24 Sep, 2020
Coles commits to power Queensland sites with ten-year renewables deal
Inside Retail

Coles is aiming to source 90 per cent of its electricity requirements in Queensland from CleanCo, a state government-owned electricity generation company.

The supermarket will purchase 40GWh of power annually through the ten-year agreement, which will primarily come from upcoming solar and wind projects from CleanCo, as well as its hydro and gas sites.

Coles CEO Steven Cain said the deal was part of its drive to be Australia’s most sustainable supermarket.

“We have already made changes throughout our business to use energy more efficiently, which has enabled us to reduce our greenhouse gas emissions by 36.5 per cent since 2009, while growing our team member base and store network,” Cain said.

CleanCo CEO Maia Schweizer said the deal will allow it to create growth and jobs in Queensland, and to reach its goal of 1000MW of new renewable energy generation by 2025.

“We’re proud to partner with Coles and provide renewables-backed power for its Queensland sites under one contract,” Schweizer said.

The deal is a huge step toward a 100 per cent commitment to renewable energy, said Greenpeace’s REenergise campaign director Lindsay Soutar.

“Now more than ever, Australia needs future-proof jobs, sound investment decisions, and economic stability, and renewable energy commitments like this help to deliver that,” Soutar said.

“The world’s biggest companies are switching to renewable energy because it’s clean, affordable and reliable – and it’s great to see Coles step up to the plate in Queensland.”

According to the Greenpeace REenergise report, Coles is one of the ten largest electricity consumers in the country, while Woolworths is the fifth largest user behind mining and manufacturing businesses.

“With Coles already heading for 30 per cent of its operations powered by renewable electricity, there’s now no reason they can’t go all the way and commit to 100 per cent renewable energy, as major competitor Aldi has already done,” Soutar said.

21 Sep, 2020
New Perth centre to host WA’s first Coles click & collect service
Inside FMCG

Construction has begun on Perth’s next shopping centre, which is to be home to Western Australia’s first Coles click & collect drive-through service.

The $30 million Coles-owned Brabham Whiteman Edge Shopping Centre will host a 2400sqm Coles supermarket along with 12 specialty retailers.

Built in partnership with Credentia Construction and Wallace PM, it will feature dedicated lanes for shoppers to receive groceries purchased online, which will be packed into their car boot within minutes without them having to leave the vehicle.

The centre will be well located within the $511 million Whiteman Edge community being built by Stockland and will service the retail needs of its growing community of 4000 residents.

The development aims to rank high on the sustainability index with hundreds of solar panels, an electric vehicle charging station, energy-efficient lighting and refrigeration, and a column-less trading floor to provide an open retail space.

“Coles Brabham will feature an in-store bakery, gourmet deli and fresh produce area,” said Coles WA GM Patrick Zanetti. “The new Coles online delivery hub will allow us to expand our online capacity right across Perth, meaning more delivery slots and faster delivery times.”

Whiteman Edge, most likely launching mid-next year, will establish more than 175 local retail jobs, as well as plenty of construction jobs during the building period.

21 Sep, 2020
Fonterra acquires RFG’s Dairy Country business
Inside FMCG

Cafe and restaurant franchise company Retail Food Group Limited (RFG) has sold its dairy processing and manufacturing subsidiary Dairy Country to New Zealand-owned Fonterra Brands (Australia).

RFG executive chairman Peter George said in a statement the move is part of the company’s 18-month restructure and transformation program. The company is focusing on its core franchising and coffee businesses as well as applying a new franchise system across its eight brands. 

“Our focus must be on our franchisees. We are only as strong as our franchisees. This is part of our ongoing restructure that has included the sale of Hudson Pacific Foodservice earlier this year. The sale is part of our strategic decision to dedicate resources to increase our franchisees profitability and sales,” said George.

“In addition, we are providing additional financial and management support to our franchisee community, especially throughout Covid-19, in readiness for the economic turnaround that will ultimately occur. Each of RFG’s brands are now better able to be resilient during depressed economic conditions and the new ‘Covid normal’.”

He added that the company is in “a better position” than many retail groups, because its franchisees have the support systems to do better.

“Net proceeds from the sale will be applied to the extinguishment of Dairy Country’s working capital facility (around $13.7 million) and the balance will be used to pay down debt. This will free up cash in the short to medium term and provide RFG further capacity to respond to the challenges of Covid-19,” he said.

The deal includes Dairy Country’s processing and packaging plants in Campbellfield and Tullamarine in Victoria, along with related services, intellectual property and the trademark for the Dairy Country brand. Most of its permanent employees will be transferred to Fonterra facilities in the state.

RFG-owned businesses including Donut King, Michel’s Patisserie and Gloria Jean’s offer impulse or low cost purchases, placing them in a strong position during the Covid-19 pandemic. George said Brumby’s Bakery offers food and staple bakery range while its pizza companies Crust and Pizza Capers have no-contact delivery services.

14 Sep, 2020
Retailers sound Christmas supply warning in lockdown talks
Financial Review

Woolworths boss Brad Banducci has warned the Victorian government supply chain pressures from the state's second lockdown must not leave customers without key products at Christmas, potentially exacerbating the spread of COVID-19.

Mr Banducci used urgent talks convened by the Business Council of Australia this week to warn Victoria's Jobs Minister Martin Pakula, senior bureaucrats and the state's Deputy Chief Health Officer Allen Cheng that shortages caused by lockdown restrictions could see shoppers move between stores and spread the deadly virus.

Woolworths has handed over internal modelling on the impact stock shortages could have as the state emerges from stage four conditions, based on shoppers' behaviour from the national pandemic peak in March and April.

The Andrews government has provided some concessions for industry in the state, a key freight and supply hub for the nation. The competition regulator is allowing major supermarkets Woolworths, Coles and Aldi to co-operate on food supply and logistics until March.

"We recognise Victoria is facing a unique challenge and value the open dialogue we’ve had with the Victorian government over many months," Mr Banducci said in a statement.

"We’ve been working to support the government's overarching health objective of reducing community movements to help prevent the spread of COVID-19.

"As part of this, we’ve shared data-driven insights on anticipated shopping behaviour in the lead-up to the busy Christmas season to help inform policy-making as it relates to our supply chains."

