our busy lives. And COVID has accelerated some trends and created new opportunities which we believe we are well positioned to take advantage of. Because all retailers are improving their online experience for available range, speed, accuracy, rewards and personalization, the customers' benchmark for our online grocery experience continues to rise. Shortly, you'll hear Ben talk about some of our standout propositions that are answering those expectations. To extend their capability to meet customers' growing expectations of immediate online fulfillment, online grocery retailers are also teaming up with new delivery services, further accelerating the expansion of their distribution capability.
Secondly, shifts in digital engagement. The exploration of digital solutions by retailers to create seamless online to off-line experiences for customers continues, especially given that they know that this is a factor in improving satisfaction and loyalty. Customers have shown they are willing to not only vary the channels they shop with but also how they pay with digital payments. For Coles, in May 2021, 1 in 5 transactions processed in stores was through a smartphone, which was up 14.3% from last year, which is almost double the growth we saw in payments with smartphones in 2019. Australians are also varying their media habits and increasingly turning to digital, with weekly Internet consumption growing 27%. In September 2020, Coles was the first supermarket chain in Australia to stop delivering printed catalogs door-to-door in Australia. This has reduced the number of catalogs printed by just over 6 million a week. We have significantly increased our expenditure in online -- in our online catalog experience with coles&co, which brings together new products, promotions and inspiring recipes. The online catalog will continuously become more personalized. We have seen week-on-week increases in customers using our key digital channels like coles&co, Coles Online and the Coles App for inspiration and for shopping. When it comes to big screens, Internet-connected TV consumption increased to 7.3 million viewers last year, a 26% increase year-on-year.
Thirdly, to convenience and value. New entrants in the ready-to-eat meal solution category have driven up quality expectations for ready-to-eat options. In the last 12 months, there's been a doubling of the ready-to-heat and ready-to-eat meals range in Coles. More than 2/3 of customers are claiming they will use those meals to change their diets or to be more sustainable. Each week, we ask customers if they are happy with what they paid. From breaking down the factors that drive these, we know that customers see value not only in competitive prices and loyalty offers but importantly the quality of their product and service, the quality of the experience they get in store and online and how we behave as a brand in society. We also continue to use our "helping to lower the cost of breakfast, lunch, dinner and entertaining" campaigns; and of course, Down Downs, now in its 10th year, to market our value proposition to our customers.
And finally, to health and sustainability. Healthier choices were growing in demand before COVID, and through the pandemic, this need has accelerated for many Australians. This is reflected in trends we observe, including more than 2 in 3 Australians saying that health and well-being is more important than ever before. 24% of Australians are avoiding gluten by choice. And 12% of Australians are going vegan, which has doubled in the last decade. Like healthier choices, our customers' focus on sustainability was also growing before the pandemic, and once again, we saw this accelerate in COVID. Now 80% of Australians say they care about the environment when they make choices, but more than 2 in 3 Australians find it very difficult to protect the environment. This has increased their awareness of sustainable choices like foods with sustainably sourced ingredients and sustainable packaging, and they're supporting brands that actively provide those options. In fact, 25% of Australians report that they have boycotted a brand for sustainability reasons compared to just 14% just over 12 months ago.
With a customer-obsessed lens on developing and executing our initiatives, we continue to make strong progress in building trust and loyalty with Australians. Underpinning this is the launch of a new brand positioning, Value the Australian Way, which reinforces our role in the Australian community. Firstly, I'll talk about Net Promoter Score, which remains our true north. When it comes to Net Promoter Score, we know that a trusted brand has 3.5x high NPS and that a strong NPS drives long-term growth. As a team, we're working collaboratively to target some important trust drivers for customers by providing offers that give customers great-value food and drink solutions that are relevant to them; promoting our Aussie-first sourcing policy through our platforms like MasterChef and our seasonal activity; providing great inspiration and easy meals through the What's For Dinner initiative; and caring about the health and well-being of Australians through our actions not only in COVID but supporting customers with a healthier and happier lifestyle with solutions such as our new healthier living platform and partnerships with the AFL, the AFLW, the Heart Foundation, Stephanie Alexander Kitchen Garden Foundation and Movember, just to name a few.
Secondly, we're accelerating towards being the most trusted brand in Australia. As a result of the initiatives I just talked about, in FY '21, we delivered our highest trust scores with a 25% increase on Coles as a trustworthy brand. And we were the fastest mover in trust in retail, based on the Roy Morgan trust rankings in February. Finally, there are 3 future areas of focus for continuing this momentum. Going forward, we'll continue to increase trust by creating a definition of value that is unique to Coles by promoting value that is based on good prices, good quality, quality experience and what is uniquely Coles. While attracting customers to the brand through trust is important, in addition, we'll drive loyal behavior using our data to target customer groups relevantly across touch points; and personalize our offering for value, tailored ranges and our Own Brand differentiators as our digital and data capability matures. I've talked a bit about the shift to online media consumption by Australians, and to support that, we'll continue to upweight investment in digital channels in FY '22.
Data lies at the heart of our ambition to be customer obsessed and to drive Smarter Selling outcomes for Coles Group. We are creating opportunities with our best-in-class JV partner in flybuys to achieve both of those aims while also continuing to scale our insights platform Coles Synergy to more brands and to more businesses. We're the exclusive launch partner of the Adobe and [ channel Nine ] people-based advertising solution, which enables us to target our customers across digital media channels owned by Nine without relying on cookie data. We recognize that loyalty programs are about more than earning and burning rewards. For flybuys, we are aligning our program efforts to our strategic differentiators as a key priority. We will increasingly gather and use more of the data that the program brings to help inform wider strategic decision-making to benefit the customer experience from Coles. Already we are very progressed in using flybuys to inform our customer insights, improve our range and our Own Brand growth strategy. With its popularity among Australians, flybuys will also power much of the personalization and targeting of customers with relevant value and quality options from our Own Brand solutions. Within our value communications, we recognize it will be important to position flybuys as the way to get the best overall value experience at Coles when customers plan and do their shopping with us.
We transact with 22 million customers a week, which has created the unique ability for us to educate and enable brands on how best to connect with Australians. This is something we've worked hard to create new revenue streams. Coles Synergy is our self-serve customer analytics platform which supports supplier collaboration on merchandising decisions by bringing together our sales transaction, basket customer and market data all in one easy-to-access place. The program has just turned 1 year old and already has over 500 suppliers who have signed up to use the platform. While creating revenue for Coles Group, importantly, these solutions enable us to work better with suppliers and partners to define relevant value offers and products that better connect with customers.
Thank you all for your time today, and I'll now hand over to Greg.
Over to you, Greg.
Thank you, Lisa. Good morning, everyone.
For those who don't know me: I'm Greg Davis, Chief Executive for Commercial and Chief Executive for Coles Express. And it's really great to be here today.
As you've just heard from Lisa, the retail landscape is rapidly changing. And I'm going to talk to you today about how we're responding to this changing retail landscape. I will cover in our inspire customer pillar range tailoring, trusted value, Own Brand powerhouse and our focus on health and convenience. In these areas, we've been on a transformational journey since we refreshed our strategy in 2019. And at the heart of this transformation are the foundational investments we've been making in people, process and technology. We are investing in our commercial teams and supporting them to thrive in this new retail landscape. You will no doubt have heard about our partnership with Deakin University to deliver a world-first academic qualification for retailers in strategic category management. We are also reimagining our ways of working. Here our new strategic category management program is translating the strategy we're sharing with you today to each and every category to drive clarity and stronger store and online execution. Strategic category management is also improving our ways of working with our supplier partners. The recent industry advantage survey -- supplier survey shows we've had our strongest results in over 12 years. We're introducing new technology such as range and space tools, improved forecasting algorithms and leveraging advanced analytics. It is the continued investment in these enablers that gives me confidence that we have the right plan and that we're able to execute it well.
Talking specifically about tailoring our offer. One of our values is being customer obsessed; and that is absolutely center of our tailored offer strategy, where we've been making significant progress. We have moved from a one-size-fits-all approach to range in stores towards a more tailored offer that meets the needs of customers of different demographics both in stores and online. To date, we have tailored 27% of our layouts, including 50% in the critical dairy category, from a standing start in FY '19. Pleasingly, the ability to roll out tailored layouts is complemented by a 55% increase in range activity compared to 2 years ago. This has brought and will continue to bring more innovation and more tailoring to more Coles customers both in store and online. The range changes we have made have driven strong improvements in our customer metrics, including a 400 basis points improvement in our range satisfaction. I'm really encouraged by this rate of improvement and the subsequent sales growth.
In addition to driving customer satisfaction with the offer, our range and space capability is also key to building layouts that deliver store efficiencies. They do so by optimizing the amount of stock on show to reduce replenishment frequencies, minimize working capital and improve availability. We have literally millions of fewer instances of intraday fill in our stores. Another critical part of our range strategy is bringing real innovation to the offer through initiatives like pet treat bars, the really popular Coles best buy program and our concession partnerships with Sushi Sushi and Roll'd. Our targeted range transformation has us well positioned to capitalize on Ocado facility when it comes online. Importantly, we'll be able to share a wider range to more customers across the country. You will hear more about Ocado from Ben a bit later.
Moving on to the next slide. We've also made great progress on our targeted value strategy, including consistently investing in our offer, in lowering prices and in introducing great-quality products that deliver a point of differentiation. Coles will always make sure that our pricing is highly competitive across the entire assortment every day. Customers today have real-time pricing comparison apps at their fingertips, making our value strategy even more critical. And as you can see from the chart, customer perception of Coles' value has improved because of our strategy. Our value equation is much more than price alone. Our plans are multipronged and include growing the role of EDLP or everyday low price and using machine learning and advanced analytics to optimize our promotional mix, delivering great-value Own Brand products from entry levels right through to the most premium tier. This is critical to lowering the cost of shopping for all our customers, leveraging flybuys and our digital marketing assets to tailor and target our offers. Customers will see more personalized offers, especially through our digital channels, including the Coles digital catalog.
Building an Own Brand powerhouse business is critical to all parts of our Inspire Customers strategy, and I would like to now show you a brief video showcasing this.
[Presentation]
Wow, what a great video. This video highlights that Own Brand has a significant role to play in our business, supporting the delivery of many aspects of our strategy from tailored range and value to sustainability and strategic sourcing.
Our Own Brand is a key strategic differentiator for Coles. It differentiates our business in 3 ways. It differentiates because it delivers great-quality products at great prices that customers can only buy at Coles. A great example of this is our Wild Tides canned fish, which launched only 2 years ago. It sells millions of units a week, is sustainably sourced, has 16% more tuna in the can than the market leader; and it's 15% cheaper. Quite simply, it's the best value in the category. Our Coles Kitchen brand in our convenience category is another great example, with customers enjoying rapid innovation, leading to extraordinarily strong category growth. Secondly, it's a differentiator because Own Brand contributes to strong brand loyalty for Coles. You can see from the charts provided and our data tells us that there is significant leap in brand loyalty for customers who buy Own Brand products. Simply, customers who buy Own Brand products are more loyal. And thirdly, it's a differentiator because our Own Brand infrastructure allows us to deliver continuous innovation to stay ahead of the market. This year alone, we've won 39 awards, so far, across the entire spectrum of categories, demonstrating the breadth of our capability.
Also, innovation in our Own Brand portfolio is the linchpin of our sustainability strategy, delivering on ethical and sustainable sourcing commitments, lifting animal welfare and quality standards across the industry and supporting innovation and expansion of sustainable packaging. Our supply partners are critical to our Own Brand strategy. We have many exclusive and long-term partnerships with our suppliers that help us drive differentiation. Laurent, a partner for more than 10 years, is a great example. The Laurent partnership, complemented by the rollout of scratch bakeries to the majority of our stores, has transformed our fresh bread offer. We see this in the strong customer satisfaction results. Laurent recently took this time to discuss the partnership with Andrew Mossop, our General Manager of Bakery and Deli. Let's hear from them.
Hi, Laurent. Nice to see you again. How are you doing?
Hi, Andrew, yes. Very well. Yourself?
Yes. Very good. Thank you. So tell us a bit about yourself and where your passion from bakery came from.
I'll start when I was 16 years old and I discovered a great opportunity to express myself through the bread and pastry and cake. I started business back in '93. And my goal was to deliver the best of my ability with the best ingredient of cake and bread to the Australian people during the journey of the growth of my business and up to meet Coles.
It's a really amazing story. And obviously Melbourne is very lucky to have you, and so are Coles. And our customers absolutely love your product and they love our in-store bakeries. And we've been spending a huge amount of time over the last 10 years investing in them and developing them, and that has been really underpinned by the partnership that you have with us.
Yes.
And what do you think you've got out of that, working with Coles?
The first time I meet Coles -- and we share the same vision. It actually gives me the opportunity to finish my dream. My dream was to deliver the best of my ability to every single Australian. During the journey with Coles, I was [ available ] to do that. They give us an opportunity to invest in manufacturing technology, where we are [ available ] now to produce a very high-quality bread, [indiscernible] Coles finest. Currently, worldwide, you have no manufacturing sites capable to produce online this product, so it's very innovative actually. And we're very lucky to have that in Australia. So it's great, yes, yes. It's great.
No -- it's brilliant to see. And it's particularly the finest product that you do produce our customers absolutely love. And it's one of our best-selling lines and something which is actually offering great value as well. So obviously that product, $6. [ Mainly within ] the market, you might get anywhere up to sort of $8. What makes it really unique? And why it's so special for you.
As a product, it is -- I think, yes, the value is fantastic. And value is driven by a manufacturing site we have in Braeside. Quality-wise is comparable to anybody, as a small artisan to a larger one. Most of the value -- you're talking about $8, $12 for the same thing. That's what you're talking about.
Yes, yes...
So it's quite a big difference with what's -- Coles offering today at $6.
Yes. No, it's truly incredible product. That's for sure, although probably my favorite product will be our pumpkin and soybean Pane di Casa.
Yes, nice.
Small, easy to use and no food waste, which is always good. What about yourself, in terms of what's your sort of favorite? Or what's your favorite thing about bakery?
I think I will pick two today. And Coles Finest. I will go with rye. The rye is really nice flavor, very [ open ] texture. And white -- there is white Sourdough Vienna. They're nice.
Yes, no, it's very good. Perfect. Well, thank you very much for taking time out of your very busy day to come and speak to us today, Laurent.
Thank you. [indiscernible].
And look forward to seeing lots of great, new products hitting the shelves soon.
Very soon, yes.
Thank you.
Thank you.
Another one of our values is passion and pace. And it's always great to hear from someone who's so passionate about the products they make, and we couldn't be happier with the Laurent partnership.
Being customer obsessed is about understanding our customers' needs and finding solutions to their problems, and 2 areas where customers expect us to solve their problems are health and convenience. As a result, it's an area where we've placed a lot of focus, and our offer has come a long way over the last few years. Our health and convenience strategy has been aided by the strategic acquisition of one of Australia's largest ready-meal facilities in Banksmeadow, Sydney. We've been bringing to life and upweighting our convenience offer in stores with extended ranges right around Australia and over 250 convenience destinations. Additionally, we have continued to launch innovative brands like the [ Form ], a ready-meal range that is nutritionist-approved; and comes in build, balanced and lean offerings to help customers meet their personal fitness goals. From a health point of view, we continue to reformulate our offer to introduce healthier choices for customers. A great example was our recent announcement of a 25% reduction in salt in our in-store baked bread. Our bakery team spent 2 years improving our white loaf recipes with a local Australian flour miller, and I'm really proud that our in-store bread is healthier and tastes better too. We are also inspiring customers through our digital content and recipes and leveraging partnerships with the Heart Foundation and Stephanie Alexander's kitchen garden to grow and improve perception of our brands' focus on health.
