What is going on WOW AU?
It has been fascinating to watch the recent Australian political and media activity in relation to their investigations into supermarket price gouging. In my view, it mirrors the same type of issues raised by the NZ government and media into our supermarkets last year.
First of all we should be clear that the food retailing environment is quite different in Australia than it is in NZ, with the 2 most significant factors being their larger economic scale and the higher level of competition.
The focus in NZ has been about high prices due to the lack of competition, with Foodstuffs NI/SI & Woolworths NZ, accounting for approx. 85% of the NZ market. See link to two of my previous articles.
In Australia the 2 main players Woolworths and Coles currently hold around 65% of the market share but still appear to be the main targets for the current investigation. What has been really fascinating to watch is how the media has covered the issues to date. It is not so much the issues raised that are fascinating but more on how some people's behaviours are clearly affected by their perceived position of power.
First of all the media have a desire for sensationalism and it can clearly be seen in the recent Four Corners interview on the price of food with the Woolworths CEO. He made a statement that the previous head of ACCC had retired and so might not be the right person to make a comment, then immediately wanted to retract it. The media reporter seized on his perceived position of power and blew up the sensationalism to showcase that the WOW CEO was being defensive. What we now know is that he was just about to announce his own retirement and as such maybe he thought that he would regret the reference when he did. To further sensationalise the issue after he formally announced his retirement the media continued to report "WOW CEO resigns after walking out on disastrous interview".
Recommended by LinkedIn
Then we have had the "Chair" of the Senate inquiry exerting extreme pressure on the Woolworths CEO for a financial number that the CEO did not feel was relevant to the inquiry. The pursuing interaction between the two of them was not only compelling viewing but was also nearly unbelievable.
From the senate's position they probably have never had someone consistently push back on their demands before. In my opinion the WOW CEO was right to initially push back, as ROE would not be the best financial measure for a large chain store supermarket operation. As for the condescending tone and language of the Chair, it was truly unbelievable and a classic example of someone exerting their perceived position of power.
As for the WOW CEO who is definitely a well respected strategic and motivational leader, he will have to accept that the optics for these interviews was not good. Maybe he could have front footed the Four Corners interview during his actual retirement announcement, to better explain why he wanted his comment retracted. Maybe he could have just moved on more quickly at the Senate inquiry by saying he would be happy to advise the senate with the actual ROE later. Again you have to question whether he was also exerting his own perceived position of power.
Finally in my opinion the key question that the Australian government and media should be asking WOW AU, is why their current food profitability is so high?
The facts are that their F23 EBIT was 6.0%, one of the highest internationally. Their sales were +5.0% but their profitability was +9.5% on the previous year? Their CODB % was flat but their actual gross margin % was +76 bpts on last year and +1.7% higher than Coles at 28.1%. WOW H1 F24 results have continued to report up side in profitability with EBIT at 6.1% and gross margin % at 28.9%.
Maybe the best question to ask the WOW CEO would be. Due to your current high level of profitability, when and by how much can we expect you to lower your prices?
Retailing | Innovation | Private Label | Industry Practitioner Turned Industry Problem Solver
8moBrett Ashley your interpretation of events and facts shows a clear bias. Where did you get 55% share for Coles & WW combined, 1980? The media continues to report 65%, however it’s over 70%. I’m not sure about you, but if I had to ask the same question about 15 times like the chair of the senate did, I would also lose my patience. He listened to Brad rattle off the numbers he was briefed on, however Brad refused to answer the question. Senator McKim said he would like to discuss other measures and Brad refused. Unfortunately it made him appear arrogant, as he appeared in the Four Corners interview when he was diminishing the credibility of the recently retired chair of the ACCC. Questions on profitability were quite detailed within the questions on notice provided to the retailers. I suggest you check the document register on this.