Retailers including supermarkets are still experiencing elevated demand for products. About 100 Business Council members joined the round-table talks on Wednesday night, coming amid frustration at poor consultation by the Andrews government.

Mr Banducci said the company would work with the government to help reduce community movement wherever possible, "while also ensuring Victorians have access to their essential needs in a COVID-safe environment this Christmas".

Woolworths has 42,000 workers nationally and more than 5 million shoppers each week in Victoria.

Australian Food and Grocery Council deputy chief executive Geoffrey Annison said the restrictions were hurting post-manufacture supply chains.

"We been involved in several round-tables where retailers have expressed similar concerns and I'm sure they're taking it into consideration.

"I think they are trying to balance the speed at which they feel able to lift restrictions with the other imperative which is to keep supply chains going into supermarkets."

Dr Annison welcomed flexibility amid falling case numbers.

"The Victorian government has made it very clear that they want to keep talking to government and they've also made it clear the lockdown isn't locked in stone."

'Adjustments' made

Federal Health Minister Greg Hunt said the Morrison government was focused on helping businesses during the lockdown, and as restrictions are eased in the next two months.

"We worked very closely with business and we made representations to the Victorian government," he said.

"There were concerns about, for example, food warehouse supply chains, concerns about medicine supply chains, and we worked quietly behind the scenes with the Victorian government and they did make a series of adjustments on the basis of our representations in conjunction with business."

Mr Hunt stressed state and territory restrictions had to be based in clear and precise medical advice.

The Victorian government will have conducted 130 briefings by Friday, including 23 this week alone.

Australian Retailers Association boss Paul Zahra has warned as many as half of all small businesses in Victoria could be wiped out by the return to lockdown

“We were called into what was classed as a consultation session but was more like information sessions,” the former David Jones boss said. “Unfortunately, there was very little feedback that was taken on board.”

Coles announced on Thursday it would alter its trading hours in metropolitan Melbourne to remain compliant with a change in the state curfew.

From Monday, September 14, customers will be allowed to enter Coles stores until 8.30pm, ahead of an 8.45pm closure.

10 Sep, 2020
The Hidden Sea winery launches campaign to remove ocean plastic
Inside FMCG

Australian wine brand The Hidden Sea has teamed with ReSea Project to launch a campaign to remove plastic bottles from the oceans. 

The company said it is committed to removing 1 billion plastic bottles from the oceans by 2030. With each bottle of The Hidden Sea purchased, 10 plastic bottles will be removed from the ocean and recycled, according to the company. After purchasing, customers will receive a QR code which helps them to track the process. 

“Having ReSea as our partner gives our consumers a really quantifiable message,” said Justin Moran, co-founder of The Hidden Sea.”We have searched for five years, and worked with loads of ocean-based charities to create a mission that people could buy into and believe in. The ReSea Project allowed us to do that.”

According to Moran, the brand rolled out a trial in Australia with gondolas in six retail stores and saw a three-fold uptake in sales. 

“I think we have an obligation not only to ourselves, but also to our customers, that whatever claim we make with our wine, we can 100 per cent back it up with our actions,” he said. 

The Hidden Sea range consists of three varietals – Chardonnay, Rose and Shiraz. The range is available on the brand’s website at $18 for a bottle. 

10 Sep, 2020
Beef boss on fake meat and the rise of COVID-19 home chefs
The Age
The Age

Australian Agricultural Company boss and beef king Hugh Killen has been eating a fair bit of fake meat in hamburgers, with and without the trimmings, off late and it's not all about sussing out the competition either.

For Killen, whose $620 million company is the largest landholder in Australia with a herd of 346,085 cattle, biting into fake meat, or plant-based protein, is important market research. But there's also a genuine curiosity driving Killen's appetite for fake meat, which some say may end up replacing the real thing some day.

"I've eaten it quite a few times. Whenever I can eat it I eat it," he says.

"I'm interested and curious in terms of what they're making and what it tastes like and how it performs on the plate. There's two reasons; one is, obviously I like to see how it compares as a potential competitive threat, but also I'm just curious," he says.

Killen, whose company exports beef to about 16 different markets, doesn't consider fake meat a threat to his business, but he believes sampling it occasionally is wise.

It never hurts to keep an eye on disruptive forces but Killen has more than just fake meat to worry about at the moment.

In recent months the AACo boss has had to contend with the emergence of the coronavirus pandemic, which has shut restaurants and hotels across the world. These establishments are part of what's known as the "food service" segment, crucial customers for AACo and millions of other food businesses around the globe.

And more recently, the ASX-listed business became collateral damage from one of the many trade strikes imposed on Australia by China as trade tensions between the two countries boiled over.

In May, China suddenly suspended imports from four large Australian red meat abattoirs, one of which processes beef for AACo in Queensland. None of the four abattoirs have had this export approval reinstated and it is unknown how long the suspensions will last.

The world's most populous nation has a strong appetite for Australian beef, and in the last financial year China accounted for about 15 per cent of AACo's total meat sales. While digesting news of the abattoir suspension has been more difficult for Killen than digesting a plant-based protein burger, the company has moved quickly to respond to the trade hit.

AACo beef exported to China is also processed at another abattoir that was not affected, so the company redirected some beef there. It also sent some beef that would have gone to China to other markets.

"What's happened since then is there's been pretty significant demand across some of our other markets, most noticeably in the US and Korea, so we've redirected into that space. And while China, we hope comes back on, it's not a huge issue for us at the moment," Killen says.

"China's an important trading partner for us at AACo, they pay really well. We hope to be dealing with them in the same volumes that we were before, but at this point we have other options and contingencies," he says.

While AACo has managed to navigate the difficulties posed by the abattoir suspension, Killen admits to being concerned by the ongoing stoush.

"Every time you lose the ability to sell your product into a global market, it's something that you're concerned about," he says.

The pandemic has had a material impact on AACo's provision of beef to the restaurant sector, however, Killen says there are a couple of silver linings that have emerged over the period as well. People are doing a lot more cooking at home and they are willing to spend more on the food they prepare in their own kitchen.