One of the things we're really looking forward to doing today was taking our investors through a site tour of our fantastic Moonee Ponds innovation store, which is not possible given the situation in Victoria, as we all know. However, we'd still like to take you through some of the great, innovative Smarter Selling and sustainability features of the Moonee Ponds store today. So throughout the day, you'll have several of our general managers share some of the great initiatives. And first up is Charlotte Rhodes, our General Manager of Dairy, Freezer and Convenience.
Over to you, Charlotte.
Hello. I'm Charlotte Rhodes, the General Manager for Dairy, Freezer and Convenience. My team and I are focusing on delivering our purpose to sustainably feed all Australians to help them lead healthier and happier lives, with a particular focus on inspiring customers with quick and easy meal solutions.
During COVID, many customers had more time to prepare meals from scratch but still bought prepared meals as a welcome break. Whilst a number of trends from COVID are likely to persist, our view is that customers will still continue to place a premium on their time. That's why we're focusing on helping Australians answer that key question that arises in all households every night: What's for dinner? And we have solutions for all occasions and settings, including options for health conscious, including our better-for-you meals; feeding a growing family, including our new tray bakes which will feed a family of 5. And whether you want an indulgence or a special treat, you can spoil yourself with our finest range.
Our strategy to be a destination for convenience has been strongly supported by the rollout of convenience destinations like this one in over 250 stores. This enables us to showcase the full range of ready meals consistent with our Own Brand powerhouse strategy, 70% of our Own Brand, of which Coles Kitchen is the largest. After only 12 months, there are now over 250 products in our Coles Kitchen brand; and it's our largest brand other than [ Coles red tab ]. This has only really been possible working in collaboration with our site Chef Fresh in Sydney. Coles acquired the site in May 2020, and we've been working very closely together to deliver a superb range for our customers. We are also proud to work with other innovative specialist producers such as Da Vinci, who make our Coles fresh pasta, which recently won the Canstar award.
The team are also focused on concessions, joining Sushi Sushi. You can see in a number of our stores. Here in Moonee we have Roll'd and Tremila pizza. This was particularly exciting, as it's Roll'd's 100th store in Australia. Exclusive to Coles and the first Vietnamese concession launch within a supermarket, it really creates a strong point of differentiation.
Thank you, Charlotte.
I'm now going to hand you over to Ben Hassing, our Chief Executive, eCommerce, to talk you through leading anytime, anywhere, anyhow shopping.
Thank you, everyone.
Thank you, Greg. Hello.
I'm Ben Hassing, and I lead eCommerce at Coles.
As Steven and Lisa mentioned earlier, more and more customers are choosing to use digital in the way they engage with Coles, whether it is to plan their next shopping trip through the digital catalog, to be inspired in meal planning through coles&co or to place a convenient order for pickup or delivery. We're seeing customers that use online for pickup or delivery service continue to shop in stores. They become omnichannel customers. These customers spend 2.3x more with Coles in total than those that only shop in store. Our anywhere, anytime, anyhow strategy centers on growing the number of Coles' omnichannel customers.
We provided an update of our eCommerce strategy in February, and I'm happy to share a bit more on our performance through the third quarter. Our NPS has more than doubled from a year ago. We've focused on the end-to-end experience and made solid improvements on what we call the 6 its: have it, find it, display it, price it, fulfill it and support it. Delivering in full and on time in online grocery is very important for the customer, and it has its own set of unique challenges for any retailer. To solve this, we've worked cross-functionally, enhanced key processes and used technology to make noticeable improvements in our perfect order rate. In fact, we have more than quadrupled our perfect order rate from a year ago. As customer experience improves, we're seeing a higher retention rate in online, and this has led to a 110 basis point increase in our omnichannel customer base. And as a result, the eCommerce channel has driven solid growth on the year at 57%, while channel penetration has increased by more than 200 basis points.
Our vast store network will remain an important part of our omnichannel strategy. For customers that want to pick up their online order, Coles Click&Collect is available at more than 780 locations across Australia. We've moved quickly in the second half to convert our remaining service desk model stores to a contactless, drive-up pickup experience. We've also added new service called Click&Collect Rapid to over 400 stores in the third quarter. Customers can order and pick up in as soon as 90 minutes. This is resonating with our Click&Collect customers and has brought in a number of new-to-online customers as well. Let me show you a short video on Click&Collect.
[Presentation]
And in the third quarter, we're -- began testing same-day delivery. We were pleased with the customer take rate and have begun scaling to more than 400 stores. With same-day delivery, we offer a 4-hour order-to-delivery service. We've also been working to increase our regional coverage and improve service where needed across Australia. This will be really important for the Australian holiday season ahead.
Our membership subscription product called Coles Plus launched nationwide at the end of the second quarter. The member base has grown 3.5x from the beginning of that quarter to the end of the third quarter. We've been pleased with the monthly renewal rates from our members, and we will continue to add new benefits over time. Coles Plus provides free delivery, including for same-day and next-day orders, any day of the week; free Click&Collect Rapid service; free delivery from liquorland.com; and also offers VIP-type member care. Another key member benefit is double flybuys points rewards on every purchase made online. We've recently activated flypay, which allows any Coles Online customer or Coles Plus member to pay at checkout with flybuys points.
On the digital front, we continue to progress in unifying our eCommerce and digital content into a single site, coles.com. We are also slated to give customers the ability to discover, order and much more via our Coles App. As part of our omnichannel strategy for the future, the Coles App will enhance a number of in-store experiences and simplify our store operations.
Our partnership with Ocado progresses, and we are on track to launch CFCs in Melbourne and Sydney. A CFC will offer double the range to what we currently offer. We will also be able to update the range more frequently at our CFCs. I spoke earlier about the importance of delivering in full and on time. The CFCs will provide a significant step jump in this department. These automated facilities will provide a number of operational efficiencies, including the reduction of food waste. Finally, we're learning from other retailers on a regular basis that have also partnered with Ocado. Let me show you a quick video of the Melbourne CFC and then a message from the CEO of Ocado, Tim Steiner.
[Presentation]
Here's some footage of our Victorian CFC currently under construction. As you can see, the building is really starting to take shape, with the external warehouse structure largely complete. This is a massive facility, with the site spanning around 90,000 square meters. Both sites will be the first in the world to have an on-site bakery, the ability to fulfill loose produce and provide bagless orders for customers.
At Coles, sustainability is a huge focus for us, and the CFCs have been built with this in mind. The roof of the facility will be covered with solar panels. The site will also have rainwater-harvesting facilities capable of collecting and holding 240,000 liters of water.
Now let's hear directly from Tim.
Thanks, Ben. Hi.
I'm Tim, CEO of Ocado Group, the global solutions provider for fulfillment of online grocery, the Ocado Smart Platform or OSP. We are thrilled to be working with Coles to bring new levels of customer service and quality online to Australian grocery shoppers. Coles knew that further developing their leadership in online would be mission critical when we signed the deal, and that has never been more true than today.
It's important to remember that, whilst online grocery shopping has become the hot topic globally in the past year, Coles will be using a solution that we've spent the last 20 years building, a solution that pulls together our deep knowledge of the complexities of online grocery retailing, having operated as a pure-play online grocery platform in the U.K. for over 20 years now, and our depth and breadth of technological expertise. Today, we have a team of around 3,000 technologists and growing across 11 development centers in Europe, the U.K. and North America specializing in fields like eCommerce, logistics and supply chains, fulfillment, handling and retrieval robotics and data science. We are the only provider that pulls this level of food and tech experience together in an end-to-end solution that drives the kind of efficiencies that enable our partners to achieve leading customer service and sustainable economics. We've evidenced this in the U.K.; and through the positive feedback from our partners in France and Canada, who have both reported market-leading Net Promoter Scores. Most recently, we've successfully launched 2 sites in the U.S., where we're targeting similar results.
Critically, we aren't stopping innovating. We've been accelerating investments in areas like robotic picking and autonomy, working to solve the toughest tech challenges remaining in online grocery fulfillment so that our partners, including Coles, can do more, better and at lower costs; and in turn, provide an ever-better experience in the online channel for their customers. It's just the beginning. The CFCs we're building together in Melbourne and Sydney will be crucial in bringing whole new levels of quality and customer service online to Coles' customers in those markets and also provide amazing opportunities to work with and around cutting-edge technology.
Now I'm going to hand back to Ben.
The Ocado technology is currently live with 3 of Ocado's retail partners in 3 distinct markets around the world. The improvements in experience and efficiency they have achieved thus far further validates our decision made in 2019 to partner strategically with Ocado. We look forward to bringing Ocado's leading technology and differentiated service to the Australian market very soon.
In sum, we have made really good progress with our Inspire Customers strategic pillar, and there is more to come. We are improving value for each and every customer through technology and loyalty data, through product range innovation and through omnichannel service. We work with many different partners both globally and across Australia to innovate together and deliver value for our customers. As Lisa, Greg and I have shared, customers are giving us high marks via NPS. And we are committed to continue to inspire them and improve overall value.
Now we'll take a short break before we share an update on our Smarter Selling strategic pillar.
Thank you.
[Break]
My name is George Saoud, and I lead emerging business and Smarter Selling at Coles. And together with Matt Swindells, Roger Sniezek and Thinus Keeve, we will present what we are doing under our Smarter Selling pillar of the strategy.
I'll provide an update on the current progress across our Smarter Selling program, the savings being achieved and how we are investing these savings. Matt will then talk to you about how we are utilizing technology to drive improvements in our stores and supply chain, which will also include a progress update on Witron and Ocado. Matt will also share how our strategic sourcing program is improving engagement with our suppliers. Roger will then talk to you about how our technology strategy supports our group strategy; and will also give you a great example of one of our business applications, smarter forecasting. Finally, Thinus will provide you with some insights into how we are driving innovation in our store format and will also talk to you about how we are delivering on our optimized network and format strategy.
We have delivered in excess of $250 million in FY '20, and we are on track to deliver in excess of $550 million by FY '21. We have plans and we will continue to target $1 billion of savings by the end of FY '23. When the Smarter Selling strategy was first presented to the market 2 years ago, we discussed a number of cost headwinds, including wage costs, energy and fuel input costs, the shift to online and historic underinvestment in some core IT systems. And we communicated that we will look to offset these headwinds through the establishment of our Smarter Selling program. The other key element of Smarter Selling was to enable the strategic reinvestment back into the business. Future Smarter Selling savings over FY '22 and '23 will require capital investment, which is part of our capital plan in these years. Leah will discuss this in more detail as part of her presentation.
Our operations team led by Matt have done a fantastic job in the delivery of sustainable savings, primarily in logistics, stock loss and waste and store remuneration, driving efficiencies through better ways of working in our stores and supply chain. Along with the utilization of technology, this has been at the core of driving out the savings that we have achieved. Matt will also provide you with more detail on some of the major activities his team have been working on in this space. In addition, Thinus and his team have delivered strong savings in store expenses and tenancy. These improvements have included a range of energy and waste reduction initiatives, including LED lights as well as the installation of a new refrigeration control system that allows full customization of store temperature. We've also been focused on becoming more efficient and agile in our store support center by investing in people skills and the use of technology, which will help us continue to work at pace. The provision of rich data through technology enables the focus to be on value-added tasks, timely root cause analyses and actionable insights. With the savings we are generating, the business has been able to offset underlying inflation; and invest in better customer service both online and in store, accelerating our eCommerce plans and growing omnichannel sales; investing further into the analytics team and technology; transitioning to digital catalogs, providing digital content for our customers.
I'll now hand over to Matt.
Thank you, George. Hi.
I'm Matt Swindells, Chief Operations Officer.
Smarter Selling is truly end-to-end, extending across Coles, inclusive of our supplier partners. We now have fewer, bigger strategic partners on longer-term arrangements as key solution providers and sources of competitive advantage. The implementation of SAP Ariba has digitized the procurement process end-to-end, creating greater transparency and efficiency and importantly now enabling the inclusion of sustainability and risk management into the procurement process. Our supplier partnering is deeper, more integrated, with engagement focused around common strategic goals, streamlining communication and providing suppliers a clear role to focus on. Greg has already spoken about the significant improvements in the advantage supplier survey. And we continue with a sustained focus on strategic category planning, aligning those plans covering value execution, range and Own Brand collectively. Resultant relationships are now more proactive, responsive and customer focused, as demonstrated through the strong recovery during COVID.
Stores are the tip of the spear for our business, and driving sustainable efficiency through technology is at the core of Smarter Selling across operations. We are digitizing and automating processes to deliver better team and customer experiences, solving those increasingly complex problems through technology that can be scaled with limited additional costs once developed. A good example of this is our smarter forecasting, using machine learning to enhance the existing supply chain algorithms and increase availability for customers whilst reducing analytical effort for supply chain team members. We're also building new capability with fresh produce easy ordering, improving fresh produce availability and freshness and also building our next-generation replenishment engine for the wider business. Advanced analytics is delivering SKU store-level dynamic markdowns, optimizing margin versus life in real time and reducing team member effort in the process.
Through COVID, we successfully rolled out customer packing benches, providing a safer and more efficient process at the checkout for both our team and customers. This has since been further developed into automating the service experience for customers with new self-service belted lanes that provide flexibility for self or assisted checkout, faster throughput and more convenient and spacious experience. In the future, digitization of service will extend beyond checkouts, to wider frictionless technology throughout the store in-aisle. While we would have loved to take you out to our Moonee Ponds store to see some real-life examples of our technology, I'd like to introduce a short video of Sophie Wong, our General Manager of Profit Protection and Service, to show you some front-of-house initiatives; and Nathan Wallace, our General Manager of Operations, to take you through some of the back-of-house technology we are implementing in store.
Hi. I'm Sophie Wong, General Manager for Profit Protection and Service within the operations team.
Service transformation is a multiyear program and is a key component of the Smarter Selling strategy supported by a clear technology-led road map. The service transformation strategy supports our values of being customer obsessed, putting our customers at the heart of everything we do through delivering a customer experience that is safe, quick and friendly.
One of the key objectives is to optimize our front end of the store whilst providing customers with checkout choices and a frictionless shopping experience. We have seen an increasing preference to use self-service checkouts. To support our customer needs and preferences, we've expanded our self-service offer to include a purpose-built checkout for customers with trolleys. The trolley-assisted checkouts provides customers with the space to quickly and easily put larger purchases through. We've seen rapid adoption of these new checkouts by customers through our initial trial stores, with excellent feedback. Trolley-assisted checkouts will be installed in 12 stores by the end of this financial year.
Listening to customer feedback, we've also rolled out new options to help customers checkout more quickly and pack their bags the way they like. We've introduced customer bag-packing benches at the end of checkouts, where customers can choose to pack their own bags. The team member can pack their bags, or the team member and customer can pack bags together. In the end, it's about giving our customers choice. Our bag-packing benches will be in 460 stores by the end of this financial year.
Our Moonee Ponds store is a great example of our service transformation strategy coming to life, and we have seen excellent customer feedback come through. Through our Tell Coles reporting system, we've seen that feedback translate into excellent results across choice of checkout, the customer experience and their self-checkout experience.
Thank you.
Hi. I'm Nathan Wallace, and I'm the General Manager of Central Operations here at Coles.
