Woolworths (Australia)

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Woolworths is Australia's biggest supermarket chain, having overtaken traditional rival Coles in 2006. The two companies compete fiercely in several sectors. Woolworths has the dominant position in the local grocery market, and also has interests in liquor retail and general merchandise through the BWS, Dan Murphy's and Big W chains. In 2011, Woolworths opened a new front with a move into home improvement, launching the Masters chain in partnership with Lowe's of the US. However, after several years of strong growth, the group's performance suddenly flagged alarmingly in 2015 following the adoption of a disastrous new marketing strategy. That led to the departure of several key personnel including the CEO, and also the closure of the Masters chain. Despite its name, Woolworths Australia has no connection to the old British or American Woolworths retail businesses.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 5th Jan 2017: Hard-pressed Australian supermarket giant Woolworths agreed to sell its entire estate of around 530 combined petrol stations and convenience stores to BP for almost A$1.8bn (around US$1.3bn). That business was formed from a previous merger with Caltex. BP already has a branded presence in Australia but the majority of its petrol stations there currently are franchised. The new acquisition, which is subject to regulatory approval, would more than double local share to 12%, but is unlikely to complete before 2018. Woolworths plans to use the cash from the deal to reinvigorate its grocery division, struggling with competition from main rival Coles and fast-expanding Aldi.

Adbrands Weekly Update 1st Sep 2016: Australia's biggest supermarket group Woolworths, a former high-flyer that has been struggling with poor performance for the past 18 months, reported a shock loss for the financial year to June. Reported revenues of A$58.1bn (around US$42bn) were 4% less than last year, but a 40% slump in earnings in its core grocery business and a huge write-off against its disastrous move into home improvement, resulted in a net loss of A$1.2bn. The supermarket business has suffered a sharp decline in performance as a result of an ill-conceived decision to move downmarket to combat discount rival Aldi. Even more damaging was its attempt to take on local DIY market leader Bunnings, a unit of its main supermarket rival Coles, by launching start-up chain Masters, a joint venture with Lowe's of the US. All Masters stores will be shuttered by the end of this year, resulting in impairments of over A$3bn. Excluding impairments and one-off charges, the group claimed a 36% fall in EBIT to A$2.56bn. Woolworths' main rival Wesfarmers, the owner of Coles and Bunnings, also delivered a disappointing set of results with large impairments against its general retail chain Target and heritage coal mining operations. Net profits plunged 83% to A$407m, despite a 6% increase in revenues to A$66bn.

Adbrands Weekly Update 3rd Sept 2015: The "Aldi effect" was apparent in the full year results from Australia's biggest supermarket group Woolworths. Just as UK supermarkets are reeling from the competition with German discounters, so are their Australian counterparts. Woolworths reported a near-13% fall in net profits, the first decline in almost two decades, following a disastrous attempt to match Aldi's low price strategy. Chief executive Grant O'Brien has already agreed to leave the group as soon as a successor can be found. Now, group chairman Ralph Waters will precede him out of the door. Woolworths net profit was A$2.15bn on flat revenues of A$61.15bn. In fact, the main culprits for the flat topline were a steep decline in petrol sales (as a result of falling prices) and weak performance at the group's Big W general merchandise business. But analysts have been alarmed by the strategic confusion at the supermarket business, which abandoned its long-established premium positioning during the year in favour of "Cheap Cheap" pricing. In fact Woolworths' results were not much worse than those of arch-rival Wesfarmers, owner of rival supermarket Coles, which quickly adopted the "fresh food" premium positioning abandoned by its rival. Group revenues were flat here too at A$62.45bn, while net profit fell 9% to A$2.44bn. However the Coles grocery division enjoyed solid increases in both sales and operating profit.