"There's been a bit of a rise of what I'm calling the home chef," he says.

"Eating at home has really become the new going out, so there are a number of different food items, beef being one of them, that is really restaurant quality that you can now get through distributors online, or specific direct-to-consumer e-commerce channels," he says.

Killen says US market research has found that 54 per cent of consumers are cooking more at home now than they were before COVID-19, adding that cooking searches on YouTube have also soared as people seek to expand their culinary skills.

After COVID-19, whenever that is, Killen predicts a vibrant restaurant scene will return around the world, but how that looks exactly is impossible to forecast. "I do think however that people are going to continue to eat more at home," he says.

Killen got an insight into just how enthusiastic some people can be about eating at home in the era of COVID-19 during a recent chance meeting.

"I saw someone who bought some of our product the other day who I was talking to, I just bumped into them in the street...and they'd just spent $550 for a dinner party on beef. So where you might have gone out and spent that money at a restaurant, people are more than happy to do that at home," he says.

A $550 bill for AACo Wagyu beef is clearly not the cost of your typical, home-cooked meal, but the beef boss was pleased to hear it nevertheless.

"It's not a full thematic at this point. And our larger retail channels are definitely more important, for now, but to me this is an emerging trend and one to keep an eye on," he says.

AACo runs a series of cattle stations in Queensland and the Northern Territory, as well as feedlots and farms. All up, its operations cover a massive 6.4 million hectares, or about one per cent of the Australian land mass.

This means that Killen leads one of the biggest workplaces in Australia. And when he needs to move around "the office", AKA remote cattle station, it is often done by helicopter or light plane. Flying is so essential to the company's operations that AACo actually employs a number of pilots, and does not allow its own managers to fly aircraft themselves.

"There's nothing better than when I'm out in one of those offices (stations) in either Queensland or the Northern Territory... and getting up and watching the dawn break, which you do every morning you're out there. It's something that's very very special and you never get tired of," he says.

10 Sep, 2020
Woolworths in supermarket bosses reshuffle
Financial Review

Woolworths supermarkets boss Claire Peters is handing over her job of running the group’s 1000 stores to Natalie Davis, a former McKinsey & Co partner who has been in charge of Woolworths New Zealand for two years.

Ms Peters, head of the supermarkets business for three years, will move into a newly created position as managing director of B2B and Everyday Needs, where she will oversee a range of businesses including Big W.


Claire Peters is stepping out of the role of running Woolworths' 1000 supermarkets into a new position which includes overseeing Big W.  Ben Rushton


She will also lead Woolworths International, Wholesale and Property and be in charge of the company's new partnership with PFD Food Services.

Last month, Woolworths said it would become one of Australia’s largest food service distributors after taking a 65 per cent strategic stake in privately owned PFD Food Services for $552 million.

The acquisition confirmed fears of independently owned food service distributors, who are worried Woolworths will take advantage of its scale to snare a major share of the $18 billion sector, threatening businesses and jobs in regional areas.

The executive reshuffle will inevitably have analysts and industry players musing about succession planning at the country’s biggest supermarket with CEO Brad Banducci now 4 ½ years into his stint.

Mr Banducci said Ms Davis had delivered solid growth as managing director of Woolworths New Zealand and would return next month to lead the Australian supermarkets business.

Ms Davis had delivered improvements across customer, brand and reputation metrics and ‘‘also rapidly grown Countdown X, especially in eCommerce’’, he said. Countdown sales had increased 12.5 per cent in two years under her stewardship.

Ms Davis worked for 15 years as a partner at McKinsey & Co and initially joined Woolworths in mid-2015 as director of customer transformation in the food group.

Ms Peters had produced ‘‘significant increases in customer and brand metrics’’ during her tenure and had played a crucial role in navigating through the COVID-19 crisis, Mr Banducci said.

Woolworths and its rival, Coles, have had major logistical issues to tackle this year as pantry hoarding by customers and a big shift to online grocery deliveries caused headaches in keeping up with demand.

Ms Peters delivered 12 consecutive quarters of sales growth and has helped keep Woolworths ahead of Coles for 10 out of those 12 quarters.

The chief executive said Ms Peters would use her detailed knowledge of food and non-food retailing to generate growth in adjacent businesses.


In a third executive change announced on Tuesday, Colin Storrie, who is currently managing director of Woolworths’ group portfolio, will take on a a new position of managing director of new business and partnerships.

On the PFD front, Woolworths has agreed to invest $302 million for a 65 per cent equity interest in the business, owned by Financial Review Rich Lister Richard Smith, who was ranked No. 91 on the AFR Rich List last year.

The Smith family will retain a 35 per cent and will be able to sell its remaining stake to Woolworths after three years under a put and call agreement.

Woolworths will also acquire for $249 million 100 per cent of PFD’s freehold properties, which comprise 26 distribution centres.

2 Sep, 2020
Amazon adds Dash Cart and Alexa to its next-gen Fresh store in California
Inside FMCG

Amazon has opened its first Fresh store in Southern California, a next-gen concept introducing the Amazon Dash Cart and new Alexa features.

Located in Woodland Hills, the Amazon Fresh store provides a “seamless” grocery shopping experience as well as reduces the risk of transmission amid the ongoing Covid-19 situation. 

The store offers an order-ahead service where customers can place their order from Amazon app and collect their order on the same day by visiting a service counter without waiting in line. 

Inside Amazon Fresh, several blue Alexa kiosks are installed to help customers manage their shopping list and navigate the store to locate the items they want to buy. 

Developed before the pandemic, the smart shopping trolley “Amazon Dash Cart” is designed to help customers skip the checkout line. To use the service, customers need to sign in via a QR code, place their shopping bags in the cart and check out via the Dash Cart lane, where the cart’s screen will be scanned. The smart cart will identify items by computer vision algorithms and sensor fusion. 

The store is initially operating at half customer capacity to ensure the social distancing.

2 Sep, 2020
Infant formula company Bubs seeks $38 million of funds to grow bigger
The Sydney Morning Herald

Bubs Australia founder and chief executive Kristy Carr says the company's investment in a new facility in China to produce infant formula using goat milk powder from Australia will shield it from the growing diplomatic tensions between Canberra and Beijing.