Our Smarter Selling strategy has a key stream focused on embedding technology to improve and simplify our processes. We want to replace as many manual tasks as possible to system-guided ones, with the goal being to improve efficiency, accuracy and availability.
At the previous Strategy Day, we showcased a couple of the manual tasks that we were focused on solving. One of these was optimizing how we manage inventory when it arrives in our stores from our distribution centers. The manual process had 2 key issues. When product arrived, team members needed to know based on local knowledge what aisle each carton needed to go to. And we would take all cartons that arrived out onto the shop floor, whether it was actually needed for sales or not. We've now launched guided split in our proprietary app [ Simple Tools ] to address this.
It went live towards the end of last year, and more than 95% of our stores are consistently using the tool through utilizing advanced analytics and wearable technology. Now as team members process the inventory that has arrived from our DC, they're guided to a specific aisle location; or told that the stock is not needed for today's sales, in which case they store it directly in the stockroom. This tool has enabled us to remove 156 million carton touches a year and ensures we send stock to the right place at the right time.
So what's next? Currently we know how much total stock on hand we have in our stores and guided split has helped us make sure we're putting inventory in the right place when it arrives, but we currently still don't systemically know where each carton is located, so our next step is to make our stockrooms digital. We're working on building a tool which will mean we will have systemic visibility of what stock is where in our stores, meaning that we can then use this information to help our teams be even more productive and accurate. For example, once we have a digital record of where everything is, we can make the process of replenishing the shop floor from the stockroom even more efficient; a [ backstop pick ] tool, where team members no longer needed to take whole cages of inventory from the stockroom to the shop floor each day, and instead they could just scan each item and an alert would tell the team member whether it needed to go out for replenishment or not. This was a great first step and removed over 1 million redundant carton movements a week.
Once we have a digital stockroom and know where a carton is located, instead of scanning every carton, we will use advanced analytics and our smarter forecast engine to generate [ fill ] lists, which will guide team members to only scan and pick stock that they need at that time on that day. This is expected to remove over 2.5 million redundant scans per week and ensure that our team members are directing energy into tasks that will have the biggest impact. As you can see, leveraging technology and automating tasks has already produced some great results in our stores. And we're excited about upcoming features which will continue to deliver our goal of improving efficiency, accuracy and availability.
The use of technology extends from stores, into supply chain, where we continue to drive higher service at lower cost through integration alongside digitization. We are generating increasing value from the end-to-end optimization of the supply chain between stores, DCs and transport as part of the organization changes and programs implemented over the last year.
There have been significant improvements in freshness, with faster flows through the network shortening lead times from suppliers to customers. And we've also digitized a number of admin processes such as paperless operations, removing that manual process for inbound and outbound deliveries. Growing primary freight alongside our third-party logistics partners by an integrated transport model continues to increase, with 35% more volume delivered compared to 2 years ago and importantly with higher service levels. As we look to the future distribution network and operations, we continue to plan for automation considering a holistic approach to fulfillment of both eCommerce and brick-and-mortar supermarkets.
The future supply chain will be a more integrated network than ever across stores, transport, DCs, CFCs and technology. The build on our 2 automated facilities is on track and progressing well. And the teams have done an outstanding job mitigating any COVID disruption. This is a major strategic partnership and importantly is exclusive to Coles. It will provide best-in-class automated fulfillment, improving safety for team members, reducing manual handling and optimizing deliveries to stores. Each facility will be approximately half the footprint in size of a traditional DC but will supply double the current volume to stores and at around 2/3 of the operating cost. Witron are an established automation provider with an impressive record of 100% repeat purchase from their customers. To give you a sense of the progress we've made at our Witron facilities, I'd like to ask Kevin Gunn, our Executive General Manager of Central Operations and Transformation, to take you through some visuals of the 2 sites.
Good morning.
I'm delighted to give you an update on our ambient automated distribution centers in Queensland and New South Wales.
In January 2019, we announced our investment of $950 million in 2 new ambient automated sites, replacing the 5 manual sites you see on screen today with 2 new automated DCs, 1 in Queensland and 1 in New South Wales, allowing us to have the full ambient range in each state. This is our site at Redbank in Queensland, and you can see from the time lapse footage the size and the scale of the building and the overall site. The building itself has an equivalent space inside of the Melbourne Cricket Ground, twice; and at the high bay end of the warehouse is 35 meters tall, 2.5x the height of a more traditional-type DC. And it's this vertical space that allows us to use a smaller footprint.
You can see through the flyover the internal fit-out that our Redbank site has commenced with our global partner Witron, who has been working on site since October 2020. They're in the process of drilling over 90,000 holes in the slab to allow the installation of racking, conveyors, cranes, mezzanines and the specialized equipment that makes up automation. This video obviously shows the progress of this installation both across the high bay racking and the low bay areas. And some interesting facts: Over 17,000 meters of conveyors will be there when we've completed it, and over 750 kilometers of electrical cables. You can see from the 3D cutout that, once the site is complete, the automation and all of its associated elements will completely fill the space within this impressive building.
Now let's see the automation in action. This is the [indiscernible] site built by Witron in 2018, 1 of over 70 sites that Witron have already installed or are under construction. You can see the automation separating cartons, first of all, from the pallet and then from the [ layer ], putting those individual cartons onto their own specific tray; and then that tray being called down, ready to build the perfect pallet [ on the cone ]. You can see the automation works with simple pushes and pulls and those conveyors in action. One of the big benefits of automated DCs is an improved safety as well as the efficiency. And with the removal of manual handling and of manually putting product away in high bay racking, that safety is a huge attraction for our DC installations moving forward. You will see here the perfect pallets rolling off, ready to be rolled on to our vehicles.
This is our automated distribution center in Redbank, Queensland. And a year from now, we will be in the final stages of testing and commissioning. I look forward to welcoming you in person to a site tour at that point.
Thank you.
Thank you, Kevin. With that, I will hand over to Roger Sniezek, who will take you through our technology strategy.
Thank you, Matt. Hello.
I'm Roger Sniezek, Chief Information Officer.
Coles' technology strategy has been developed to support Winning in our Second Century. There are 5 pillars to the strategy. The first is technology foundations, which cover cybersecurity; our significant technology infrastructure, including data center and networks; enterprise tooling for our team members; and continuous improvements to our core stability and resilience. Within smarter technology, we are utilizing AI and machine learning across a large number of use cases. We are deploying foundational future capabilities such as master data management and order management; and migrating progressively to the cloud, where we've also built the foundation of our enterprise data platform.
Within technology innovation, we have a team called LAB288, which focuses on emerging technologies that can deliver material value to Coles Group. The core team, with expertise in the fields of machine vision, robotics, mechatronics and electronics, collaborate across the business on high-value use cases. We also work with partners like Accenture and Microsoft on various new innovations, and this typically leads to a proof of concept in our stores or distribution centers. A foundation we have developed for future innovation in stores especially is edge compute, which is the ability to reduce speed to market and undertake significant processing locally at low cost for applications like machine vision.
For our team members and operating model, we are continuing our journey to agile. With our eCommerce team leading the way, we're ensuring our teams can work effectively from anywhere. And we're also training the teams in new technologies like Microsoft Azure. Smarter procurement means that we focus not only on commercials but also, for example, ensuring we get the best resources from across the world from our partners, something which the last 18 months have shown us all how to do well and remotely across time zones. And we're always looking at global innovation with other retailers, start-ups and our partners.
On top of all of this, we have extensive business technology road maps which support the business plans into the future. And the purpose of the underpinning technology strategy is to allow us to execute these road maps faster and more efficiently. As I mentioned, the volume of work in the business technology road maps is significant. Coupled with the underpinning work to deliver the technology strategy, we are forecasting a 1.9x uplift in technology investment in the next financial year compared with FY '18. This clearly demonstrates our commitment to a technology-led strategy.
A great example of a business application which showcases the technology strategy is smarter forecasting, which was built by our own internal advanced analytics team. Smarter forecasting allows us to predict sales by SKU, by store, by day for our supermarkets. The better we do this, the better availability will be for our customers and the more we will reduce waste and cost. It is powered by a large set of AI models which utilize a wide range of features, including historic sales and current promotions, as you'd expect, but also weather events and a whole range of other features. Crucially, these models are robustly productionized into our core technology platforms and deployed into the cloud. Enormous computational scalability to run the models is provided by using the enterprise data platform running in Azure. We passionately believe that these models are unique to Coles and we should own the IP. And since we own the models, we're able to continuously improve them and respond to new conditions, for example, COVID-19.
Moving forward, smarter forecasting provides us with a single version of the truth, which is critical to joining up the whole operation and indeed organization end-to-end. It's a foundational platform for many other applications, most of which utilize further AI themselves, such as dynamic markdowns, which is enabling us to increase sell-through and reduce waste. And we're working on deploying this powerful engine across Coles Express, Liquor and fresh produce easy ordering. This is a wonderful example of how we're using our unique data assets to improve our customer offer, make things simpler for team members and deliver efficiencies for Coles.
I will now hand over to Thinus.
Thank you, Roger.
My name is Thinus Keeve. And I am the Chief Sustainability, Property and Export Officer.
Our new formats bring our Winning in our Second Century strategy to life, inspiring customer with -- customers with innovative new concepts, tailored offers, Smarter Selling operational efficiencies and, of course, winning together through sustainability initiatives and within our local communities. Our new formats started with Eastgardens in New South Wales in November of 2018. And they continued to evolve with the launch of our latest innovation store, Moonee Ponds, which launched in Victoria in March of this year. Having multiple formats enable greater innovation at pace and are an essential part to our future network strategy. We are making great progress. This year will be the largest single year of investment in over a decade, with over 60 stores being reinvested in. Tailoring the format and investment levels is obviously driving greater customer satisfaction, strong sales uplift and higher returns, with our latest performance the best in history.
The optimal format is determined for each store based on the customer shopping mission and demographics, the property type and store size and the relevance of the customer offer and store condition. Format A presents a full-line supermarket with all our latest innovations and concepts, with a targeted subset of innovations and concepts deployed into our Format B stores. Format C is focused on driving operational efficiency while also enhancing the fresh offer. And then of course, Coles Local is an innovative convenience-focused smaller supermarket tailored to the needs of the local customers, typically in high-density and more affluent locations. And then rapid innovation enables the accelerated rollout of our most successful new innovations and concept to a greater number of stores without the need to wait for a larger-scale reset.
In the 2 years since the Eastgardens innovation store launch, over 25% of our supermarket network has been updated or has opened with a new format. We are building a new store pipeline, delivering circa 1.5% space growth, SFA, in line with our network priorities focused on population growth corridors and market share gaps. And we are working with our landlords and developers to deliver new infilled opportunities in high-population-density locations through our small-format Coles Local. We are very proactive in managing our store tenure and investment profile to enable the ongoing optimization of the fleet as we look ahead to the future network requirements. We are also actively managing our [ store tail ] and have permanently closed 15 marginal stores over the past 2 years. This is an example of prioritizing productive stores over market share.
Through our network transformation, we will meet the future needs of the omnichannel customers, including in-store experience, Click&Collect and home delivery.
I will now hand to Kirsty and Jon, who will talk you through Moonee Ponds and the store's innovation concept and, of course, sustainability initiatives.
Hi. I'm Kirsty Davis, General Manager of Sustainability and Property Services.
Moonee Ponds is our flagship sustainability store. And it showcases how we're bringing our sustainability strategy and ambitions, which are focused around the 2 pillars of Together to Zero and Better Together -- as you can see in the store, we haven't just announced commitments. We're also making meaningful progress to achieving them. Let me show you around.
There are so many incredible sustainability features in the store, including our new fresh produce area, green alley. While packaging plays an important role in keeping products fresh, protecting them during transport and reducing food waste, we continue to look at ways to reduce the amount of packaging in our stores. Here we are trialing misting and cold plate, which allows us to remove packaging without compromising on freshness or quality. The cold plates on the bank also replace ice using less water. Other great innovations are helping us to reduce our energy use. We've added doors to many of our fridges, which reduces energy and improves our ability to regulate the store temperature. We're also capturing waste heat from the refrigeration system to help warm the store. And the roof has a rainwater-harvesting system, which cools refrigeration systems, reducing our water use.
Moonee Ponds is also the first Coles renewal store to be upgraded with natural refrigeration solutions whilst continuing to trade. Natural refrigerant gases have virtually no impact on the environment. During construction, 80% of waste was diverted from landfill for recycling. On sustainability alley, we have refill stations that dispense laundry soaps, household detergents, body wash, hand wash, shampoo and conditioner produced by major Australian brands such as Omo, Surf and Sukin. And this helps us further reduce packaging.
Our partners are a very important part of our sustainability strategy. This is the 10th year of our partnership with REDcycle, and customers can see the recycled plastic being put to use in the store. We have hand-sanitizing stations made from recycled soft plastic and new trolley baskets which are made from 90% recycled milk bottles and 10% recycled plastic collected through REDcycle. We encourage our stores to embrace their local community. And the Moonee Ponds store has partnered with the Ascot Vale Heights School and helped set up a Stephanie Alexander kitchen garden. This year, we are celebrating 10 years of partnering with SecondBite, enabling us to donate edible unsold food to the local community organizations around Moonee Ponds, including Flemington's People's Pantry, Asylum Seeker Resource Centre, Merri Outreach and Open Table. In the calendar year 2020, the store donated 4,310 kilograms of edible food, which is the equivalent of 8,620 meals. We're excited about what we have achieved and even more excited for what's next.
I'm Jon Haggett, General Manager for Store Development. Welcome to Moonee Ponds in Victoria, our most recent flagship innovation store.
Each year, we aim to launch one innovation store that brings together all of the innovations we are working on in the business in one location. Our innovation stores ultimately inform our new store blueprint, and many of the innovations you'll see here in Moonee Ponds will appear in our new stores and store renewals over the next 18 months. Some will also find their way to our top-trading stores through our rapid rollout program. We typically measure the innovation for 12 to 16 weeks; review its commercial and customer performance; and then take a view on whether to roll it out, modify it or exit. We have 51 innovations that we are assessing here in Moonee Ponds. 25 of those are already progressing to our next blueprint releases. 17 are being developed further, and 9 we have already chosen to exit. These innovative features could be aimed at driving sales, reducing costs while making our customers' or team members' lives easier or a combination of all of those. The store has been designed to also set a new standard in sustainability and help us create opportunities to reduce our environmental impact now and in the future.
In developing Moonee Ponds, we have also jumped into biophilic design. Biophilic design is about increasing our customer and team's connection to the natural environment, highlighting the importance of a team and community that is better together. We have living green walls, skylights in the roof and also a significantly increased use of natural materials.
[Presentation]
The video captures our bold ambition to be Australia's most sustainable supermarket and highlights that our commitments made are real and happening as we speak. Our sustainability strategy, which is a group-wide strategy, focuses on 2 pillars of Together to Zero and Better Together and encompasses the breadth of Coles' focus on sustainability. Together to Zero sets our ambition across key sustainability areas, including climate change, waste and hunger. It highlights that we will work together with our stakeholders to drive change in these areas, with high expectations for ourselves and the broader community. Better Together recognizes that, when we work together, we can make a real difference to our team, our suppliers and, of course, our customers and to the communities in which we live and work; that we are all really better together.
We engaged Nikita Ridgeway of Boss Lady Design and Communications to create our iconic sustainability icon. The dots, as used in the art of the Northern aboriginal Australian people, reflect the notion of community and with many different groups circling around a larger collective goal. The cross-hatching designs, as you see in the roundel, as used in the art of the Southern aboriginal Australian people -- and it represents a weaving technique used to create tools to hunt and gather food. Combined, they represent the importance of working together to protect and sustain life, meaning they align perfectly with Coles' vision and purpose and our sustainability ambitions of Together to Zero and Better Together.
