Australia's Coles to sell UK-based Sainsbury's private brands

Sainsbury's wants to build it private label wholesale business.

Sainsbury’s, the second-largest supermarket chain in the United Kingdom, has agreed to a strategic wholesale partnership with Coles, a leading Australian supermarket and convenience store retailer, with private label products playing the key role.

Starting early next year, Sainsbury’s will supply its own brand products to Coles across Australia as well as online. The range will be labeled under the Coles brand and includes a selection of packaged groceries and household products.

London-based Sainsbury’s, a 150-year-old company, operates more than 1,400 supermarkets in the UK. Hawthorn East, Australia-based Coles has more than 2,400 retail outlets — including 800 supermarkets and 700 convenience stores —  across Australia.

According to Sainsbury’s, Coles’ customers will now be able to buy innovative own-brand food and groceries that they won’t find anywhere else in Australia. Sainsbury’s offers several store brand lines, including Taste the Difference. Sainsbury’s said the agreement with Coles marks a key milestone in its strategy to build its wholesale business, with a number of partnerships already in place in Asia, Europe and the UK.

“Coles is one of Australia’s leading food retailers and we are delighted to enter into this new partnership with them,” said Michael Luck, director of business development at Sainsbury’s. “Great quality food, high standards and ethical sourcing are at the heart of both our businesses, and we are delighted to work with Coles to bring more choice and innovation to Australian customers.”

Greg Davis, Coles' chief executive of commercial and express, said Coles wants to accelerate the introduction of innovative products to Coles own brands.

“This partnership allows us to do that with a range of food and groceries that are already proven in the international market but not yet available in Australia,” he added.

According to the Australian Financial Review, Coles wants to increase its house brand sales to 40% of total sales over the next few years, a move analysts say could boost earnings by 10%. Coles' private label sales are currently about 30%.

Private label products sourced from Sainsbury's will be toward the mid- to upper-end of the market, rather than budget products designed to compete with ALDI, the Australian Financial Review reported.