“Everyone sees the opportunity in China, but there’s a new level of risk there in terms of the geopolitical landscape, and I think this strategy has really mitigated some of that risk,” Ms Carr said, adding that investors in the company backed the move.

The investment will be funded by a $38.3 million equity raising and will give the company a 25 per cent to 35 per cent stake in the facility alongdside a Chinese partner. The funds will also be used to expand into other markets and strengthen the balance sheet.

The capital raising announced on Monday coincided with the release of Bubs’ 2019-20 full year results. The company delivered a 24 per cent increase in revenue to $54.64 million, but fell short of recording a full year profit. Bubs reported a statutory net loss of $7.8 million, which was an improvement on last year’s $35.5 million loss and ahead of market expectations of an $8.97 million loss for fiscal 2020.

The capital raising includes $28.3 million via an institutional placement, and up to $10 million via a share purchase plan. The shares will be issued at 80¢ each, which is 12.6 per cent below the stock’s closing price of 91.5¢ on Friday before the raising was announced.

Bubs does not currently have the necessary regulatory approval to sell Chinese label goat milk infant formula products in the country's retail stores. But the Beihai factory is certified to produce infant formula for the China market, and Bubs hopes that it can get approval for its own China label products manufactured at the plant to be sold in Chinese retail outlets.

Bubs already sells English label infant formula products in the country via online channels but Ms Carr said securing approval to sell Chinese label products in local retail outlets is crucial in a market where about 50 million babies are born every year.

“This we believe is not only the fastest route to market to that channel, but also one that we think will best cater for Chinese consumer needs, to have a product that’s produced in China,” Mrs Carr said.

"So we're able to continue to give them Australian provenance and Australian milk and an Australian-made brand, but we’re able to jump over the regulatory hurdles and be able to manufacture our products locally in China,” she said.

Mrs Carr also said Bubs had not experienced any negative impact from the tensions in the China/Australia relationship on its business in China.

Last month Bubs announced that it would enter the children’s vitamin and supplements category, on the same day it said it had appointed Jennifer Hawkins as a brand ambassador for three years.

28 Aug, 2020
Woolworths backs down after refusing to raise pay
Financial Review

Woolworths Group has backed down on its two-month refusal to deliver pay increases to 130,000 staff following last-minute talks with the retail union.

The Shop Distributive and Allied Employees Association (SDA) launched court action this week for back-pay and penalties after the supermarket group claimed it did not have to pay a 1.75 per cent wage increase this year because of the delay in the minimum wage increase for retail until 2021.

Despite months of resistance during talks with the SDA, and launching its own legal action on Tuesday to ensure the delay, Woolworths said on Wednesday that it would advance wage increases to not only its supermarket and Big W staff but also the tens of thousands of employees at BWS and Dan Murphy's.

The company, which is expected to announce more than a billion dollars in profit on Thursday, had tied the quantum of its annual wage increases in its enterprise agreement to the rise in minimum wages.

However, it argued that its agreement was unclear if it had to pay the increases on the date they came into effect for the retail award, which this year has been deferred until February 1 because of the COVID-19 crisis.

Following overnight talks with the SDA, Woolworths general manager of workplace relations Hayley Baxendale said it had reached "a mutually agreeable outcome with the SDA, which will provide a much quicker resolution for our team in these unsettling times".

“We care deeply for our team and feel that delivering these pay increases early – without lengthy legal proceedings – is just the right way to resolve the issue and move forward," she said.

“Our frontline teams are doing an extraordinary job for our customers in the pandemic and we’re incredibly grateful for everything they do."

'Done the right thing'

Staff at Woolworths and Big W will now receive the 1.75 per cent increase with back-pay from July 1; the quantum of pay rises for BWS and Dan Murphy's employees, who are paid a percentage or dollar amount above the award rate, are yet to be confirmed.

SDA national secretary Gerard Dwyer said Woolworths "had done the right thing by its team in bringing forward these pay increases ahead of the Fair Work Commission schedule and should be congratulated for putting their team first".

“Our members are providing an essential service to the community through the crisis of our generation and deserve every bit of this pay increase," he said.

“We call on other large retailers to follow Woolworths’ lead on this issue and push through the Fair Work Commission’s pay increases immediately.”

Coles does not have to pay an increase to staff this year as its agreement has expired but a spokesman said it was considering a discretionary increase.

Woolworths and the SDA have agreed to withdraw their legal actions over the pay dispute in the Fair Work Commission and Federal Court respectively.

Woolworths has experienced strong sales during the pandemic and it awarded full-time staff up to $750 in shares and vouchers for their work in June.

28 Aug, 2020
Woolworths profit dips despite strong sales
Inside Retail

Supermarket giant Woolworths has reported a 1.2 per cent drop in underlying profit to $1.6 billion due to skyrocketing costs and the temporary closure of its hotels business.  

The retailer recorded sales of $63.7 billion in FY20, up 8.1 per cent on the previous year, due to strong performances at supermarkets, liquor stores and BIG W department stores.

However, one-off costs for the Group ballooned to $591 million. These included $185 million related to staff underpayments, $176 million in supply chain transformation costs, and $230 million for the restructuring of Endeavour Group.

In Q4, Woolworths Supermarkets saw like-for-like sales growth of 8.9 per cent. Earnings in the second half increased by 4.6 per cent with Covid-related sales growth somewhat offset by roughly $290 million in Covid-19 costs such as cleaning and security. 

Online was a big winner for Woolworths this year as many consumers opt to avoid crowded supermarkets. Group online sales rose 41.8 per cent to $3.5 billion, with record Q4 online penetration of 6.3 per cent. 

Department store BIG W made a major turnaround in FY20, returning to profit and reporting earnings before interest and taxes of $39 million.

Chief executive Brad Banducci said Woolworths is “especially proud” of the achievements of the BIG W team.

“BIG W had strong sales momentum prior to Covid but sales growth increased materially from March. Growth was initially in lower-margin household items; however, in Q4, all major categories delivered strong growth including Apparel. Online sales increased by 181% in Q4 to 8.4% of total sales,” he said.

