Coles New Alliance Agreement

“The economic benefits of the terms of the new alliance are clear,” said Mark McKenzie, CEO of ACAPMA. “Both organizations take responsibility for each element of the combined petrol-comfort offering based on their respective strengths. Viva Energy will pay $137 million to renew its fuel partnership with Coles on a new 10-year contract. On February 6, 2019, Coles Express announced a new alliance partnership with its fuel partner, Viva Energy (Shell). Under the agreement, Viva Energy is responsible for setting fuel prices and obtains the fuel margin for retail trade. Coles Express receives a commission per litre from Viva Energy based on the amount of fuel obtained and has no direct exposure to fluctuations in retail fuel prices. [7] Coles Group Limited has signed an agreement with Viva Energy Limited to restructure the terms of the Fuel and Convenience Alliance (New Alliance), in addition to the agreement to extend the alliance until 2029. Analysts cut Coles` profit forecast by as much as 10 percent after the recent retailer signed a new fuel supply contract with Viva Energy, which will decimate gasoline profits and force Coles to boost convenience store sales. Some industry analysts believe the new alliance will lead to more competitive fuel prices at Coles Express stores.

Whether it is appropriate for the national competition authority to criticize a participant on the basis of its independent pricing decisions is an issue for another time, but the new alliance should improve the price competitiveness of Coles Express` current fuel supply – and probably over the shoulders of market competitors in the future. Coles Express and Viva Energy have both issued statements to the Australian Stock Exchange on the terms of the alliance. The new 10-year contract will come into effect in March 2019. Coles Express and Viva Energy have agreed on the terms of a 10-year extension of their current alliance. Australia`s leading retailer Coles Group Limited (ASX: COL) announced on February 6, 2019 that it had reached an agreement with Viva Energy Limited to restructure the terms of Fuel and Convenience Alliance. The two companies also agreed to extend the alliance until 2029. Despite this news, the company`s share price fell 2.2% on ASX in intraday trading. “We also anticipate that the reintroduction of Viva Energy as a fuel distributor, combined with the financial conditions of the new alliance, will further enhance competition in the fuel retail market.

As part of the 10-year agreement reached on Wednesday after two years of discussions and testing, Viva will set the retail price of fuel, collect full sales margin and collect higher royalties for the sale of convenience stores. Under the new agreement, Coles and Viva Energy expect fuel volume growth to an average of 75 million litres per week.