Together to Zero details our ambition of emissions, waste and hunger. Our ambition together to zero emissions is underpinned by 3 commitments to deliver net 0 greenhouse gas emissions by 2050; to be powered by 100% renewable electricity by the end of FY '25 for the entire Coles Group; and of course, to reduce our scope 1 and 2 emissions by more than 75% by the end of FY '30 from a FY '20 baseline importantly. It is important to note that we've already signed 5 renewable energy deals to progress our 100% renewable electricity target, demonstrating that we don't just announce targets but we have a plan to meet them, as per what we showed you is already happening at Moonee Ponds. The makeup of the green energy deals include power purchase agreements, LGCs or large-scale generation certificate agreements and the installation of on-site solar. When they all go live, they will already enable us to purchase more than 70%, yes, 70%, of our electricity required to meet our FY '25 renewable energy target.
Even before we made this commitment, we were focused on reducing our emissions. We were the first Australian retailer to commit to buying renewable energy through a power purchase agreement in 2019 through MYTILINEOS RSD, which was previously known as METKA EGN. And I'm very proud to say that our first PPA officially commenced earlier this month, with the solar farm in Corowa in regional New South Wales now connected and generating electricity. And we already have a strong record on greenhouse grass -- gas reduction. We have already reduced scope 1 and 2 by 36.5% since 2009.
Together to zero waste details our ambition around waste reduction and recycling. We are committed to divert 85% of waste from landfill by FY '25, with a continued focus on food waste. As a food retailer, we love food and do not want it to go to waste. Our first choice for unsold edible food is to donate it to food rescue organizations. Following that, we have other food waste solutions, including donation to farmers and animal or wildlife services, organic collection and in-store food waste disposal equipment. We are making packaging recyclable in line with the federal government's 2025 national packaging commitments. As part of this, we are also reducing packaging in our supply chain and increasing the amount of recycled content in some of our product packaging. We are a founding member of the ANZPAC Plastics Pact, working collaboratively towards a shared vision of a circular economy for plastic. In February, we committed to no longer selling single-use plastic tableware, including cups, plates, bowls and straws, from the 1st of July. This move alone will divert over 1.5 million kilograms worth of single-use plastics from landfill each year.
We are very pleased that this is our 10th year partnering with REDcycle to deliver soft plastic recycling in Coles supermarkets. Over the past 10 years, we've collected more than 1.5 billion pieces of soft plastics returned to our supermarkets by our customers. We're not just collecting plastic. We're also putting it to good use, including using it in some of our supermarket car parks. We've partnered with Victorian recycle organizations RED Group and Replas to pioneer and install footpaths, curbings and [ footings ] made partly out of recycled soft plastics. And those are in our car parks at our Horsham, Cobblebank stores. Horsham was also the first commercial construction project in Australia to make use of Polyrok, which is made from plastic bags and soft plastic packaging recovered from REDcycle, available on all our supermarkets.
In another 10-year milestone, this year, we are celebrating 10 years of partnering with the food rescue organization SecondBite. This is a fundamental program as part of together to zero hunger and our ambition. Through our partnerships with SecondBite and Foodbank, we are helping Australians in need. These long-standing partnerships have enabled us to donate edible food and unsold food from our supermarkets and DCs, to provide the equivalent of more than 33 million meals to Foodbank since 2003 and 145 million meals to SecondBite since 2011. And that is to feed vulnerable people in our community. Again this is industry leading.
I will now hand you over to Sally, who will talk with you about our other pillar of the sustainability strategy, Better Together.
Thanks, Thinus. Hi, everyone.
My name is Sally Fielke, General Manager, Corporate Affairs. And I'm going to step you through how we're better together through diversity and stakeholder engagement.
So from Geraldton in the West to Ocean Shores in the East, we have 120,000 team members who are passionate about supporting farmers, suppliers, customers and the communities in which they live and work. We know that, when we work together, we can create positive outcomes for our team members, for our farmers, for our suppliers, customers and the communities. Better Together sets out our ambitions to detail how we'll work with all of our stakeholders to drive positive change.
In terms of a team that's better together, our team is better together through diversity. Kris will take you through this in more detail shortly, but as you can see on the slide, Coles is recognized as a leader in LGBTQ inclusion, winning a gold Australian Workplace Equality Index award in May 2021. We also celebrate diversity and inclusion through a partnership with Pride in Diversity, Australia's first and only national not-for-profit employer support program for all aspects of LGBTQI+ workplace inclusion. This partnership is helping us to drive positive change across 4 focus areas: internal policies, internal events, communication and community engagement.
So for a community that's better together, we believe we can build stronger communities when we work together to make a positive difference to support each other in times of need. One of the key ways we support those who are disadvantaged is through our major national partnerships with food rescue organizations SecondBite and Foodbank, which you've already heard Thinus speak to. We're proud of the support we provide across a broad range of local community initiatives through to our national partnerships. One partnership I'm particularly proud of is helping sick kids to get home from hospitals sooner as part of the Curing Homesickness initiative. Since July 2019, more than $3 million has been raised by Coles for children's hospitals across Australia. This includes donations from the sale of over 1.7 million jars of Mum's Sause products in less than 2 years. Supporting communities during times of need is something we're also incredibly proud of, whether it's through drought, floods, bushfires or cyclones. In February, March and April this year, Western Australians faced bushfires and cyclones, while New South Wales and Queensland experienced floods. To help those affected by natural disasters and support emergency services teams, we donated essential food and grocery items and raised funds in partnership with relief organizations, something we've done time over.
So for sourcing that's better together, we want to work with our suppliers and producers to make life easier for our customers by offering them quality, safe and trusted products which are sourced in an ethical, transparent and responsible way. We understand customers' concerns about making sustainable choices. And as part of this approach, we work with stakeholders throughout our supply chain, including farmers, food manufacturers, unions, transport providers and accreditation bodies, to promote best practice in ethical standards, safety, labor standards, human rights and animal welfare.
And in terms of farming that's better together, we also want to win together with our supplier partners; and are committed to building strong, multigenerational, collaborative relationships with Australian farmers and producers. We remain committed to our Australian-first sourcing policy in fresh produce in our supermarkets so we can provide our customers with quality Australian-grown fruit and vegetables as a first priority. We continue to safeguard animal welfare by sourcing higher-welfare meats and ingredients in Coles brand products, providing the broadest range of RSPCA-approved products of any major Australian supermarket. We're also supporting the food and grocery sector through the Coles Nurture Fund and have awarded more than $24 million in financial support to over 60 Australian small and medium-sized businesses since 2015.
I'll now hand over to Kris, who will take you through in more detail a team that's better together.
Thanks, Kris.
Thanks, Sally. Hi, everyone.
My name is Kris Webb, and I am the Chief People Officer here at Coles.
Given our 120,000-plus team members, this pillar is a critical element of our strategy. Our focus is on making Coles somewhere where everyone feels like they belong. And this extends to the welcoming experience our 22 million customers receive when they shop with us each week either in store or online. We care deeply about the communities in which we operate, and we believe that a team that is better together at Coles is able to connect with and service those communities. We have renewed our commitments to accessibility, pride and indigenous; and have made positive progress in all areas. We continue to strengthen our local pride networks in all states and to support inclusion and engagement at the local level. This year, we have implemented "welcome here" signs, a visible symbol of safety and inclusion for our LGBTQI+ customers and community members across Coles Local, Coles Liquor and Coles Express, with Supermarkets to follow soon.
Over 420 stores nationally now have [indiscernible] available for customers and families with sensory sensitivity. This year, we focused on increasing indigenous representation in trade and management roles, with more than 300 team members in these roles. And we remain committed to achieving our target of 5% representation in our workforce. We have refined our commitment in gender balance to focus on equity, recognizing it is important to achieve both balance and address equity, particularly from a pay and opportunity perspective. Under gender equity, we have renewed our commitment to achieving employer of choice for gender equality by 2023. Our total women in leadership has increased to 35.3%, and women in management to 43.6%. We are announcing improvements to our parental leave policy to encourage more men to take up carer's responsibilities with an increase in secondary carer's leave to 2 weeks. We have made progress on both a gender pay gap and pay parity measures. This year, we have reduced the pay gap -- pay parity gap for like-for-like roles from 1.5% to 1.2%, and we will achieve pay parity in like-for-like roles through investment over the next 2 years.
And finally, we've introduced a new commitment: belonging. This ensures we foster an open and welcoming culture at Coles, one which recognizes that our different backgrounds, experiences and perspectives are what makes us unique and helps us spark ideas to create connections and bring us together as a team. We're proud of the progress that we've made on our strategy, a team that is better together, and to be able to share that progress with you today. And that's a lovely slide -- or a lovely segue, rather, into the important role that we play within the Australian employment market, employing and engaging nearly 1% of the Australian workforce.
We have enjoyed consistent progress in our strategy of creating a great place to work over multiple years and have done so through a commitment to listening to our team members and to taking action as leaders. Over the past 2 years, we have improved team member engagement by 400 basis points. This represents significant progress for a company our size, and we know we have more to do over the coming years to achieve top-quartile engagement.
I've never been prouder or believe more strongly in our purpose to sustainably feed all Australians so that they can lead happier and healthier lives. And in 2020, our purpose could not have been clearer for our team members. We became essential workers, which came with a real sense of being critical to the community and being valued for the role that we play. Our values communication and education was key in instilling our leaders and team members with the practices of values-driven decisions. We delivered learning to our store leadership teams across all brands to equip them with the skills and knowledge to inspire and lead and engage their teams. Over 8,500 line leaders completed the line manager training; and nearly 6,000 leaders have completed workshops on team effectiveness across all of our stores, sites and brands. This year, we were recognized as #1 in GradAustralia's top retail sales and consumer goods graduate employer and #3 overall graduate employer. We also completed the implementation of the full SAP suite of SuccessFactors people modules and a new payroll system, enhancing the team member experience of the people practices here at Coles.
As we look ahead, our focus will be consistent. We will continue to build team member engagement. Over the past 12 months, we have significantly increased our focus on learning and career development, on feedback and recognition and on action planning. And the team's feedback on all fronts has been really positive. We'll continue to focus on these areas, and our investment in learning will continue to increase in 2022. We recognize that it's critical to attract and attain the best -- retain, rather, the best talent in Australia to deliver on our strategy. Our promise to team members must be clear, and we want to be recognized as an employer of choice within Australia. 2 groups which are priorities for us are younger Australians looking to kick-start their careers and professional talent looking to tackle complex business challenges. We want to show why team members choose to join, stay and grow their careers at Coles. You've seen this morning that, over the last 2 years -- sorry. Over the next 2 years, our workforce will transform with the growth in eCommerce, the introduction of the Ocado fulfillment centers and the completion of our new Witron distribution centers. This will require the reskilling of existing team members and building of new capabilities across our organization. We have partnered with TAFE New South Wales; upskilled team members in qualifications like the certificate 3 or 4 in supply chain operations; or reskilled by gaining qualification in hospitality, in health and maintenance.
Investment in automation and technology and finding smarter ways to work will enable our in-store and store support center-based team members and ensure that our talented team can continue to do their best work and work better together. We are continuing to build a great place to work at Coles, one which provides opportunities for many Australians to grow their career in a company that is purpose led and values-driven.
I'll now hand over to David, who will speak to safer choices together.
Thanks, Kris.
Turning now to safety. The last 12 months have challenged all of us like never before in terms of physical and mental well-being, be it our own, our loved ones', our colleagues' or the community. At Coles, our safety and operations teams have had to respond rapidly to crises including bushfires, floods and the COVID pandemic. I'm really pleased that our success in doing so shows the strength of our underlying safety plan, which has 3 pillars: safety leadership, critical risk reduction and mental health. Despite all the challenges, we've delivered strong results in these areas, including for the fourth year running another double-digit decrease in TRIFR, our injury frequency rate, this year. As a provider of essential services, we've served hundreds of millions of customers in the COVID pandemic, and yet we've shown time and time again that we can operate safely for our team and our customers.
In the next year, our focus is on critical risk reduction, the greater use of data and analytics to identify and address safety issues; investments in technology, especially in our distribution centers where we're rolling out Bluetooth technology that alerts the drivers of MHE when they're in physical proximity to someone on foot; ongoing mental health investments. We made a substantial investment in our partnership with The Resilience Project during COVID, with the ambition of being a leading Australian corporate in the area of mental health. And we're going to continue to invest in this area, including ensuring that our program is fit for purpose for some of our large team member cohorts such as the 5,000 or so indigenous team members, the almost 10,000 people who identify as LGBTQI+ at Coles and our disabled team members.
So thank you. That concludes the Win Together pillar of our corporate strategy, and we're now going to go to Q&A.
[Presentation]
Hi. My name is Darren Blackhurst. I'm the Chief Executive for Coles Liquor. I'm delighted to be with you today to share a brief update on our Liquor strategy and some of the progress that we've been making.
As you'll recall, I joined the business back in January 2020. And we reset our strategy in August that year, with the ambition of our liquor business to be a simpler, more accessible, locally relevant drink specialist. The vision and strategy now guides everything that we do, especially our 6 priorities that align to the group strategy of inspiring customers, Smarter Selling and winning together. Given the time today, I'll share some market and customer context, give an update on our strategic framework, detail the progress we're making and finish with a word on the importance of our 3 banners as we develop our omnichannel capability to serve customers better.
Firstly, let me start with some market and customer context. It goes without saying that it's been an interesting period for liquor retail, especially given the challenge and the opportunity brought about by a COVID-impacted trading environment. As you'll be aware, the liquor retail market has been extremely volatile during the last 12 months with panic buying, lockdowns, on-premise closing and reopening, voluntary limits, restricting volumes and a move towards greater in-home consumption all impacting demand in different ways and to a certain extent distorting the market share read from 1 month to the next. We saw elevated demand in big box, online and spirits during the period with a shift away from metro, CBD locations to more suburban and regionally located stores as the year progressed and restrictions eased.
From a broader customer perspective, tastes continue to evolve. Whilst premium brands remain important, there's a growing demand for local wine, craft beer and boutique spirits; and a clear move to lighter red wine varietals, rosé wine, gin of any description and champagne and sparkling. And despite the increase in drinking at home during COVID, we continued to see healthier drinking habits. Our growth in no- and low-alcohol and 0- and low-sugar alternatives over the past year certainly support this. Ease of shop, value and choice remained key for customers; as do the fundamentals of team member and product availability, a competitive offer and a clean shop.
Against this market and customer backdrop, we've been making some solid progress. If you'll remember, this is the slide that I shared with you last year. It guides everything we do as a team and as a business. We've shared this now with all key stakeholders and have now embedded key aspects of it into the way that we work on a daily basis. Our purpose is clear and links closely to the overall group purpose: to help adult Australians lead happier and healthier lives by drinking in a responsible and sustainable way. And it goes without saying that responsibility and sustainability are fundamental and essential to the way that we run the business and deliver for our customers within the communities that we serve. Our vision or ambition, if you like, is to be a simpler, more accessible and locally relevant drink specialist. This underpins our priorities and each deliverable within our plan. To that end, we have 6 key priorities with 32 key deliverables. These improve the business over 3 time horizons. And whilst we are very much in a simplify and refocus phase of our plan, we have initiated investments that will help us differentiate and grow the business over the longer term.