Looking towards the year ahead, Banducci is mindful of continuing to providing a safe environment for staff and members of the public. 

“The main priority for F21 is making COVIDSafe a part of everything we do,” he said. 

“I again want to recognise the way our team has continued to respond to the ongoing challenges, and I continue to be inspired by our team’s collective commitment to do the right thing.”

Minimum wage increase 

On Wednesday, the supermarket giant agreed to a minimum wage increase ahead of Fair Work’s scheduled retail award rise in February next year. 

Legal proceedings between the Shop, Distributive and Allied Employees Association (SDA) and Woolworths have been withdrawn after the retailer agreed to the deal in which it will backdate the increase to July 1, 2020.

“Woolworths has done the right thing by its team in bringing forward these pay increases ahead of the FWC schedule and should be congratulated for putting their team first,” SDA national secretary Gerard Dwyer said on Wednesday. 

“Our members are providing an essential service to the community through the crisis of our generation and deserve every bit of this pay increase.”

Staff at Woolworths Supermarkets, BIG W, BWS and Dan Murphy’s will receive the new minimum wage of $19.84 per hour.

Woolworths general manager of workplace relations Hayley Baxendale said the retailer is pleased to have reached “a mutually agreeable outcome”.

“We care deeply for our team and feel that delivering these pay increases early – without lengthy legal proceedings – is just the right way to resolve the issue and move forward,” she said.

Dwyer is urging other large retailers to follow Woolworths’ lead in bringing forward the increase.

28 Aug, 2020
Bega boss 'interested' in buying Lion dairy after China sale pulled
The Age
The Age

Bega Cheese executive chairman Barry Irvin says the company could be interested in buying Lion's dairy and drinks business after the sale to China Mengniu Dairy was stopped by Treasurer Josh Frydenberg.

The proposed $600 million sale was pulled this week after Mr Frydenberg indicated to Mengniu that it would not go ahead. But Lion has not said if the division will go back up for sale.

"Of course we're interested in dairy consolidation and we're interested in good dairy companies," Mr Irvin told The Age and the Herald.

"But as you've seen in the past, we're sometimes successful and sometimes unsuccessful. And at this stage Lion has not commented on where they think they're going or what they're going to do. So really at the moment, it is all a bit of conjecture," he said.

Bega has made a series of acquisitions in recent years including the 2017 purchase of Kraft subsidiary Mondelez Australia, which gave it Vegemite and peanut butter.

The abandonment of the Lion sale to Mengniu comes amid simmering tensions between Australia and China, and after China had imposed a number of trade strikes on Australia. Lion's dairy and drinks business owns a number of big name brands including Dairy Farmers and Pura.

Mr Irvin was speaking after Bega reported a 2019-20 full year result that beat market expectations for underlying profit, and was near the top of its earnings guidance. Statutory profit after tax was $21.3 million, up from $4.4 million in 2018-19. Underlying profit after tax was up 3 per cent to $31.9 million and ahead of $27.4 million market consensus.

Bega reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $103 million, at the top end of its guidance of $95 million to $105 million.

"I'm actually quite proud of how the business has performed this year...we've delivered stable numbers to the market as far as the profit and financial performance is concerned. But [also] revenue growth and initiatives for business improvement," Mr Irvin said. "And we've achieved all that while dealing with drought, fires and then COVID-19."

The result was powered by exports (up 15 per cent to $523 million), and sales of groceries like peanut butter and Vegemite. Bega's peanut butter sales grew 14.3 per cent and Vegemite 4.8 per cent. Total Bega revenue rose 5 per cent to $1.49 billion.

"It was really our retail branded and international business, that was able to offset what would have been a challenging year had we not been quite such a diversified business," Mr Irvin said.

Bega faced a range of challenges in 2019-20 including drought, bushfires, high prices paid to farmers for milk and lower margins in its bulk dairy ingredients and nutritionals business. Bega did not give 2020-21 guidance. It declared a fully franked 5 cents per share final dividend, payable on October 7, down from 5.5 cents last year.

Bega shares closed up 7.8 per cent at $5.24.

28 Aug, 2020
Aldi tops supermarket rankings (again)
Inside FMCG

Discount supermarket chain Aldi has topped the Canstar Blue 2020 supermarket review for the seventh time in nine years.

Canstar’s review compares the major Australian chains on eight counts, ranging from product freshness and quality through to value for money and overall customer satisfaction. The firm surveyed more than 2600 consumers on their grocery-buying experiences within the past month, finding that big chains are now tending to distinguish themselves more on value and customer experience rather than price.

Aldi was the best-rated retailer for the third year in a row, and was the only supermarket in this year’s results to score five stars for overall customer satisfaction. It also rated five stars in most categories surveyed.

The survey showed that of the 25 per cent of Australian consumers who do all their grocery shopping in one supermarket, 72 per cent choose the store because it is located closest to their home. Of the 10 per cent of respondents who changed their go-to supermarket within the past year, 57 per cent said they made the move to save money.

Almost half of respondents thought private-label products offer good quality, with 25 per cent admitting they tend to buy these labels over major brands.

Although 19 per cent of Australians report a tendency to forget recyclable shopping bags, consumers overall still support supermarkets getting rid of plastic bags at the checkout, with 49 per cent of consumers interested in seeing supermarkets do more to reduce plastic packaging.

The survey also found that the average Aussie grocery bill at the checkout is still roughly $140.

28 Aug, 2020
KKR takes the biscuit as panic buying boosts Arnott's sales
Financial Review

The coronavirus crisis has helped iconic biscuit maker Arnott's achieve its best sales growth in years – an unexpected bonus for global private equity giant Kohlberg Kravis Roberts, which outlaid $3.2 billion for the group last December.

Arnott's sales rose 6 per cent to around $1.3 billion in the 12 months ending July – well above the historic annual growth rate of around 1 to 2 per cent – with sales surging more than 10 per cent at the peak of the pandemic as consumers filled their pantries with soups, stock and chocolate and savoury biscuits.

"In-home consumption was a plus for a number of companies including ourselves," said Arnott's new chief executive George Zoghbi in his first interview since taking the helm in March, just as the COVID-19 crisis triggered panic buying in supermarkets.

