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Just nine months after spending $25 million on a catalogue distribution business, one of IVE Group's (ASX: IGL) major clients Coles Group (ASX: COL) has called it quits on physical printing.
From 9 September 2020 Coles will cease the distribution of its weekly catalogue that is currently printed and distributed by IVE to around seven million Australian households.
As a result, marketing distributor IVE says its revenue will be cut by approximately $35-40 million per annum.
Coles says the decision to move away from printed catalogues and focus on its new digital catalogue called coles&co was driven by a change in customer preferences.
The supermarket giant sees digital as the future, driven by a significant shift to online shopping during the COVID-19 pandemic period.
"With COVID-19, we've really seen a shift to online shopping in the last few months, as lots of our customers try our contactless home delivery and Click&Collect services for the first time," says Coles Group CEO Steven Cain.
"We've also seen an increase of more than 50 per cent in readership for our digital catalogue since March," says Coles Group CEO Steven Cain.
"As customers add more fresh food to their diet they're shopping more often, and their appetite for immediacy and digital information means a weekly, one-size-fits-all, catalogue in their letterbox is no longer as relevant for them as it once was."
Cain says ceasing the delivery of printed catalogues would save over 10,000 tonnes of paper every year the equivalent of an estimated 80,000 trees.
"We're committed to being Australia's most sustainable supermarket and reducing our reliance on paper by prioritising digital channels like coles&co is a significant step towards that goal," says Cain.
IVE says it is still evaluating the full impact of the reduction in revenue including the potential for any goodwill impairment, and will provide an update later this month.
"IVE moved quickly at the outset of the COVID-19 pandemic with a range of initiatives in response to revenue volatility and the risk of negative impacts to revenue in the short to medium term," says IVE.
"These initiatives place the Company in a stronger position to mitigate the impacts of revenue declines.
"The group remains committed to supporting the continued strength of the printed catalogue as an important component of an integrated communications mix to a diverse national consumer base."
Shares in IVE are down 17.50 per cent to $0.66 per share at 12:23pm AEST.
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