Bid adieu to Coles Express stations and retail stores, as soon they will all spell out Viva Energy. In a strategic move for both companies, Coles Group (ASX: COL) has agreed to sell its petrol stations to oil refinery Viva Energy (ASX: VEA) for $300 million. While Viva will use this opportunity to become the biggest fuel and convenience retailer in Australia, Coles will focus on growing its omnichannel supermarket and liquor businesses. 

The transaction is expected to take place in the second half of FY23, depending on the approval of the Australian Competition and Consumer Commission and Foreign Investment Review Board (FIRB). Viva Energy will own and operate the 710 Coles Express sites currently operated by Coles, and the alliance between the two companies—which was going to end in 2029—will end as soon as this transaction is completed.

Coles CEO Steven Cain said “This agreement is positive not only for Coles and Viva Energy, but also for our customers, team members and respective shareholders. Viva is well-placed to make the most of opportunities to grow the Express business into the future, while we will strengthen our focus on our omnichannel supermarket and liquor businesses and our ambition of becoming Australia’s most sustainable supermarket group.”

For Coles, this move probably comes as a big relief as the Company has not had a good year with Coles Express. In FY22, Coles Express earnings fell by nearly 37.3%. Reduced mobility and traffic flows due to lockdowns negatively impacted fuel volumes. Recovery from Covid-19 restrictions has been slow due to flood events and higher fuel prices. Over 30 Express sites were shut as a result of the floods with three remaining closed at the end of the year. 

Plus, following the country’s shift to sustainable fuel alternatives. In fact, in a bid to cut emissions, Sydney has begun phasing out petrol and diesel cars and aims to ban them by 2027, which is only five years away. However, Viva is of the view that traditional fuel is here to stay for a decade, at least.

The Coles Express convenience stores will carry a new brand name to reflect Viva Energy’s long-term positioning of the convenience offer. Reference to ‘Coles’ will be removed from the sites over the course of 3.5 years from completion.

Around 6,000 Coles Express’s employees will transfer to Viva Energy once the deal is sealed, and Coles will help Viva Energy with product supply arrangements, enabling customers to benefit from continued access to Coles Own Brand product range. In addition, Coles has agreed to provide ongoing support and services for up to two years to assist Viva Energy in establishing its own internal capabilities.

Though Viva will become the exclusive owner of the stations, Coles customers will still get some benefits, including access to the four cent per litre fuel docket. Plus, Viva Energy will remain a partner of the Flybuys Program, with customers able to continue earning and redeeming points across the network. 

Viva Energy CEO Scott Wyatt shared, “We have enjoyed a strong partnership with Coles over the last 20 years and this is an exciting next step for our business and our relationship. The acquisition means we will be able to accelerate our plans to grow the integrated fuel and convenience business while our customers continue to enjoy the excellent customer service provided by the dedicated Express team, the extensive product range in-store and the loyalty programs we know they love.”

Just two hours after posting this announcement, Coles shared its sustainability report. It noted that, this year, the Company has signed the last of its agreements needed to meet Coles’s target of 100% renewable electricity by the end of FY25. Perhaps, in the end, owning petrol stations is not a good look for the brand and its sustainable image.