"We were doing OK then we had a boost from increased home consumption, which more than offset the decline in food service and travel channels," Mr Zoghbi told The Australian Financial Review.

"In a category like soup we saw a major spike early on in mid-March and the first two weeks of panic buying, where we saw 200 to 300 per cent [growth] – it was something we'd never experienced in the past.

"However, most companies like ours had to work hard for it because a prerequisite was keeping the business going, keeping people safe and keeping supply chains open.

"Sales were very strong, profit was not too bad, as we had to incur that extra cost that everybody else incurred."

Mr Zoghbi, a fast-moving consumer goods veteran who has worked with Kraft Heinz, Mondelez, Fonterra and Associated British Foods, believes some consumption habits developed during the pandemic will prevail even when restrictions ease.

"It's highly likely we'll see more flexibility between working from the office and working from home, so that suggests there will be more in-home consumption," he said.

"We lost a generation of home cooking and it seems we're getting a lot of new households into these [soups and stocks] categories ... the question is will they leave completely or will some of that behaviour be sustained.

"When you put all these points together they point to healthy home consumption. I don't believe it will be at current levels, but I believe it's going to be higher than levels of in-home consumption pre-pandemic."

"We have governance structures in place to have the flexibility to do whatever we want in the future,"

— Arnott's chief executive George Zoghbi

Mr Zoghbi wants to build a multinational consumer food business across the Asia Pacific and hopes to grow annual sales in line with or faster than category growth by investing in marketing, product innovation, data analytics, digital, supply chain and manufacturing.

One of his first investments is a $66 million upgrade to modernise baking facilities at Arnott's Huntingwood site in western Sydney.

He plans to invest $200 million to $250 million in capex over the next five years and is also considering acquisitions.

"We like consumer brands and we like the Asia Pacific region – we have an appetite to grow but we are also very disciplined in how we utilise capital," he said.

After cutting head office costs in June, with the loss of 48 jobs, Mr Zoghbi has tweaked the senior management team, appointing former McDonalds chief marketing officer Jenni Dill as CMO, former Kraft Heinz and Campbell Soup executive May Lim as managing director of the Asia business, and Michelle Foley, an Arnott's marketing veteran, as chief customer officer.

Mr Zoghbi took the Arnott’s helm from KKR senior adviser Brian Driscoll, who served as interim chief after the sale and is now Arnott’s chairman.

On Thursday, Arnott's unveiled a new corporate structure, The Arnott’s Group, and a new brand identity which features a modernised version of the original Arnott's rosella.

While Arnott's is now wholly owned by KKR, it will be run like a public company, with its own board, independent directors, audit, people and remuneration committees, and will be well prepared if KKR decides to float the business in a few years.

"We have governance structures in place to have the flexibility to do whatever we want in the future – it's good to put ourselves in a position where we have optionality, but it's very early now to discuss any exit," Mr Zoghbi said.

Born in Lebanon, Mr Zoghbi came to Australia in 1989 and lived here for almost 25 years, working with Fonterra and Kraft before moving to Chicago to run Kraft Heinz's commercial operations in the US.

"It's very exciting to be back in Australia. This is like a homecoming for me," he said.

27 Aug, 2020
Metcash reaps benefits as consumers shop more locally
Inside Retail

Metcash says sales continue to benefit from the change in consumer behaviour since the advent of Covid-19. 

Chairman Robert Murray said consumers have been shopping more in their local neighbourhoods since the advent of Covid-19, bringing new customers to independent Metcash businesses which the company is focusing on ensuring they are retained in the future. 

In a trading update released at its annual meeting today, CEO Jeff Adams said total sales are up 11.4 per cent in the first quarter of the new trading year, with supermarket sales – excluding tobacco – up by 13.8 per cent. 

Last financial year, Metcash lost the Drakes supermarket chain in South Australia as a customer. Excluding those sales from the previous comparable year’s figures, total food sales are running 14.9 per cent ahead and supermarket sales 18.4 per cent. 

Sales of liquor rose 11.4 per cent, despite various restrictions in retail and on-premise trading across Australia and New Zealand during the quarter relating to Covid-19 control measures. Excluding customers impacted by the restrictions, liquor sales were running 23.2 per cent above the same quarter last year.

The company’s hardware division recorded a 19.2-per-cent increase in first-quarter sales underpinned by strong demand across DIY categories due to consumers spending more time at home during the Covid-19 crisis.

However Metcash has felt an impact from the pandemic in Melbourne since the government introduced restrictions on August 2, requiring a one-third reduction in warehouse staff, the closure of 36 IHG retail stores in metropolitan Melbourne and consumer DIY sales restricted to click & collect or online delivery. 

Adams said that all the group’s business sectors are facing “significant volatility and uncertainty” due to pandemic-related restrictions. 

“Operating costs across all pillars remain elevated as the business continues to respond to the strong demand from customers, the increased volatility and incremental costs associated with managing the health and safety of both our employees and customers.”

27 Aug, 2020
Mecca makes play for Chinese market
Financial Review

Jo Horgan's cosmetics empire Mecca Brands will launch into the lucrative Chinese market on Wednesday via e-commerce platform TMall Global.

Mecca, which has 100 retail stores across Australia and New Zealand, has traditionally invested heavily in bringing niche international brands to the domestic market. With China, it will showcase Australian beauty brands to the mainland Chinese population.

"China is the second-largest premium beauty market globally, behind the United States," said Ms Horgan, Mecca's co-CEO and founder. "In three years' time it's predicted to be the number-one market. And consumer dynamics in China are changing in Mecca's favour; there's a growing interest in niche, premium brands, in more international brands."

While skincare and cosmetics in China are usually subject to mandatory animal testing, Mecca has found a loophole in selling through TMall Global, an online marketplace that accounts for more than 30 per cent of the country's beauty sales and where testing is not required.

Launching the new market in the middle of a pandemic was "not ideal", said Ms Horgan. Lack of international flights has made distribution to China difficult, and Ms Horgan will attend the store's launch for more than 100 Chinese influencers and editors via live-stream from her home in Melbourne, where she is under stage four restrictions.