To give you a little bit more color on the progress that we're making. So I think I mentioned to you back in August last year our first key priority is to simplify the operating model and improve shopkeeping standards to ensure our offer, our in-store communication, our pricing and the way we operate is less cluttered and clearer for customers. Over the last 12 months, I'm delighted with the progress that we're making. So far, we've removed over 2/3 of point of sale from our shops. We simplified our shelf edge ticketing, improved availability for customers and reduced overall stock levels within the business. Our stores are now cleaner, less cluttered, simpler to operate and much easier to shop. Our second priority, in tandem with simplifying the operating model, is to refocus the business on some retail fundamentals, particularly the way we buy and sell. This has led to a complete restructure of the team and transformed the way that we work. The customer is now back at the heart of the business. And we've established clear and simple commercial and operating agendas that drive our longer-term joint planning with our suppliers and the day-to-day operational priorities for the store teams.
In our quest to inspire customers, we've initiated work on our third priority, to differentiate our offer and serve our customers better. As part of the restructure, we embedded a sourcing team within each category, bringing focus and expertise to the development of our exclusive liquor brands and helping us develop a much more focused and engaged local supply base. This has driven local and exclusive liquor brands participation [ of ] sales and helped focus the team on our longer-term brand and product development plans. Key to longer-term differentiation and growth is our fourth priority, to be more relevant, accessible and local. It focuses on the work we're doing to optimize our estate whilst accelerating our online and omnichannel capability. The latter is a huge growth engine for us. And given the investment we are now making in systems, order fulfillment and team capability in online, it offers us considerable headroom for growth over the longer term, especially as customers evolve the way they shop. From an online order fulfillment perspective, we're currently moving from 19 online hub stores to 4 dedicated dark stores. 3 of these are now open in Victoria, Queensland and Western Australia; and we have 1 more opening in New South Wales in the coming months. And central to our longer-term omnichannel ambition is the continued integration of our liquor offer into Coles Online to provide a better offer and experience for customers seeking to shop both food and drink. In the past year alone, we've doubled the liquor range with Coles Online. This is something that will continue to make us much more relevant and accessible to more Australians over time. With regards to the optimization of our estate, we continue to close suboptimal stores, with 26 closed since January 2020. And we'll be increasing our investments in our new store program to accelerate our future pipeline for growth. This will broadly double the number of our new store openings over the next few years. And work on our formats continues, and I'll say a word on this in a second or 2.
Our final 2 priorities are to build capability; and engage safely, responsibly and sustainably. And building capability and automating the way that we work are key to delivering our vision and will ultimately drive the future growth of the business. As part of our long-term plan, we're investing in our team, our systems, our online business and our estate. And in the past 12 months, we've commenced work on our team structure, started to invest in core system capability that will create a better, simpler, cheaper and faster business. And work we've done to simplify the business, as already highlighted, is also enabling us to invest more in service within our shops. Lastly and underpinning the whole strategy is our priority to engage safely, responsibly and sustainably in all parts of the business with all stakeholders and within the communities that we serve. In the last year, we've established a clear sustainability plan, created and delivered a [ BeeSAFE ] program to improve safety in our shops, launched the "choose to drink wisely" responsible drinking campaign and partnered with Clean Up Australia. We've also recently joined the International Alliance for Responsible Drinking or IARD, a global not-for-profit organization dedicated to addressing harmful drinking worldwide and promoting responsible drinking.
To close, I want to say a little more about our 3 distinct banners and the development of our omnichannel capability. Whilst we're on a journey with this, I think it's important to reflect on the banners that we have today and how they're evolving to meet the needs of our current and future customers.
Liquorland is still fundamental to our business and our future, and as such, we will be accelerating our investment in the renewal program. Liquorland is a well-loved brand, and this is currently being reimagined to be a local convenient specialist. With a multisite trial that we've initiated, to date, in black and white livery, it's clear that there is considerable latent potential in this brand, especially as we digitize it and further integrate our value proposition with that of Coles Online, creating a compelling food-and-drink offer for our customers.
To help you visualize the evolution of Liquorland, we have produced a brief video for you. This is our Moonee Ponds store.
Hi. My name is Brad Gorman. I'm the General Manager of merchandise for the Coles Liquor business.
I'm delighted to introduce you to our new Liquorland at Moonee Ponds today. In this store, we brought to life key aspects of our vision for Coles Liquor to simplify our operating model, differentiate our offer, improve our relevance and local credentials and most importantly to trade responsibly and sustainably. Based on extensive customer feedback, we've reimagined the Liquorland brand, a brand which is well loved, trusted and familiar to Australians but one we needed to reset to bring to life our vision to be a truly local convenient specialist. The first thing you'll notice is a completely new store blueprint with black-and-white colorways and clear navigational signage. We've differentiated our offer, driving stronger participation in local and exclusive liquor brands; and showcasing ranges which reflect what our customers are looking for, including more local wines, craft beers and boutique gins. Within the wine category, we've reset the range to expand into lighter styles like Pinot Noir, Tempranillo and Sangiovese; and growth categories such as rosé to provide more choice for customers.
Driving a seamless experience within our omnichannel business to support this significant growth channel is another key feature of our black-and-white stores. Allocating more space to Click&Collect and a closer integration with the Coles Online offer are significant changes to the customer offer in this area. Simplifying the operating model has been a key area of improvement. Within the store, we've reset the ticketing to ensure clarity of pricing and a focus on value. We've also significantly reduced point of sale in store, reducing waste in print and production, changes that have now rolled out across the entire fleet.
At Moonee Ponds, we hope we've created a store that locals will love to shop and pairs well with the innovations in a Coles supermarket.
I'll now introduce Steve Hugginson, our General Manager of Operations, to talk through the evolution of our service model and the sustainability initiatives in the store.
Thanks, Brad.
I'm delighted to be able to share with you today some of the significant improvements we are making in our mission to trade safely, responsibly and sustainably. Building capability within the black-and-white Liquorland is a key to success. Investing in additional hours for the store and team training as part of the brand transition is a key aspect of the renewal to ensure the team is set for success with greater product knowledge and time to serve.
In Moonee Ponds, in addition to all of the great work creating more relevant ranges and simplifying the operating model are the changes we've made to creating sustainable stores and stepping on the environmental credentials of our shops, which will inform the work we do in future store renewals and new store builds. A couple of those key sustainable initiatives are refrigeration. We replaced the old cooling with a new unit using inert gases which produce less emissions and are more energy efficient. With our flooring, the new flooring is more environmentally friendly, as it holds a certified Green Star tag and is manufactured using recyclable materials and is suitable for recycling. With our lighting, the use of environmentally friendly non-PVC plastic in our track lighting and lighting [ for rack ] has been replaced to ensure more energy-efficient LED globes are in use. As a result of these initiatives and others, we've created a net-positive-energy store, a key milestone on our sustainability road map.
I'm really proud of the sustainability credentials represented in this store. However, I'm even more proud of the reduction in waste and energy usage across the entire store fleet as we roll these changes across to all of our stores.
Thank you.
With regard to our other formats. First Choice Liquor Market continues its successful rollout, 75 stores now complete, with more renewals to come in the new financial year. This is our warehouse, where destination, bulk, more choice, better value are all watch words for this banner. And then we have Vintage Cellars, a brand that has potential to capture the real spirit of the indie, a place where service, knowledge in local and craft and boutique can truly come to life, together with some of the more premium offerings that you can see here in our vault. The work the team is doing to evolve this brand is really encouraging. As ever, we've got more to do, but customers seem to love the changes that we're making, and we will be renewing more stores going forward.
As you can see, 3 banners, 3 distinct brands, all evolving, all with headroom for growth, especially as they will be underpinned by the continued development of our online and omnichannel capability. Over the life of this plan, we will create a seamless experience between our shops, the online offer, allowing our customers to shop the way they want to with us, building loyalty through greater synergy with Coles Online and the flybuys ecosystem in the process. I'll leave it there for now, but by way of summary for me, there are 3 key takeouts. Firstly, there is considerable latent potential in this business. Secondly, the market and our customers are evolving, and this is an opportunity for our business. And thirdly, our vision, strategy, the investments that we're making and the delivery of our 6 priorities will lead to sustained growth over the long term.
Thank you. I'll now hand over to Michael Courtney, who runs our Express business.
Thanks, Darren. Hi.
I'm Michael Courtney, Executive General Manager, Coles Express. And I'm pleased to be providing an update today on Coles Express' progress of late and our strategic focus areas as we move forward.
The last 2 years for Coles Express has been a phase in our strategy which we refer to as more from the core. The focus of more from the core was to win with customers by improving our underlying convenience proposition whilst investing in enablers of future growth. I'm pleased to say that more from the core has seen us deliver material improvements, which can be summarized through the following key points. First, we have improved underlying profitability, meaning that we are now more profitable at a lower level of fuel volumes than previously assumed. This has been achieved by delivering above-market sales growth and through robust cost controls. Crucial to this improvement has been better planning and engagement with our supply partners. I'm pleased to say that, based on the most recent Convenience Pulse supplier survey, we now rank first in the channel on supplier engagement, which is a material improvement from where we ranked at the beginning of our more from the core journey. Second, we've done a better job at leveraging synergies with Coles. Examples of this include leveraging Supermarkets' convenience range where appropriate, extending key customer campaigns into our channel or by playing a role in the Coles Own Brand powerhouse strategy by developing our own award-winning blend of Urban Coffee Culture sold exclusively at Coles Express.
Third, we have made meaningful investment into 100% of our store network. This has included initiatives such as new self-serve coffee machines and fast-lane fridges. And we are now just under halfway through the refurbishment of more than 130 sites, which we expect to complete at the beginning of the second quarter in FY '22. Fourth, we have made significant improvements with the team, led by greater clarity on strategy and greater focus on reward and recognition throughout the business. We've also invested in our team, with one example being the launch of the [ Express Yourself ] learning platform, which is an innovative learning and development program that aims to provide customers with channel-leading service. Lastly, sustainability is an area where the expectations of our customers and our own ambitions have grown rapidly. We have developed a road map that we believe will see us play a channel-leading role in sustainability. It's early days and there remains much to do, but we have already delivered a number of channel-leading initiatives in the area of ethical sourcing. These include the use of hormone-free beef in our Own Brand hot food lines, RSPCA chicken in our sandwiches and wraps and achieving the Rainforest Alliance certification for our new coffee blend.
Whilst volumes have remained below pre-pandemic levels, there has been a gradual improvement in underlying volumes as customer behaviors normalize. Even prior to the most recent lockdown, Victoria, which represents our largest market by number of sites, remained a material laggard to the rest of the nation. Despite volumes remaining below the level we've expected at the time of renegotiating the alliance agreement, Viva have maintained share despite the headwind from Victoria and competitors rolling out new space more aggressively. This has been achieved through improved customer perception; greater investment in forecourt optimization; and marketing investment in the Shell brand, which is recognized by customers as a quality fuel offer. Whilst the pandemic has negatively affected fuel volumes, it has also led to elevated shop sales growth within the channel. This can be seen in the chart on the right. In addition to the benefits of elevated channel growth, this chart shows that Coles Express has also grown share through this period. This validates the strategic investments that we have made through the more from the core phase of our strategy, in addition to benefits which we have seen from a dedicated focus on value, ranging and availability, as customer missions have changed.
At the end of FY '21, we transitioned from the more from the core phase of our strategy to the grow our potential phase of our strategy. If more from the core was about winning with customers by improving underlying convenience proposition whilst investing in enablers of future growth, then grow our potential will see us win with customers by leveraging these investments to deliver new experiences to customers and better capability to our teams. The investments in planning we have made will start delivering these solutions under our 3 strategic pillars from first half '22.
Under Inspire Customers, with investment in systems and through format optimization, we will have the ability to offer increased tailoring of the store experience, providing a more relevant store experience based on location and customer needs. In digital, we will launch a transactional app through first half '22 that will allow for mobile fuel payment. This is the first of a series of initiatives that will allow Coles Express to play a role in serving Coles' customers digitally. We will also continue to leverage Coles' food credentials to improve our range to meet the changing needs of customers in a way that differentiates us from competitors on quality and value.
Under Smarter Selling, whilst rolling out our core refresh program to over 130 sites, we will also enter FY '22 with some trial sites on the ground aimed at dedicating more floor space to food-to-go categories and building on the foundational elements of our core refresh program. The last 2 years have seen a phase 1 investment to re-platform our core replenishment, ranging and space systems. This is being rolled out currently, and we'll see more efficient store processes and material working capital savings. In terms of enhancing our commercial efficiency, this is the opportunity to invest in tools which have been deployed in Supermarkets to drive better pricing and promotion decisions.
On winning together, we will continue to build upon the investments that we have made in the [ Express Yourself ] platform, which is critical to delivering best-in-channel service for customers. On sustainability, as mentioned previously, we have made inroads on an ambitious agenda and will continue to work alongside our alliance partner and in line with Coles Group objectives to create a more sustainable future. We will also continue to grow our community and strategic partnerships. This is an area which our teams tell us is incredibly important through our team engagement survey and aligns to our group value of responsibility. Redkite is an example where we have leveraged a group partnership to support in a way that is relevant to our team and channel, and this has seen our contribution to Redkite increase over tenfold in recent years. We have expanded our support to other causes such as Movember which you can see represented on this slide.
I'd like to conclude my presentation today by saying that the last 2 years have seen improvements throughout the Coles Express business. And myself and the team are excited about the opportunity for continued growth over the coming years.
I'll now pass over to our Chief Financial Officer, Leah Weckert, who will take you through the Coles financial framework.
Thank you.
Thank you, Michael.
I'm Leah Weckert, Coles' Chief Financial Officer.
As Steven outlined at the start of our day, our objective is to deliver long-term shareholder value. We do this by focusing on 3 key things: firstly, a focus on sustainable returns across the business through setting ROC hurdles well above long-term WACC and aligning long-term incentives to ROC; secondly, a disciplined approach to capital allocation; and finally, maintaining a strong balance sheet with solid investment-grade credit ratings to ensure we have access to diverse debt funding sources. I'll talk through each of these now in turn.
Over the past 5 years, Coles has consistently improved return on capital when adjusted for the impact of AASB 16. All growth, efficiency and renewal capital is required to deliver returns well above our long-term view on WACC and, when blended, give us an attractive overall outcome. In the short term, Witron and Ocado CapEx and start-up costs will negatively impact ROC prior to the delivery of benefits once they are fully operational.
We take a disciplined approach to capital allocation. At the core of this is the generation of sustainable operating cash flows, which through COVID have demonstrated their resilience. Firstly, we use our cash flow to ensure we maintain the business; pay our debt obligations; and deliver on our dividend commitment to you, our shareholders. The excess cash that we have once those 3 things have been considered is then used to create value through capital investment in growth, efficiency or property development initiatives as a priority, which we refer to as returning capital. Or excess capital is returned to shareholders. We are in a good position currently, with a range of strong-returning growth and efficiency initiatives available to us over the medium term.
Over the past 2 years, Coles has demonstrated a trend of strong cash generation, growing operating cash flow and delivering cash conversion of over 100%, which was our commitment. Given the importance of maximizing cash flow for the business, we have a disciplined focus on working capital, in particular optimization of inventory levels. A number of capital investments have delivered greater visibility of inventory, and we will continue to optimize this into the future. This disciplined approach to the management of working capital and operating costs has provided the company with the confidence to invest more.
