MARKETPLACE
THE FOOD RETAIL SECTOR IN AUSTRALIA AND NEW ZEALAND
THE AUSTRALIAN RETAIL FOOD SECTOR
Source: Pitney Bowes MapInfo based on company reports and ABS sources including Household Expenditure, Australia National Accounts and Australia Retail Trade Services.
Notes:
(1) Excludes take-aways outlets and cafes/restaurants but includes fresh food specialties and fresh food markets.
(2) Mass merchants are department stores and discount department stores.
(3) Includes smaller foodstores and independent stores supplied by Metcash as well as larger supermarkets (IGA and Foodworks).
Woolworths is a strong supporter of competition in the retail market. Competition not only helps to keep prices low for customers, but it also drives retailers to provide better products and services. The food retail sector in Australia and New Zealand is highly competitive, and recent years have seen a number of new market entrants and a growth in the number of independent and specialist retailers.
There is a popular perception that Woolworths dominates the retail food market. However research undertaken for the Roy Morgan Supermarket Monitor (January to December 2007) found that, for Woolworths customers, 68% of weekly spending on fruit and vegetables takes place outside of Woolworths – at fruit shops, markets and other supermarkets.
Our share of total domestic production is relatively small. Australian farmers produce food for export to other countries as well as for other Australian retailers, wholesalers, manufacturers and food service businesses. In 2007, 12% of the fruit and vegetables grown in Australia were sold at Woolworths, 6% of Australia’s beef and 15% of Australia’s lamb.
The recent ACCC inquiry into the competitiveness of retail prices for standard groceries investigated a number of issues, including the ability of independent supermarket
operators and smaller retailers such as butchers, bakeries and greengrocers to compete with major supermarket chains. We welcomed the inquiry and cooperated fully with its
investigations. The inquiry found “viewed overall, supermarket retailing is workably competitive” and noted that the most significant factor in the nature of
competition is the high cost of setting up large-format, one-stop-shop supermarkets.
In November 2005 Woolworths purchased Progressive Enterprise Limited (PEL), a key player in the New Zealand retail sector. PEL owns the Foodtown, Woolworths and Countdown
supermarket chains. It coordinates the franchises for Fresh Choice, a supermarket chain that operates primarily in the South Island, and SuperValue. Woolworths does not have operational control over the Fresh Choice and SuperValue franchises.
PEL’s market share of food and liquor retailing in New Zealand is estimated at about 28% (estimated by Concept Economics from publicly reported information).
Working with our fresh food suppliers
In our Australian Supermarkets business 100% of our fresh meat is sourced from Australian producers and 95% of our fresh fruit and vegetables are grown and farmed in Australia.
In our New Zealand supermarkets 98% of our whole sourced meat, 100% of our fresh chicken and 78% of our whole sourced fruit and vegetables are grown in New Zealand.
Across our business, we abide by voluntary codes of conduct in relation to supplier trading relationships. We were an inaugural member of the Produce and Grocery Industry Code of Conduct, which is a voluntary code aimed at promoting fair trading practices and building better business relationships. The Code also provides access to a simple and accessible dispute resolution procedure for any individuals or groups in the event of a dispute.
Fresh food is our business and we have made it our mission to partner with the very best farmers and growers in Australia. We have hundreds of direct trading relationships with fruit, vegetable and meatsuppliers. We are absolutely committed to domestic sourcing and work with over 3,000 suppliers large and small around the country supplying our supermarkets in Australia.
Our preference is to have direct, long term trading relationships. The benefits of working this way are better quality management, improved planning and forecasting, and greater consistency and sustainability of supply.
We are very proud of the relationships we have with our suppliers and many of them have been able to grow their business thanks to the surety of a long term partnership with Woolworths. More than 80% of suppliers have been partners for more than 10 years.
Sometimes we do buy small quantities of produce in the wholesale markets so we can pass on special offers to our customers. By working this way, we can find great specials for customers and help suppliers to clear their stock.