Adbrands Weekly Update 16th April 2015: Australian retailer Woolworths was in the firing line this week after a social media blunder in which it appeared to be exploiting human tragedy for commercial gain. It is the country's biggest retailer, a local icon in the same style as Tesco in the UK or Walmart in the US. For years, the grocery business has been describing itself as the "Fresh Food People". In a misguided tie-in last weekend with Anzac Day, the national holiday celebrating fallen soldiers, it launched a social campaign under the banner "Fresh In Our Memories", asking customers to share memories of family war heroes, "Lest We Forget", alongside the supermarket logo. The promotion was widely derided by customers for trivialising the solemn annual event. A similar controversy greeted UK grocer Sainsbury's Christmas 2014 ad, depicting a temporary truce between First World War enemies. Woolworths' campaign, though, lacked Sainsbury's emotive creative work, and ended up looking more like a mere cash-in. As one commentator said, "There is a place for brands in Anzac Day but you need to be seen doing the right thing and there is a fine line. This one stepped over that line by being too heavily commercial and was made worse by tying their brand slogan and brand positioning to it." 

Adbrands Weekly Update 27th Mar 2014: Leo Burnett scored the week's biggest account win, securing creative lead for Australian supermarket giant Woolworths. It is the country's highest-spending brand account with annual billings of around A$240m. Burnett takes over from Droga5, which remains on the roster for smaller special projects.


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Background

Free for all users | see full profile for current activities: In the 1920s entrepreneur Percy Christmas ran a successful fashion store in Sydney called Frock House. Mid decade, he broadened his range with a new variety store, borrowing the bargain prices concept pioneered by FW Woolworth in the US. The original name was to be Wallworths Bazaar, but at the last minute Christmas found that the Woolworths name was not copyrighted in Australia, so he took a chance on simply borrowing it. "Woolworths Stupendous Bargain Basement" opened in 1924, and for the next 30 years the group did well with its general store format. It wasn't until 1960 that Woolworths opened its first supermarket. It acquired women's clothing store Rockmans in 1961, and launched Big W discount warehouses in 1976. 

The 1980s witnessed rapid expansion. In 1983 the group bought consumer electronics chain Dick Smith Electronics, followed two years later by the Australian subsidiary of US supermarket giant Safeway. The latter purchase stretched the group too far, and it reported losses of A$15m in 1986. In 1989 Woolworths was itself acquired by diversified conglomerate Industrial Equity, before being refocused and then spun off in 1993. In 1997, the group dipped a toe into fuel retail, opening its first Petrol Plus combined service station and convenience stores. Two years later, it followed the successful example of UK supermarket chain Tesco, launching a banking service for customers in partnership with Australia's Commonwealth Bank, under the name Woolworths Ezy Banking. 

Also that year, the group launched Project Refresh, a 10-year restructuring program designed to close the gap with rival retail group Coles Myer. Woolworths focused on its core business and cut costs to boost profits. In 2000, it sold off its Rockmans clothing chain and added the Booze Bros liquor store chain to its portfolio. It also sold meat processing business Chisholm Manufacturing. A year later, the group sold its Crazy Prices discount chain, but acquired the Australian arm of Tandy Electronics from Canada-based Intertan, as well as 71 supermarkets from the former Hong Kong-owned Franklins chain. (A further 30 stores were acquired by Coles Myer). The group also acquired a 38% stake in internet grocery retailer GreenGrocer.com.au, later increased to 100%, and a 50% stake in MGW Hotels, which operated a chain of liquor stores, taverns and hotels in Queensland. In 2002, the group sold its chain of Woolworths supermarkets in New Zealand to Progressive Enterprises, the owner of rival grocers Foodtown and Countdown (before buying them back in 2006).

In 2004 Woolworths teamed up with Melbourne entrepreneur Bruce Mathieson to launch an unexpected takeover bid for Australian Leisure and Hospitality, the country's Australia's third largest liquor retailer and its biggest pubs operator, demerged earlier in the year from Foster's. The takeover quickly turned into a bidding battle between Woolworths and US venture capital group Newbridge, and became more complex still after Woolworths' arch-rival Coles Myer entered the bidding. Woolworths won the battle after raising its offer in November to around A$1.33bn. See full profile for current activities


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