Inclusive of FY '21, over the past 3 years, our average annual gross operating CapEx spend has been approximately $300 million higher than pre demerger, while at the same time, we have managed to grow our ROC, as I indicated earlier. Key areas of focus have included increased investment in renewal, spend on transformational automation with Witron, increased investment at -- in technology and the use of data in the business. We have a strong balance sheet and a number of strategic initiatives requiring investment that support long-term earnings growth at attractive rates of return. Many of these have been outlined through the earlier presentation by my fellow executive team members.
So given the opportunities we are seeing, we plan to step up investment in gross operating CapEx to a level of up to $1.4 billion in FY '22. The incremental year-on-year spend will be deployed on Witron and Ocado, with FY '22 being the peak year of capital spend for these 2 combined projects. We will also be investing deeper to enhance our omnichannel offer for our customers. An example of this is prioritized funding for eCommerce offer expansion and acceleration of growth categories such as best buys and store-specific international ranging. Efficiency initiatives will also benefit from increased funding, with produce easy ordering and front-end service transformation that Matt spoke about earlier being examples of this. Liquor will also receive investment for Liquorland renewal and new space. These initiatives will provide good returns and are an attractive use of the balance sheet capacity that we have built up over the last few years.
Our process for determining which projects receive capital includes a prioritization framework which balances strategic importance and returns. The strategic importance measure as part of the matrix is driven by Coles' 5 strategic differentiators, as a starting point. Our WACC and internal hurdle rate falls into the low category on the x-axis. Around 90% of returning gross operating CapEx falls into the green and yellow boxes. Examples of initiatives in the green boxes are store-specific ranging, expanding and enhancing the Click&Collect program. Examples of initiatives in the yellow boxes are the store renewal program and fresh easy ordering. In addition to this prioritization of returning capital, an allocation of capital is made each year for nonreturning essential and maintenance capital such as life cycle management of refrigeration and IT equipment, IT security initiatives and basic repairs of stores.
The focus on growth opportunities and efficiency, particularly through Smarter Selling, means that we have seen a significant shift in where our CapEx is going compared to 5 years ago. 5 years ago, around 3/4 of our CapEx was going into the traditional bricks-and-mortar network and maintenance. Next year, more than half will go into growth initiatives aimed at growing sales and revenue through digital engagement, expanded range and reach of offer and also efficiency initiatives that are transforming our business and its cost base for the future. Delivery of the 2 Witron automated DCs in New South Wales and Queensland and the 2 Ocado robotic CFCs in Victoria and New South Wales is a big focus for the business over the next 2 years. In FY '22, we expect Witron CapEx to be approximately $290 million, the peak year for spend on this project. Project OpEx for the combined Witron and Ocado projects is expected to be up to $75 million in FY '22 and up to $160 million in FY '23 as the projects are completed, filled; and double running occurs during transition. And these are one-off in nature.
There will also be commensurate impacts on depreciation and amortization. In FY '22, total D&A for Coles Group is expected to be between $1.67 billion and $1.72 billion. This is driven by the step-up in CapEx spend but also from a step-up in AASB 16 leasing impacts, including the Queensland Witron site coming onto the balance sheet as a right-of-use asset that will begin to be depreciated.
Our shareholders have told us that the dividend is important to them and a key differentiator for Coles as an investment proposition. We have also heard from our shareholders the importance to them of franked dividends. Since demerger, we have delivered fully franked dividends. And as we have always said, dividends will continue to be franked to the maximum extent possible. Our target dividend payout ratio remains unchanged at 80% to 90% of earnings whilst always remaining at the discretion of the Board.
I would like to acknowledge and thank the relationship managers from our debt providers that are watching today. You have supported us through the uncertainty and volatility of the last 15 months, and for that, we are very much grateful.
At the time of demerger, Coles initially drew down $2 billion from committed debt facilities. Since then, we have proactively managed down that debt to a net positive cash position at the end of the first half. This has been done through careful working capital management; and supported by the divestments of property sites, the hotel business and the Coles Express fuel rights. With the increased levels of investment that we have described today, we expect the net cash position to reverse but to remain below the net debt position at demerger for the next couple of years. Since demerger, we have significantly diversified our debt and lengthened the tenor to 7.2 years through 2 successful [ AMTN ] placements. We have also achieved pleasing reductions in our cost of debt.
Our debt funding framework is conservative and is intended to provide funding flexibility through all economic cycles. Maintaining strong credit metrics and access to debt markets remains an important part of our capital management strategy. Our current ratings of BBB+ with Standard & Poor's and Baa1 with Moody's allows Coles to diversify our funding profile and increase our average tenor of debt over time. Coles remains committed to retaining solid credit metrics.
So in summary. We have some exciting plans over the next couple of years to invest in the business whilst delivering attractive returns.
And I'd now like to invite my fellow ELT members to join me up on stage for the final Q&A session before we wrap up for the day.
[Presentation]
This Q&A session will cover the first 4 sections from this morning's presentation, and we request questions focused on these sections only. Any further questions will be added -- will be addressed during our final Q&A session to be held at the conclusion of the presentation. [Operator Instructions] Your first question comes from Andrew McLennan of Goldman Sachs.
Just wondering, Steven, if I could just ask around your -- the space forecast that you're anticipating. Obviously it looks like from small stores, but correct me if I'm wrong there. And just how you square that away with the limited population growth, at least in the short term; and also probably more importantly, the increased capacity coming through from online, particularly the Ocado Smart Platform. It looks like, if I can take a guess, that you're looking to increase market share and will need an increase in capacity to drive this. It looks a little bit incongruous, but that may be the conclusion, so if you can just sort of talk through that point, please.
Thanks, Andrew. And a great question. And I might get Thinus to get involved in a second. I might just sort of give a helicopter view first, which is I think most people are still expecting that there'll be 10 more -- 10 million more people in Australia over the next couple of decades. And we've got to cater for the long-term growth here, not necessarily short-term growth. Obviously we want to win in online. We've talked about that. And we expect online sales to be more than 10% of total sales going forward, but this is a strategy to win. We think we will have the best offer both in stores and online in the future and that we'll have a competitive advantage through the automation and Smarter Selling programs, but I might hand over to Thinus here on my right just to sort of fill in a bit more detail. Thank you.
Thank you, Steven. Thank you, Andrew, for that question. Yes, just to add a bit more: We look at our property strategy on a very long-term basis, 20-plus years. Of course, there will be impact in the short term and we're aware of that. And you're right in saying that the smaller format will play a part in that space growth we foresee. If I can just touch on the online question: I mean, Ben was clear in his presentation. We will always have an omnichannel strategy and looking at it from a long term, bricks-and-mortar will play a part in that. So from that perspective, we think 1.5% is the right space growth required from an SFA perspective over the long term. Thank you.
Your next question comes from Michael Simotas of Jefferies.
A question from me on your online strategy. How do you plan to solve for Click&Collect as well as same-day delivery? Will that eventually plug into Ocado? Or is that going to be -- or is the plan to continue to fulfill those orders from store? And if you do plan to plug into Ocado, does that mean you'd then need spoke facilities or something similar to micro fulfillment centers down the track?
Thanks, Michael. I might hand you straight across to Ben.
Yes. Thanks. Thank you, Michael. As Thinus just said, stores are really an important part of the overall eCommerce strategy and the network that we require. What we've done in this quarter is expand our Click&Collect offer, standardize it effectively nationwide. And as you do that, you have more nodes to be able to fulfill a same-day type of experience. We're really excited about the CFCs and what they're going to bring to market. And of course, Ocado has a number of ways to serve the customer, so we have a lot of options going forward in the future. So we look to continue to develop that with them, but we're really excited about what we're going to bring here to Australia for the customer with Ocado.
But so if you do plan to automate these types of orders at some point, does that mean [ incremental CapEx relative ] to what you've laid out?
[indiscernible].
I might hand that one to Leah.
So in the CapEx plan that we have announced today for the $1.4 billion in FY '22, there isn't anything in there specifically around automation for next day or -- sorry, same day or immediacy within the online space. We are very focused on landing the CFCs. And we still have plenty of capacity and runway in terms of productivity improvements we can get in the store [ pick ] model that we have that we'll be looking to capture.
Your next question comes from Ross Curran of Macquarie.
I've got a question just around Slide 13, on market share. So you've lost about 60 basis points of market share since pre COVID, and that translates to about $700 million of annual sales. Clearly you guys have been impacted by the store locations in shopping malls and CBDs. Can you help us understand or give us some customer traffic numbers on the [ CBD ], neighborhood and shopping mall-based stores; and how that's been tracking over the last few months? Just so we can see if those customers are starting to come back into those stores again.
Thanks for the question. I think it was about just over a month ago when we were out with our Q3 sales and we gave an update on what was happening in Q4. And to that point, we said that there was clear evidence that local shopping is unwinding. And that's still the case today. So what we're seeing -- and I'm not talking about Victoria now because obviously we're back in lockdown and circumstances have changed, but in the rest of the country, we're continuing to see a normalization. And that normalization, you would expect, would overall benefit Coles into the future. So the only new news that we're announcing today about short-term trading -- given this is a 5-year story, not a 5-week one, the only new news we're giving today is that our online sales are significantly higher standing here today than they were at the end of Q3. So 5.9% of sales in Supermarkets, 4.2% of sales in Liquor. And those are both significantly up on the prior 2 quarters, so it really shows that the strategy that Ben has been talking about today is working even outside of the pandemic. The other thing we've done is just give you the market share number for April. We told you what the sales were in April or gave guidance. And really that just demonstrates that, since Q2, our market share has been consistently improving. And we expect that to continue not through the investments we're making today because the investments we're making today are about long-term further growth, further efficiencies. There's trading plans and so on to drive short-term sales performance.
Your next question comes from Craig Woolford of MST.
Steven and team, just wanted to ask a question around the CapEx related to your Format A and Format B stores. You've -- obviously spending more on those stores because they have been the right locations, but is it a substantial fit-out cost? And could that mean that elevated levels of CapEx continue beyond FY '22?
Okay, thank you. I'll hand over to Leah, and -- but it might be something that she wants to talk a little bit more when we go into the financial section as well. Leah?
So the CapEx that we typically spend, you're right, on a Format A or a Format B is typically higher than what we would spend on a Format C store, with Format As typically the largest CapEx spend because that is where we are putting in the most innovation, the more new offers that we roll out. As with all of our CapEx, any format development and renewal program that we have for a particular store needs to pass our internal hurdle rates that we have. So we need to have good confidence that those stores will be able to deliver the sales uplift that we would need to deliver that return to make us prioritize CapEx to put into that store. So we will continue to prioritize A and B renewals, but at this stage, we're not calling out a significant step-up in renewal CapEx. The step-up that we're seeing in CapEx is largely in other areas. Does that answer the question, Craig?
Your next question comes from Bryan Raymond of Citi.
Sorry. I was on mute there. The -- my question is on online and the incremental costs that we've -- that we're seeing come through there. So most notably, some of these are newer initiatives, like 90 minute Click&Collect and same-day delivery, relative to more traditional Click&Collect time lines and maybe next-day or even 2-day delivery. Can you help us understand how that impacts online profitability and whether that's something you can charge for and see some sort of offset there through delivery fees or some other form of revenue?
Bryan, the short answer is that our online business is profitable. And Click&Collect is more profitable than home delivery on average, although there's lots of different permutations. I might hand over to Ben to talk a little bit more about some of the innovations and how he sees the sales-versus-cost trade-off. Ben?
Yes. Thanks for the question. One thing we see is, when we have improved customer experience, we actually reduce cost. Bad experiences create operational inefficiencies at the beginning of the customer journey, all the way through to the end of the customer journey. Our NPS has more than doubled. And that's a customer metric, but I can tell you that it's playing through all the way to the bottom line. So by being experience focused, it's actually having a good benefit. With Click&Collect, we offer Click&Collect Rapid, 90 minutes order to pick up. And this is actually a differentiated service that we offer for $5. So we've seen great take rate on that and that's also profitable in and of itself. And lastly, we talked about Coles Plus, which is a monthly membership subscription program. So that's also adding to the economics of eCommerce. There's other things that we're working on as well that'll drive profitability, but it really starts with customer experience.
Thanks, Ben. I might just add to what Ben said there. And he talked about the experience and how it drives costs or not, but the support center -- or the call center is another great example of that, Ben, where we've managed to become much more efficient. The number of people calling our call center is going down, and that means actually less cost as the experience improves. So there's another example of how a better business drives sales. You then drive scale and then you drive further profitability. Thank you.
We appear to be having technical difficulties at the moment. Please stand by.
[Technical Difficulty]
[Operator Instructions] Your next question comes from Ben Gilbert of Jarden.
Steven and team, just first question [indiscernible] just on the Ocado [ side of things. It just seems ] obviously, when you get the 2 CFCs up and running in fiscal '23, there's going to be a material increase in capacity across the globe [indiscernible] $1 billion online capacity. Just I'm just interested in how you sort of look to ramp and fill that quickly. And do you sort of sit there and [ get more ] aggressively around promoting the offer? What do you do to really sort of driving that quickly?
Thanks, Ben. There's a little bit of noise in the background, but I think I caught the gist of your question. As we've said and as you can see from some of the videos, the -- Ocado and -- Ocado Melbourne, Witron Queensland are both going to finish building next year. So that's exciting. It's gone from a contract 2 years ago to something real next year. What we've learned from around the world and all the other customers who are using Ocado successfully is that you start with a soft launch, friends, family; and you build capacity slowly. So we're not expecting any big changes in FY '23. We'll expect that capacity will ramp up. And capacity will come from 2 places. One is stopping delivering from home delivery stores in that catchment. And the second is obviously new customers from the extended range.
[Operator Instructions] Your next question comes from David Errington of Bank of America.
Steve, the impression that I've got -- I mean you've given a great presentation on inspiring customers and what you're looking to do and through Smarter Selling, but the message that I'm taking away today -- and I want you to clarify whether it's the right message to take away, but the industry -- post COVID or during COVID or pre COVID, the industry is becoming a lot more capital intensive to win to -- basically to inspire your customers. Now you've had great success with your NPS up 610 basis points, but what you've outlined today is a significant step-up in capital requirement. I think that was one of the key slides that you put in, that to really win, you need to step up that capital requirement in digital store formats, automated DCs, sustainability, et cetera. Now is this obviously going to be a winning strategy, this step-up in CapEx? Or is it basically just to offset a trend that the industry is becoming a lot more capital intensive to service customers in the Australian market?
Because I've come away thinking today it's a lot more capital intensive than what I was thinking yesterday. And obviously, from a shareholder's perspective, that does cause me a few concerns as to whether the industry has changed in some structural way that is we're going to require this investment; or whether it's just Coles saying, "No. We've got a great balance sheet. We're going to go for it," and this is going to be a winning strategy for Coles going forward. So could you spend a bit of time just elaborating on what the key message is in a summary format on that, please?
Yes. Thanks, David. It's definitely b, the answer on that one, not a. So look, there's no question that there's a world of opportunity ahead of us in food and liquor and convenience. More -- and by the way, the amount that we're announcing today is a shorter list of what the opportunities were. We've spent an enormous amount of time as a team trying to focus on the things where we will get the best long-term return for shareholders and give the best customer experience, but there is no doubt that investment in the industry is rising from all players. And that's existing players and it's some of the new disruptors as well. What I do believe in the future is that Coles has an asset base that's unique. We've got some partnerships that are unique. And I think we'll end up with an offer which is differentiated online and we'll end up with a very low cost base because of our automation. So this is a strategy that we think is a winning strategy, not a "keeping up with the Joneses" strategy. And you always have to look at it from a point of view that, when you saw those market share numbers earlier, there's 80% of the market outside of Liquor that we don't have and there's 70% of the market outside of Coles Supermarkets that we don't have. And I think one of the things that's changing in the future is the cost of automation is significant, but so are the returns, and therefore it will favor the scale players. And the same with data, we will have as much data as anybody in the future. And leveraging that data, leveraging automation means that we think we'll very much have a winning strategy. This is not a keeping-up strategy.
