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Woolworths boss Brad Banducci says Australians are starting to change the way they shop, swapping beef for cheaper proteins like chicken and stocking up on canned goods, after a year of soaring produce prices.

Banducci told The Sydney Morning Herald and The Age after delivering the company’s 2022 financial results that the grocery retailer was trying to provide the best prices for customers at a time when fresh produce growers were facing elevated costs.

“We are always trying to get the right balance, do the right thing for the consumer but also recognise when the supplier has significant cost pressure.”

He said the supermarket was passing through price rises where it could but in some cases the company was absorbing the hikes, if “it feels like it’s too much pressure on our customer”.

Beef prices continue to go up and up... there comes a point where you can’t actually pass it on to customers

Woolworths CEO, Brad Banducci

Banducci said that while it was difficult to separate current shopping trends from the impacts of the pandemic, it was clear that cost of living pressures were changing how people shopped.

“We are seeing some customers trade down from beef into more affordable sources of protein and trade across from fresh vegetables into more affordable frozen and canned offerings,” he said.

He highlighted that while it was hard to see the shift on a macro level, more budget-conscious trends were playing out when looking at individual product categories. Trends included shoppers switching up beef mince purchases for chicken or pork mince, or moving from fresh to frozen fish.

The company also flagged with analysts on Thursday that the business was having to face lower margins on beef as prices climbed throughout the year while shoppers’ budgets were squeezed.

“Beef prices continue to go up and up... There comes a point where you can’t actually pass it on to customers,” Banducci said.

The retail giant on Thursday reported a 0.7 per cent rise in net profit from continuing operations for the year ended June 26, making $1.5 billion off the back of $60.8 billion in sales.

Reported net profit surged by 282.5 per cent to $7.9 billion, but this figure reflects the spin-off of drinks business Endeavour Group as its own listed entity last year.

The supermarket giant also gave a trading update for the first eight weeks of the new financial year, showing that food sales are down 0.5 per cent on last year - though those figures are “clouded” by the Delta variant outbreak this time last year.

Discount department store Big W had a strong start to the new year, up 30 per cent on last year as Australians head back to the shops.

Investors will receive a final dividend of 53 cents per share, fully franked, to be paid on September 29, bringing the full-year payout to 92 cents per share, up 1.1 per cent on last year.

Woolworths’ shares fell 4 per cent on the back of the results and closed 3.2 per cent down to $36.20.

Jarden analysts noted that the decline in food sales in the first eight weeks of the new financial year “will likely see some consensus cuts for the [the first half] of 2023.”

Banducci will be attending the Albanese government’s jobs summit next week, and said he wants to discuss modernising the general retail industry award with flexibility in mind.

“It [the award] needs to reflect the reality that a number of our team [members], when they work, want flexibility. Flexibility on when they work, what hours they work, and so on,” he said.

Household spending in June was up more than 10 per cent compared with the same time last year, as Australia struggles through skyrocketing cost of living.

The latest monthly spending figures, released on Tuesday by the Australian Bureau of Statistics, show household spending increased 10.2 per cent through the year, with a 15.9 per cent increase on services and a 5.0 per cent increase on goods.

Both discretionary and non-discretionary spending increased – not surprising given the rate of inflation is 6.1 per cent.

Discretionary spending rose by 10.8 per cent, driven by spending in recreation and cultural activities, while non-discretionary spending on essentials rose 9.8 per cent, due to the rising cost of transport.

The most significant area of spending was on transport, up 22.7 per cent, driven by higher petrol prices due to the ongoing war in Ukraine and the demand for air travel.

Spending at hospitality businesses like hotels, cafes and restaurants was up 17.1 per cent in what is viewed as a positive return to pre-pandemic levels.

There was also strong growth in spending on clothing and footwear – up 16.3 per cent; as well as a 15.5 per cent increase in recreation and culture.

Jacqui Vitas, from the Australia Bureau of Statistics, said June marked the 16th consecutive month of through-the-year increases in total household spending.“This was off the back of consistent decreases in total household spending from March 2020 to February 2021, as responses to Covid-19 were experienced across the country,” she said.

