Coles is selling its share of Cole Express to its partner, Viva Energy.
👉 Background: Way back in 2003, Coles entered the petrol retailing space in an alliance with Shell. The plan was to leverage their existing loyalty program and discounts to lure supermarket customers into Coles petrol stations.
👉 What happened: And this worked a treat - the Shell Coles Express petrol stations saw a 30 per cent increase in demand. In 2019, Coles announced a new partnership with Viva Energy.
👉 What else: 3 years, 710 sites and 6,000 staff later, Coles has announced Viva Energy will buy its share of the fuel business for $300 million because apparently Coles' fuel biz is their lowest return-on-capital business in the whole group.
💡Return on capital is a ratio that measures how well a company turns capital… like debt or cash into cold, hard profits.
💡Companies will often use this ratio, alongside other ratios, to determine which parts of their businesses are performing well... and whether its time to exit an underperforming part.
💡Companies have finite resources so they need to use these resources most effectively. Coles may be asking themselves.. If we were to invest $100m in fuel… or in groceries.. which would generate more profit for us? And the answer is pretty clear now...
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