Your final question comes from Grant Saligari of Crédit Suisse.
I'm also sort of trying to reconcile the short-term increase in CapEx, I guess, with the Smarter Selling benefits that you've outlined. The quantum of Smarter Selling benefits over FY '23 hasn't changed since the last update. And CapEx obviously has been brought forward in investment initiatives, as you've outlined, so I'm just trying to reconcile that difference. Is the implication that you're expecting to get more benefits either longer term or shorter term on the sales line that maybe we don't see in the Smarter Selling benefits line? Which -- and the [ other efforts ] on the sales line would be -- I guess you're indicating that you will be anticipating getting more market share or market share at a faster rate than you've got in the past. So I'm just wondering whether you can elaborate on that at all, but it's just interesting that the Smarter Selling benefits haven't changed yet the mid-term CapEx obviously lifted.
Yes, thanks very much, Grant. I might just hand over straight to Leah on this one.
So good question. In terms of what the step-up in the CapEx is looking to focus on, it's not all on Smarter Selling. And you're absolutely right. We're still targeting the $1 billion out by the end of FY '23. Really, the rationale that we've got for the step-up in the CapEx that we've announced today, I guess it comes from a place of, over the last few years, we've done -- or last couple of years, we've been really pleased with the progress that we've been able to make on reducing our debt level. And so we're in a very strong position now from a balance sheet perspective. In addition to that, we've been very successful in demonstrating that we can drive good ROC outcomes. And the initiatives that we've invested in, in the last couple of years have really delivered on a set of attractive returns for us, so that's given us a lot of confidence to move forward. At the same time, we've seen a lot of opportunities that have arisen on the back of COVID. And some of those are in the eCommerce space and the digital space. Some of them are in the efficiency space. And many of these opportunities for us, we view as quite low risk. They're organic opportunities that we have strong line of sight to the returns that they will deliver for us. And they're organic in nature, so the risk is much lower than were we to do something where we were going and making a large acquisition or something like that.
Now some of the investments that we are making, particularly in the space of efficiency, where we are seeing this step-up -- and I'll call out a good one from my perspective is the fresh produce easy ordering that you saw Matt talk about. Some of the benefits with them are not going to come through for a couple of years. So some of this investment is actually setting us up for the efficiency phases that we've got, if you like, the next phase of Smarter Selling, once we deliver the $1 billion at the end of FY '23. Does that answer the question, Grant? [indiscernible] -- okay.
I think [indiscernible].
Would you take a few more questions?
Okay.
Your next question comes from Scott Ryall of Rimor Equity Research.
I think [indiscernible] for Ben. I was wondering, Ben, if you could talk to 1 or 2 key customer-facing initiatives that you think has helped your online business growth in the last 12 months. And what has enabled those initiatives at the back end of your business, please?
Thanks for the question. What I heard was just improvements overall in the customer experience. Was that...
What's been the biggest improvements over the last 12 months in the customer experience?
Yes. I think the biggest thing is we've just changed the way we're working. We've talked in the past about being able to solve customer problems a lot faster. So while we have big initiatives such as bringing Ocado CFCs to market, we're providing fortnightly releases for the customer. Use an example like Coles Plus, the membership subscription model that we have. That membership base has grown 3.5x from the beginning of the third quarter to the end of the third quarter. And within that quarter, the member or the customer had a number of new releases to them. For example, they're able to see how much time they've saved by using a Coles Plus subscription. And the last release, about 2 weeks ago, the member can now see how much money they're saving by being a Coles Plus member. I think that -- we can go into the details of these types of things. There's big initiatives. Click&Collect, we talked about that, but the real difference that I think that we're seeing and that the customer is experiencing and grading us for is that we're releasing for them more frequently and we're looking to solve their problems first.
Your next question comes from Michael Simotas of Jefferies.
Just a follow-up, if I can. The line has been [ fairly ] bad, in particular when Ben was answering a question earlier around online economics. [ So if you can repeat ]...
Michael is -- Michael, unfortunately, you're cutting out, so you might want to sort of dial back in. Perhaps we could go on to Ben's question and come back to Michael straight afterwards. Is that possible?
Your next question comes from Ben Gilbert of Jarden.
Just in -- so you put some good stuff in there around brand trust and NPS. A lot of your competitors [ or other retailers in the market ] have been talking a lot about ecosystems and broadening customer reach and moving into sort of right-to-play categories or adjacencies. I'm just -- well, I'm just wondering how you guys are thinking about [ actuals getting normal to customer ] network, great data capabilities with flybuys. Do you start thinking about looking to launch some [ pet-only ] or general merch-type online sites or trying to look to broaden range or looking to adjacencies. [ I mean sort of things like ] [indiscernible] [ more aggressively into ] financial services, [ which I know you sort of ] pulled back from that [ or solved that range ] a few years ago.
Yes, thanks, Ben. It's a, as -- a very good question. The -- first of all, if you haven't got a strong core business, there's no point having an ecosystem. So the Coles strategy is built around making sure that our core business delivers high NPS for customers and is constantly improving. So that's the first point. The second point, about our ecosystem, and I tried to say this in my little preamble earlier. I'm not sure whether it came across as such, but our ecosystem started years ago. flybuys was the start of it. It includes [ sort of the ] retailers from the Wesfarmers Group and it includes financial service companies and other. What we've tried to do over the last 2 years is really think about what's our global ecosystem because we recognized in Australia -- Australia is too small a market for you to do everything on your own, and so what we set out to do 2.5 years ago was to find the best partners in the world. And we think we found the best partners in the world in people like Witron and Ocado and [ them ] working with local players -- or local. We're still -- we're working locally with players like Microsoft and so on. So we're recognizing that in our ecosystem we can't do everything ourselves and we need to leverage what other people have done. And as you heard from Tim Steiner, he spent 20 years and a lot of money getting Ocado to where it is. And he is absolutely obsessed with making sure that Ocado stays ahead in terms of robotics and automation. And what that means is they'll gradually sort of come down in size to more micro-type centers in the future.
So our ecosystem is about automation and technology partnerships as well as building our own internal IP and team here, but our ecosystem is also around our team because actually, with customers, they're the most important part of our ecosystem. And then we're thinking about what are those partnerships externally that give us a license to operate from a sustainability point of view because we want to be the most sustainable supermarket in Australia. And that's where organizations like SecondBite come in. It's where dealing with farmers and dairy farmers and so on in an equitable way comes in. So our ecosystem is global, but we're increasingly thinking about it. If you go to Moonee Ponds -- I know we didn't get a chance today, but if you go to Moonee Ponds, what we're trying to do for customers in that store is to understand the impact that they have in their locale with charities, whether that's a hospital or whether it's a SecondBite outlet that distributes food to those in need. What impact Coles and them -- or having local -- and that's what Together to Zero means. That's another ecosystem, which is we know we can't solve the climate issues in Australia on our own. And that's why we've said, Together to Zero, we want to do it with our customers. We want to do it with our suppliers. And we want to achieve our targets which we think are very ambitious but we're committed to achieving.
There are no further questions at this time. I'll now hand back to Mr. Cain.
I do have Craig on my list here. Is he still there? No worries if not. Okay, I'll...
We can take the question from Craig, if you'd like.
Yes, last one.
Okay. The final question comes from Craig Woolford of MST.
Yes. Thanks, Steve. Just on the issue around your omnichannel customer, like the stat you have that the omnichannel customer is 2.3x more valuable or shopped more at Coles. What evidence or data could you share with us around customer loyalty to Supermarkets in the online world? And then [ with some years ago ], in the bricks-and-mortar space, a lot of supermarket shoppers cross-shopped multiple banners. Is that very different in the online world?
Okay. Yes, [ looking last ], Craig. I'll hand you over to Ben. And then I will hand over to the break when you finish, Ben.
Thanks, Steven. And a great question. And I'm glad you picked up on the omnichannel customer and the stat that we're sharing because I think it's an important one. What's really unique about these customers that we have, as opposed to others, is that they're far more loyal. We see that in the data. We won't share the actual retention figures, but they're far more loyal. They shop more frequently. They're less sensitive to price and promotion actually, so this is really important for not just the eCommerce strategy but ultimately the Coles strategy and to drive growth of omnichannel customers and omnichannel shopping behavior.
Okay, thanks very much, Ben.
So that concludes the first Q&A. We've still got plenty to come, so don't go away, but do have a short break. We're planning to be back at 11:50 for Darren and this Liquor strategy.
Thank you.
[Break]
[Operator Instructions] Your first question comes from Michael Simotas of Jefferies.
We've touched on it already, I guess, but I just wanted to sort of talk through the CapEx outlook a little bit more. There was obviously a big step-up in CapEx post the demerger and now we've got another large step-up in CapEx. You said FY '22 is a peak year for Witron and Ocado CapEx, but how should we think about the profile going forward? Are there more investments that you'd like to make to capitalize on opportunities that we should expect that sort of CapEx level to remain? Or should we think about CapEx tapering down to something more around the time of the demerger?
Okay, thanks, Michael. And I might hand you straight across to Leah.
Thanks, Steven. So you're absolutely right. FY '22 is a peak year for us, and that is primarily driven by the fact that the Witron CapEx in that year is quite significant at $290 million. So we would expect the CapEx level post FY '22 to come off that level. However, given some of the investments that we have talked about today, which will be multiyear investments for us in terms of CapEx spend, we are expecting the CapEx level to remain between the amount of CapEx that we've guided to this year, which is around the $1.1 billion, and that peak number of $1.4 billion.
Okay. That's very helpful. And second question for me, on the Express business, just sort of looking at the fuel volumes. Obviously Melbourne is an important market for Coles Express, but notwithstanding the volume momentum you had in the lead-up to COVID, Coles Express looks to have underperformed the market quite significantly through COVID. Are you still confident that you can hit that 75 million liter per-week target? And do you still have to hit that target? What happens if you don't?
Yes. I'll probably hand over this one to Greg in a second, but I'll just give a perspective. I had a meeting with Scott from Viva last week. And he is and we are both committed to making sure that we get to that 70 million to 75 million liters a week. What's happened, though, is the team has done -- Michael, Greg, the team have done an amazing job at Coles Express in terms of improving the convenience offer. And what that's done is it's brought down the break-even point for Coles Express going forward. I'll hand to Greg now to talk a little bit about how Victoria impacts the business and what's happening in the rest of nation. Greg?
Thanks, Steven. Thanks for the question, yes. Obviously we have more stores in Victoria, so it does impact us slightly more in Coles Express. Michael and the team have done a great job focusing on being a great -- convenience business. And I've seen really good results in the cost controls, rem controls and our cost of goods. So we're a much more resiliently commercial business now than we have been in the past. Our fuel volumes of 70 million to 75 million liters is something that we would see in the long term -- medium to long term. However, we are now profitable, as you can see from the results, much more profitable at a much lower fuel volume now than in the past.
[ Why lose the momentum in market share gain stock ], though? It's still not obvious to me. I mean we can think about Victoria or a Melbourne and we can pull that out, but at the very least, it looks like you stopped gaining share through [ COVID ] but probably actually lost share. Pricing looks to be about where it needs to be. It's not obvious to me why you have lost momentum.
So we've been -- we originally it -- COVID, we saw really good sales uplift as customers changed their shopping habits. And we had a very strong supermarket offer in our stores. And so we're cycling in the market a much bigger growth last year. We're still outperforming the market and holding our market share in store sales. However, we're cycling a bigger number and a bigger result than the rest of the market last year. You can see that from the graph that we showed today.
Your next question comes from David Errington of Bank of America.
Leah, this is probably a question to you. The first one, Slide 73, I find really intriguing, where you put your capital prioritization framework. A couple of questions: Where does Witron fit into that? Is it in the strategically important but low? And is low meaning -- just to elaborate, is low meaning below cost of capital, and anything above low above the cost of capital?
Thanks, David. We were just quickly working out what Slide 73 was. So on that prioritization matrix. So all of our returning capital, which is what we plot onto that prioritization matrix, has to come in above WACC. So you can really think about our hurdle rates that we have as a business where -- which are actually in excess of WACC. That's really your x-axis. Is that clear on kind of how that works?
So you said, I think, 90% of investment now is above the cost of capital, but 10% is below. Is -- that's -- so that 10%, where does that fit in?
Sorry. The 90% falls into the yellow and green boxes. Everything on that chart is above WACC. So think of the WACC as the x-axis. And I do want to just clarify that this matrix is only used for returning capital. That allocation of capital that we have for essential and maintenance, which is by its very nature nonreturning, we don't use this prioritization matrix for that.
All right. So where does Witron fit in? Where, which box does Witron and Ocado and all of that fit in? Where will that be?
Well, Witron is in our strategically important, so it is in one of the yellow or green boxes.
Right, so -- but it's -- okay, but one-off. But it could be 4, 5 and 6. Or it could be anything, so I'm trying to get what the return on Witron would be.
Yes. Witron -- so Witron is in strategically important and it fits within one of the green boxes. So we are very confident in terms of the returns that we are getting from the Witron project, as we've talked about in the past and as Matt talked about in the presentation today. So the commercials on it are very strong. And that comes from lower operating costs to run the site, the site needing to be smaller than what we have for typical DCs at the moment; the fact that 4, 5 existing DCs, we consolidate down to 2. But then there are also benefits that flow into store with regards to the fact that we are able to customize every pallet that goes to stores so we can get efficiencies within the way that the carton unload is done at the store as well. So there are multiple areas which are creating value for us out of the Witron project and the returns are good.
Okay. And just my final question here, on Witron. We saw Woolworths taking 10 years or so to get their automated DC up. You're going to be taking 4 or 5, which is phenomenally it's quick. You're doing it very well. Now what's the risk that there's going to be cost blowouts? What's the risk that it's going to take a bit longer to implement? What's the risk that the technology that you've got in there will have teething difficulties? So I know that that's a long-winded question, but we didn't probably touch on it in the first part. But what's the risk here that there could be a blowout in costs and CapEx? What boxes have you got ticked to ensure that, that won't happen?
So I might get Kevin to talk to this in a little bit more detail, but certainly our perspective would be that we're working with a very experienced operator of automated DCs who has done many, many of these around the world. And we've been able to take many of the learnings from those who have already implemented it. Kevin, could I get you to maybe add a bit more color to David's question?
Great. Thanks, Leah. And thanks for the question, David. I think the important thing, as we showed in the video, is that we're on track now, as we called out, at Redbank. We showed you the progress and where we're up to. We're really pleased with how that's worked even through a difficult world of living with COVID. And to Leah's earlier point, Witron, in our view, are the global leader on cage pick automation. They have done more of these sites than all of the others put together. And we've been able to partner on the back of that knowledge, so lots of great learnings. We've been able to talk to the partners in other countries and learn how they have implemented and how they're able to accelerate that. And then the last point would just be that we have some experience with simple automation in our own DCs today. We've been able to leverage on the back of that, and we're very confident of what our execution plan looks like.