"It's a new way of operating, for sure. I will be in my front room doing a live cross to Shanghai. Because we're in stage four I'm doing my own hair and make-up … and it'll probably be my daughter holding my iPhone."

Customer service, said Ms Horgan, was key to the DNA of her company.

"We have been approached on so many occasions to go internationally in different shapes and forms. Our focus has always been on the customer experience, and we have the team and operations to support that in Australia and New Zealand. We've waited until we felt it was the right time to translate that to another market."

The brand has employed a team of dedicated Chinese staff on the ground, who were trained by Chinese-speaking Mecca employees from Australia and New Zealand.

Launching with 22 brands, many of which were founded in Australia including Frank Body, Goldfield and Banks and Go-To, the store will flip Mecca's tradition of bringing international brands to the Australian market, and instead focus on presenting young Australian brands to Chinese audiences.

"We started in 1997 with seven international brands that we loved and nurtured and grew," Ms Horgan said. "The Australian customer now understands those brands. That's what we are doing in China, where Australian brands are perceived as having authenticity and high quality."

As for opening a bricks-and-mortar store in China, Ms Horgan isn't saying no. "We’re firing our bullet. We will learn, through TMall Global, everything we can about our customers and market. We will make sure our offer hits the bullseye.

"If we are successful in that, it opens up every opportunity for us. We are a bricks-and-mortar operator, and we offer something very unique in-store. We would love to replicate that in other markets. But let's crawl first and then see if we can walk and run."

27 Aug, 2020
The Reject Shop posts profit on strong demand for ‘essential’ products
Inside Retail

Discount retail chain The Reject Shop has reported a $1.1 million profit in FY20 off the back of strong demand for everyday essentials across the cleaning, grocery, pet care and toiletry categories.

The full-year result is a significant improvement from the $16.9 million loss the company recorded in FY19 and shows that the turnaround strategy – a three-phase plan to fix, reset and grow the business – is working, according to TRS chairman Steven Fisher.

“The new leadership team has stabilised the business – the company has returned to profitability, has significantly reduced its inventory and has a strong balance sheet,” Fisher said in a statement about the FY20 results on Wednesday.

First up, fixing the business

The company is currently in the fix phase, which is all about simplifying the business and cutting costs. This can be seen in the reduction of in-store labour costs from 15.4 per cent of sales in FY19 to 14.5 per cent in FY20, thanks to a new rostering system that uses machine learning, and a 20 per cent reduction in head office jobs in April, though this added $1.5 million in one-off redundancy costs in FY20.

Occupancy costs remained flat in FY20 at around 14 per cent of sales, which the company called “too high”. Leases will be renegotiated as they come up for renewal, with 87 leases in holdover or set to expire in FY21, and another 130 set to do so in FY22. The Reject Shop has 354 locations in total across Australia.

The company has also gained operational efficiencies from its new approach to merchandising, which includes using more shelf- and floor-ready products and displaying high-volume products on the pallets they arrive on.

Later, the reset phase will involve delivering on The Reject Shop’s lowest price guarantee, homing in a smaller number of core categories and rolling out a consistent and improved store layout across the network. The grow phase will involve initiatives to improve customer loyalty and drive new customer acquisition by opening new stores and ramping up online.

Chief executive Andre Reich said there is more work to be done in the fix phase before the company can focus on the reset and grow phases, but some of the groundwork for those phases has already been laid.

Shift in sales mix

The company launched a new e-commerce site this week, and it started the shift towards more essential products in the second half of FY20 in response to an uptick in demand during the global Covid-19 pandemic.

The company reported a material increase in sales in the second half of FY20, with the cleaning, grocery, toiletry and pet care categories performing particularly well. There was also increased demand for craft and stationery products, toys, garden items, furniture, electronics, hardware and kitchen items, reflecting the fact that many consumers were spending more time at home. At the same time, there was reduced demand for traditionally strong categories, including Easter-related products, luggage, party and events and cards and gift wrap.

Overall, FY20 sales were up 3.4 per cent on the prior corresponding period to $820.6 million. Comparable store sales were up 7.1 per cent in the second half, up from 0.5 per cent in the first half, equating to a 3.5 per cent year-on-year increase.

The shift in sales mix towards lower-margin essential products rather than general merchandise contributed to a decline in gross margin by 125 basis points to 40.9 per cent. This also reflects the impact of markdowns taken on aged inventory in Q4 and the expectation of further markdowns planned for FY21, as well as the higher supply chain costs associated with higher sales in the second half.

However, reduced shrinkage helped the company grow gross profit to $342.4 million, taking into account the new lease standard. This was up on FY19.

Thanks to the cost-cutting measures outlined above, The Reject Shop grew EBITDA to $123.4 million in FY20, taking into account the new lease standard.

Excluding the new standard, FY20 EBITDA was $23.7 million, up 30.1 per cent on FY19. The company did not receive any wage subsidies under the JobKeeper program in the second half.

Statutory net profit after tax was $1.1 million in FY20. Not including the new lease standard, NPAT was $2.7 million. Either way, the company is back in the black after recording a $16.9 million loss in FY19.

Well-positioned to navigate uncertainty

The Reject Shop ended the 2020 financial year with a net cash position of $92.5 million, including $24.1 million from an equity raising, and no drawn debt. It had $70.9 million in inventory, a 30 per cent reduction on the prior corresponding period. Its existing banking facilities have also been extended from March to August 2021.

The board declined to declare a final dividend in FY20, given the recent equity raise the company’s current focus on fixing the business.

“The Reject Shop is well positioned to navigate the uncertain trading environment with its improved profitability and strong balance sheet – though there is more work to do to fix the company before we reset and grow,” Reich said.

27 Aug, 2020
'Promising signs' for Coca-Cola Amatil; Vic vending machines quiet
The Age
The Age

Coca-Cola Amatil boss Alison Watkins says there has been a strong rebound in supermarket sales for its beverages and across its alcohol portfolio, after it fell to an $8.7 million June half statutory loss.

Amatil reported a 17 per cent rise in sales volumes through its supermarkets and convenience stores/petrol outlets in July compared to July 2019. Alcohol sales volumes rose 18.6 per cent in the same month as venues reopened and social gatherings increased.

