Woolworths is Australia's biggest traditional supermarket chain, having overtaken traditional rival Coles - now a unit of Wesfarmers - in 2006. The two groups compete fiercely in several sectors. Woolworths has the dominant position in the local grocery market, with almost 1,200 supermarkets in Australia and New Zealand, trading under the main Woolworths banner in Australia and as Countdown in New Zealand. It also has interests in liquor retail and general merchandise through the BWS, Dan Murphy's and Big W chains, and operates around 700 co-branded service stations in partnership with Caltex. The group plans to sell or spin off that business by 2019. (A deal to sell it to BP was blocked by regulators in 2017). Separate subsidiary ALH Group operates a national network of pubs, restaurants and hotels. In 2011, Woolworths opened a new front against Wesfarmers with a move into home improvement with the launch of Masters in partnership with Lowe's. However the biggest threat to both Woolworths and Coles has been the growth of German invader Aldi, which has made significant inroads into the homegrown brands' market share in groceries. Woolworths had around 37% share in 2017 to Coles' 30% and Aldi's 9%. After several years of strong growth, performance suddenly flagged alarmingly in 2015 following the adoption of a disastrous new low-price strategy for its main supermarket business, designed to counter the threat from Aldi and a rejuvenated Coles. That led to the departure of several key personnel including the CEO, and also the closure of the Masters DIY chain. Brad Banducci became the group's new CEO. There has been some recovery with revenues rising to A$61.5bn (or approx US$ 48bn) for the year to Jun 2018, including petrol. Despite its name, Woolworths Australia has no connection to the old British or American Woolworths retail businesses. Retail entrepreneur Percy Christmas appropriated the name for his new general store in 1924 when he found the celebrated US company had failed to trademark the brand in Australia. Woolworths launched its first supermarket in 1960 and that side of the business gradually came to dominate its general retail division, now Big W.
Capsule checked 21st September 2018
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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. [The deal was later blocked by regulators].
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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