The only other color I'd just add, David, is you will have seen in the presentation that we talked about net EBIT benefits starting to flow through from the Witron overall project by FY '25, but it is worth remembering there are 2 DCs. And so Queensland comes on first. And so we start to see benefits for that starting to flow through, but we have New South Wales ramping up in terms of the final stages of construction there. So worth keeping in mind that we're doing the 2 here, whereas others may have taken just 1 at a time.
Then the final thing to add as well is -- David, is that I think this is the third supermarket automated DC to arrive in Australia. And I think it's fair to say that, the first 2, there's been a lot of learning through the whole supply chain. And making sure that the case configuration can go through an automated facility has really been an arduous task probably over the last 5 or more years. And the fact that some others have led the way on automation in the past, this now means that, as this comes along, the packaging is more resilient and it can be handled by machinery. So that's one risk that others have had to face that we will face, but it won't be as taxing as the past.
Your next question comes from Grant Saligari of Crédit Suisse.
So slightly [indiscernible] question but just wondering whether you could help with it. You've indicated that part of the reason for the D&A increase that you're guiding to is the amortization of the right-of-use assets on the Queensland Witron DC. I guess the question is, once the Queensland and New South Wales DCs are up and running, do you get a benefit from some DC rationalization down the track even if that's occurring in '24 or '25 over the longer duration? So are these step-ups that we see going to be partly mitigated at some point down the track from the reconfiguration in the DC network?
I'll hand over to Leah a second on that one. So obviously that was all part of the original business case, but also part of the original business case was the fact that the DCs that we're closing were running down on leases as well, which made the whole business case more affordable for us. But I'll hand over to Leah to sort of add any further detail on that one.
Yes. Well, we absolutely do get benefits from exiting out of those 5 leases over time, so that's definitely something that, as Steven said, was factored into the business case as something that's positive. In terms of the D&A step-up, about half of the step-up is coming from what I'd describe as the traditional D&A. So that's the depreciation on the capital program, which hopefully isn't a surprise to anyone given we have seen a step-up in the CapEx that we've been investing in the business over the last couple of years and then obviously with the $1.4 billion that we've announced today. About -- the other half is related to the AASB 16 leasing impacts, and the majority of that is from property impacts. As we see every year with the network continuing to grow, those leasing obligations do come onto the balance sheet, but the one thing that's a bit unusual this year is the first of the Witron sites. We take the lease onto the balance sheet. So we've just called that out.
That's very helpful. So second question, just on the Liquor strategy, if I could. And the -- I'm trying to get a sense of the extent to which your Liquor strategy is one around, I guess, efficiency of the network; reducing working capital, as you've indicated, in Liquorland. There's a sort of an opportunity to grow [indiscernible] materially above market because -- my sense is that to be -- to grow the convenience side of the Liquor business, you're actually going to need more convenient stores, similar stores or a stronger digital offer. And for the first choice side of the network, it's -- it didn't seem to sort of feature strongly, I guess, in the growth outlook. So I'm just trying to get a sense of what the actual growth opportunity that you see in Liquor is versus sort of more of an efficiency and EBIT improvement opportunity.
Okay, thanks, Grant. I might hand over straight to Darren. Darren?
Thanks, Grant. Thanks for the opportunity to taking off this mask and get a gulp of air. What I would say is our strategy is -- I mean it's a simple 6-point strategy which is well balanced. And I'm sort of 1 year into this rather than 2 years, I should say, in comparison to probably some of my colleagues. And so the simplify and the refocus phases are quite critical to make sure that we get the business where we need it. So that's why we're heavily focused on that at this stage, but as I sort of made the point in the presentation, critical to our growth is the differentiation of the offer and then effectively the evolution of our estate, the optimization of our estate. And that is certainly where we're placing our investments for growth in the future. I certainly wouldn't want you thinking that it is just sort of the former that we're focused on, far from it, but it is a multiyear strategy.
Your next question comes from Ross Curran of Macquarie.
Actually I had a similar question on the Liquor business. So Endeavour is getting spun out in the next couple of weeks. Your largest competitor all of a sudden gets access to capital; gets more focused, probably more focused, on growth than it has been in the last 5 years, so how do you see the competitive environment evolving in Liquor? And are you comfortable with the CapEx budget if the competition starts to reinvest in its network and which probably it's underinvested over the last few years?
Yes, another good question. Darren, did you catch all of that?
I got parts of it actually.
So there was are you happy given what's happening in the competitive landscape and the refocusing that might happen? Are you happy that you've got -- well, a, that you've got more capital than ever going into Liquor, but do you think it will be sufficient to achieve your objectives?
Yes. I'm -- I mean the simple way to answer this is I'm very -- we're very clear on our plan and the investment that's required within that and the levels that we are investing. So I think that's probably the simple -- simplest answer. And it will lead to the right level of growth and clearly from a CapEx perspective is meaningful [indiscernible] Liquor business but in the context of the total group is still relatively modest, but it absolutely -- we're focused on the right strategy. And within that, we're certainly focused in the right level of investment, particularly around online and our capability there and also on the estate. And that's why we're sort of -- announced today that we're going to be looking at doubling our new store opening as we go forward because the opportunity is there for us to grow. And that sits very nicely with our desire to build capability in online and omnichannel because there are hundreds of locations around the country that we haven't currently got presence. And that is an opportunity for this business.
Thanks, Darren. I think the other thing I'd add is we talked about ecosystems earlier and so on. And the fact of the matter is that we'll end up having the largest integrated ecosystem in Australia when it comes to food and liquor, and obviously that's something we intend to leverage as we go forward as well.
Your next question comes from Bryan Raymond of Citi.
Just on the CapEx again. I just wanted to sort of get some color around how much do you expect to reinvest of this -- of the return that you should be receiving on capital? Do you think 90% of your -- of what your spending is going to generate a return on capital above WACC? How much do you think, of that, should flow to EBITDA given you've got a circa $200 million uplift in D&A? Just wondering what the net effect of that is coming through [ below the line ] after reinvestment given quite -- given for major competitors -- a lot of the same things you are around DC, automation and online and so on. So good -- yes. So just interested in how much of that is flowing through versus getting reinvested.
Okay, I might just start by saying that obviously the food market and the drink market isn't -- in Australia, whilst it's fairly concentrated, there's still a lot of market outside and the market is growing. So when we look back over time: 1/3 of the market growth has come from population. 1/3 of growth has come from inflation, and then 1/3 of the growth has come from consumption. And the reason to be excited is that, 10 or 20 years ago, it was a race to the bottom. And it was about baked beans and sliced white bread and all of that type of stuff and cases of low-price beer. The world has changed and none more so than in Australia. This is a really exciting market to be in where we're talking about health, convenience, all of those things, low-alcohol gin. All of these things drive up average shelf prices. And that means you can invest more back into the business, but I might hand over to Leah to sort of perhaps talk through that slide again that talked about how much of the CapEx is going into each of the buckets and what drives growth and what drives efficiency and then what sort of return we're expecting.
So just to clarify. It's not 90% of the returning capital is delivering a return above WACC. It's 90% is sitting in the yellow and the green boxes. Everything on that matrix is above WACC. So think about WACC as it's the x-axis. It's the minimum requirement to even make it on. So we are choosing to -- as Steven sort of indicated before, we have more opportunities available to us that are delivering returns above WACC than what we are prioritizing and doing. And many of those that are in that lower category but still above WACC, we are making a prioritization decision to not go after. And we're going after the higher-returning initiatives. So that's...
And how do you think about the reinvestment piece of that given a lot of what you're doing [indiscernible] wondering how much that [indiscernible] EBITDA [indiscernible].
So I mean one of the big commitments that we made when we launched the strategy in 2019 was to grow EBIT. And our aspiration around doing that and delivering on that as a commitment over the life of the plan hasn't changed. And part of the purpose of going out and going after these initiatives that we've talked about today is that they are enablers for us to deliver on that commitment.
[indiscernible].
Bryan, could you please repeat your question?
I think...
Yes, sure. Sorry. I had -- the sound dropped out. Can you hear me now?
Yes, we can hear you, Bryan.
Yes, we can.
Okay, great. I mean just 2 quick clarification [ sort of going ] together [indiscernible] second question. Just on D&A. You talked about further uplifts in FY '23, I guess, as the second Witron site comes online. I'm just wondering. Should that be a similar uplift or maybe smaller? And then just second part of that is the implementation OpEx. How much of that steps down or goes to 0 beyond FY '23?
Leah?
I didn't catch the last...
How much of the OpEx disappears beyond F '23.
FY '23, right. Okay. So on the D&A piece, as I indicated previously from one of the earlier questions, about half of the step-up is related to traditional D&A step-up. And so our expectation is that we'll continue to see some step-up year-on-year, as we see more of the depreciation impacts flow through from an increasing CapEx profile over a number of years now. And then the second component then is the leases piece. So we will have the Witron sites and the Ocado sites come on over the next couple of years in terms of leases. And that will lead to further step-ups that we'll have on the AASB 16 front as well. On the OpEx, sorry, that last part of your question: I even saw clarification on it. On the OpEx, those costs are one-off in nature. So they really are about the process of getting the facilities up and going. They are not operating costs that will hang around then in the other years post the go live at the sites.
[indiscernible] of Rimor Equity Research.
I had a quick follow-up from a question I asked Ben earlier and then another one for Leah. Ben, you listed the improvements you've made to the online offerings and particularly called out the membership base changes and the site for fulfillment. I was wondering if you could help me understand the enabling -- changes to your systems technology that have enabled those at the back end, please.
Thanks. Very good question. So I think our approach is to make improvements via technology but powered by people. We talked earlier in the session around the 6 its. So getting access to data, using data and then iterating data to solve customer problems, to upgrade the experience. That would be one specific example, but I think...
Yes -- sorry. I know you're answering online because I can hear it online, but I -- like it's a bit delayed and I don't know whether you're finished or not. Should I go to my second one, operator? I don't know if you can...
So I think we've got a bit of a delay...
Please ask your second question.
Okay, great. I'll listen to the answer online, so just [ play on ], but Leah, there's been a few questions with respect to the CapEx slide. Obviously lots of analysts look at maintenance and growth CapEx in different ways. I was wondering if you could explain to us how you think we should measure the success of your growth CapEx initiatives in particular. Should -- and over what time frame should we be measuring it? So is it market share? Is it the ability to target new markets that Coles currently can't target? Is it incremental [ ends ] in return on capital? If you could just explain those for me, that would be great.
I might start, Scott, just with going back to the beginning and what the vision is. And the vision is to be the most trusted brand in Australia and to grow long-term shareholder value. Now that was never intended to be 6 months or a year. And we're delighted that, after 2 years, we've got to where we have got to, but really what we're trying to do with these plans is to deliver sustainable long-term returns for investors. And then we've issued a -- probably more KPIs than anybody else in Australia. We've -- around keeping a track of things. And it starts with safety. It talks about having an engaged team. It is about at least holding, if not growing, market share. We've got 7 or 8 KPIs there that we hold ourselves to account on, and that's what we're trying to improve over the next 3 years. And that's we'll be -- we don't need to be held to account on those, by the way. We actually bring them to you and tell them how we're doing. So we bring our scorecard every 6 months and we're serious about it. And we talk about it internally fairly regularly. I can tell you. And if things don't get delivered, then we have a change of tack and do something about it, so -- sorry. Leah, do you just want to carry on with how investors should think about -- I think, the first part of Scott's question, which was the duration, how -- over what time period can they expect a return, and at what level?
Yes. I mean I actually think that the best measure is the one that Steven has already given you, which is are we delivering on the balanced scorecard that we've set for ourselves. I think the thing to call out with the CapEx program and as we've -- as I've sought to highlight in my presentation today, it's a blended approach which is that we have a range of initiatives in there, some which get us quite quick returns in terms of payback periods on those, which are longer dated but potentially more strategic in setting us up for a longer-term advantage within the industry. And so what we're really looking to do is get an overall blended return that is attractive for our shareholders. And we -- the step-up in the CapEx that we've talked to today, we'll just keep coming back to the point of we've got a really strong balance sheet which we've worked very hard to build over the last couple of years. We've demonstrated a good track record now in terms of delivering strong returns on the initiatives that we're doing. And we are in a position where we've got -- our cost of debt is quite low.
And so these opportunities which we have available which are good returning and relatively low risk versus other things that we could go after, they -- we're quite excited about what that means for the creation of long-term shareholder value here. Now Scott, I don't think Ben did get a chance to answer your question, so if you can still hear us, Scott, we might actually ask Ben to answer it now, if that's okay.
Yes, yes. That would be great. I'll [ get you back ] online on the [ funds at the time ].
Great.
Okay. I think it was about using technology to improve customer experience, right?
Yes.
So we -- yes. We spoke in the presentation and also when we shared the eCommerce strategy in February about the 6 its: have it, find it, display it, price it, fulfill it and support it. And we're using data in a real-time way to identify exceptions, automate against those exceptions and solve problems for the customer. It's iterative. Another element of that would be the -- our view on the regional network and being much more dynamic about how do we identify gaps in the market when it comes to service. Those are just 2 examples, but I think probably the key thing, as I said at the beginning, was it's really technology powered by people. So you can make a lot of investments in technology but the way you work with it. And I think, across this team cross-functionally, we're working together to solve those problems with technology for the customer.
Thanks, Ben.
I'm conscious we've got a few people online. And so I think, for Ben and the rest, if you could sort of maybe contact Mark and the IR team afterwards. Because I am also conscious that I made a commitment that we would finish at 1:00, and I like delivering on my commitment. So with that, we might sort of wrap things up. I think, Leah, you did -- almost did of -- an excellent job of wrapping things up, anyway, with your last piece, but I'll just finish with a few comments, if that's okay.
I really wanted to start by saying that we have delivered strategic and financial progress in the last 2 years, and we're actually pretty comfortable with what's being delivered on a 2-year view. And we've had lots of distractions. We've had lots of emergencies that everyone else has had as well, but I think that Coles has served the community well. We've moved from being one of the most distrusted brands in Australia to one of the most trusted, and that's not an accident. It's a lot of hard work. And in particular, we've focused a lot on improving supplier relationships and not more so than in the dairy community.
I hope that what you've seen today demonstrates that there's a lot of opportunity in the Australian food and drink market. It's never been a more exciting place, and we are energized to be a part of it. And we think Coles will go from strength to strength. We've got a balance sheet that's probably as good as anybody's in Australia and it's probably underleveraged. And as we heard from Leah recently, we've managed to double the [ tenure ] of the debt. So the debt is reasonably long term, but it's costing 2%. That is one of the lowest not only in Australia but in the world. And that's because we've got banks who believe in what we're doing.
And so we want to put that money to good work. We're not going to waste it. We spend a lot of time looking at returns and making sure that we're trying to improve them all the time, but what we've said to you today is we are pressing the accelerator and we're accelerating in 3 areas. We are accelerating in data and technology. We are accelerating in winning store formats, which is the new Liquorland and the new Coles Local. And we're also accelerating in sustainability. We've been a leader for quite some time in what we're doing and we want to be the best in this space. It's going to move from being a license to operate to something on which customers base their decisions on where to shop. And we want to win with our customers and with our suppliers to be the best.
And we're not leaving shareholders behind. And I don't want anyone to think today, because we're investing more, we're moving away from our dividend and franking credits. We're not. We think we can do and do it all. So that's really the summary of today.
Sorry. We're 2 minutes over. I hope it's been a valuable use of your time. And I hope you've enjoyed meeting and hearing from the wider team here at Coles. And that's it for today. I look forward to seeing you at the annual results, talk a bit more about current trading, in August.
So thank you very much.