"We saw quite a promising recovery. As soon as the measures were relaxed people were getting out and about again to a certain extent, but also entertaining at home more as well as they were allowed to have bigger gatherings," Ms Watkins said.

"We saw pubs and clubs restocking and getting back up and running again, so we definitely did see some good encouragement there through July," she told The Age and The Sydney Morning Herald.

Australia produces about 60 per cent of Amatil's revenue. But August delivered something of a reality check, with total Australian sales volumes up just 0.3 per cent in the first two weeks of the month, compared to the same period last year.

Sales have been hit by Melbourne's lockdown and curfew, and a quiet CBD as people work from home. Amatil revealed that of its 4000 Victorian vending machines, 2000 of them did not sell anything over the past fortnight.

"That's because those vending machines are sitting at places like universities or train stations, where because of the stage four lockdowns there are no longer any students or commuters," Ms Watkins said.

She also highlighted the $6.7 billion company's performance in Western Australia, which has had a limited number of COVID-19 cases, where it recorded higher sales volumes in the June half this year than last year. WA has had about 651 COVID-19 cases, out of about 24,000 cases nationwide, according to health department data.

Amatil's performance in WA was a sign of how it could perform in other states, Ms Watkins said, when lockdown restrictions were lifted.

"In Western Australia when we look at our volumes there, you'd say it's pretty much back to normal, it's been very impressive and consumers are out and about and enjoying themselves and that's reflected in our volumes," she said.

Amatil's $8.7 million net loss came as COVID-19 lockdowns closed cafes and pubs, and it took a $101.2 million impairment in Indonesia. The Australian division recorded total revenue of $1.3 billion, down 8.8 per cent, and was also hit by widespread bushfires over summer which hurt holiday trading. Last year the group recorded a $168 million first half net profit.

Total revenue for the first half fell 9.2 per cent to $2.19 billion, but was ahead of Bloomberg consensus ($2.15 billion). Amatil will pay a first half 9 cent dividend, unfranked, on October 13, down from 25 cents a year ago.

The company did not give any earnings guidance because of COVID-19, but said it would give a trading update later this year.

Amatil shares closed up 4.6 per cent at $9.28.

27 Aug, 2020
Beacon Lighting profit up 38 per cent on DIY orders
Inside Retail

Beacon Lighting has achieved record sales and profits during FY20, with Australians spending more time working, educating and completing DIY projects at home. 

The lighting group recorded sales of $252.2 million and a NPAT of $22.2 million – 38.5 per cent up – off the back of its ability to keep stores open through lockdown and seeing a strong spike in sales during April, May and June. 

The business also saw record online sales reach $16.2 million, representing a year-on-year growth of 50.2 per cent, as more and more customers turned to e-commerce.

“It was fantastic to see the strength of our team and support from our customers during those challenging times,” CEO Glen Robinson said.

And due to the pick up in demand the business never applied for JobKeeper.

That’s not to say the business remained unaffected by Covid-19, however. During March and April the business reduced market expenditure due to the high levels of uncertainty many businesses felt at the time, and delayed several investments in store refurbishments and future projects.

“Given the uncertainties around the extent of future Covid-19 cases, changes in customer shopping behaviours and changes to future government policies it is not possible to forecast whether the current high level of sales being experienced will continue,” the business said.

“This is especially so considering recent Stage 4 restrictions applying to all 28 Melbourne metropolitan stores and Stage 3 restrictions applying to the 4 regional Victorian stores.”

Stores in Melbourne have been closed to the public, though remain open to trade customers.

Beacon does have big growth plans for FY21, despite the relative uncertainty remaining in the market due to the Covid-19 pandemic. 

In the next financial year the business plans to replatform its websites, open several new stores and introduce new product ranges, and pursue international business opportunities that complement the core activities of the group.

“[We] remain encouraged by the continued support from our associates, customers and business partners and the general community,” Robinson said.

“However, there remains a high level of uncertainty in Australia and the rest of the world given the impact of the Covid-19 pandemic.”

27 Aug, 2020
Online wine retailer Vinomofo bankers up for IPO preparations
Financial Review

Wine business Vinomofo is seeking to cash in on investor appetite for online retailers and COVID-19 proof businesses with a sharemarket float that could value it at more than $300 million.

Street Talk can reveal Vinomofo has called in Macquarie Capital's bankers to help prepare it for an initial public offering and listing, and wants to be ready to have a run at the ASX-boards before the end of this year.  

While it's still early days, the business is expected to be pitched as a COVID-19 winner, with sales and earnings up as customers turn to online retailers for goods including wine.

Vinomofo is one of the biggest players in Australia's $325 million a year online wine market.

It is understood the company has about $80 million in annual revenue and 70,000 customers, and both numbers have been growing at 20 per cent to 30 per cent in recent years.

It is expected to be compared with pure-play Australian online retailers and Temple & Webster Group, whose shares have both been heavily bought by investors in recent months to trade at 3 and 3.7-times forward revenue respectively.

Vinomofo was set up in 2007 in the garage of brothers-in-law and wine lovers Justin Dry and Andre Eikmeier, and launched in 2011.

The two co-founders each retain 20 per cent of Vinomofo, but Eikmeier is now focused on his Adelaide-based GOOD Agency, which helps businesses develop their brand, culture and vision.

The company's ownership register expanded significantly in 2016 when it raised $25 million from Blue Sky Venture Capital to help fund its ambitious expansion plans. That stake is now controlled by Oaktree Capital Management.

Vinomofo joins a growing IPO pipeline, which is particularly heavy with online consumer-based businesses.

Other float contenders include tradie bookings website Hipages, UK telehealth business Doctor Care Anywhere, non-bank lenders Plenti, and Zebit, cashback scheme Cash Rewards, furniture maker and retailer Fantastic Furniture, and fintech ThinkMarkets.

It remains to be seen whether Vinomofo - and the other contenders - make it to the ASX-boards this year. Wider equity capital market conditions and investors' risk appetite are likely to play a big part in the listing plans.

For now, though, the IPO window is wide open for these types of businesses. The question is whether the companies and their bankers can get offer documents ready and be in front of investors before sentiment changes.


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