“Spending categories most impacted from Covid-19 responses – transport, hotels, cafes and restaurants, and clothing and footwear – have now returned to pre-pandemic levels.”

Queensland and Victoria recorded the highest state-based increases in spending through the year, spending 12.4 per cent and 11.8 per cent respectively more.

Fast-fashion brand Zara has released a sustainable capsule range in collaboration with Swedish sustain-tech company Renewcell. The collection has been created using Circulose, Renewcell’s branded material made from 100 percent textile waste. 

The Renewcell x Zara range of cream-coloured products includes a rib knit tunic top and rib knit pants, maxi dress with sweetheart neckline, buttoned sleeve knit top, eyelet knit sweater, and cut out maxi dress. However, the range is now available only in the US – sorry, Aussie shoppers.

This joint initiative helps Zara move toward a circular supply chain and is part of the Sustainability Innovation Hub that Zara parent Inditex has developed. The hub is a platform that promotes the discovery of technologies, materials and processes. It supports the fashion brand in limiting its impact on the environment and adopting sustainable solutions.

“Zara is one of the largest fashion brands in the world, a testament to its power to influence real change within the industry,” Renewcell CEO Patrik Lundström said. “Collaborations with such global brands bring our vision to change fashion at scale to life, and our rapid growth would not be possible without partners like Zara joining this shift. We are delighted to reveal this collection made with Circulose as the latest step in our ongoing collaboration.”

Creating Circulose involves a recycling process that dissolves cotton cellulose from textile waste such as jeans into cellulose pulp without the need to incorporate wood pulp, which takes immense pressure off forests. The pulp is sent to producers and made into viscose fibres, then spun into new yarns and fabrics.

Renewcell will soon be able to expand its production at scale to accommodate brands of all sizes, in its new plant in Sundsvall, Sweden. This will save tonnes of textile waste from going to landfills, where it takes more than 200 years to decompose.

During decomposition, textiles emit greenhouse methane gas, toxic chemicals and dyes into the ground. In Australia alone, about 240,000 tonnes of textile waste goes to landfills each year. 

The key to the fashion industry becoming circular is building in a regenerative system to ensure garments are in use for as long as possible. At the end of its lifecycle, a piece can be broken down to create something new or go back to the earth in a sustainable and safe manner. 

Brands should be designing clothes with the end in mind and have a clear strategy for a garment’s afterlife. Options include clothing take-back schemes, upcycled collections, and textile recycling. Many large brands have created their own sustainability initiatives in line with the United Nations Sustainable Development Goals. These provide huge benefits to the environment, their local communities, and customers. 

When it comes to fashion, however, can the largest fast-fashion brand in the world be the answer to turning the industry circular?

Sustainability at scale

In truth, for the fashion industry to generate any real and lasting change, it needs sustainability at scale. The Renewcells of the world can delve deep into the root causes of fashion’s wasteful problems and design new processes to take their place – but the new processes must be easy enough for the largest fast-fashion brands to adopt. Then fast fashion can be part of the solution, rather than the problem.

Sustainability is a hot topic at the moment, literally. But for the last decade, tackling the problems surrounding waste has been a challenge. However, awareness has increased. Evidence is shining a light on the most wasteful industries and the detrimental global impact hyper-consumerism has on waste creation. 

Here are four major concepts helping fashion become more sustainable and ethical. 

Non-animal leathers

There’s now an alternative to leather made from animals, it’s leather made from plants, fruit, and fungi. These alternatives offer a similar look and feel without harming animals or the environment. They include leather made from cactus, pineapples, and mushrooms. Further research is happening with coconut and apple leather. Meanwhile, material scientists from Modern Meadow have developed a leather made from lab-grown protein. 

Lab-spun silk

Similarly, materials company Bolt Threads has grown silk in a lab by replicating the way spiders spin silk. 

Textile recycling

Finally, Australian technology and textile recycling company BlockTexx recovers polyester and cellulose from textiles and clothing. The process turns waste into resources, producing material for new products suitable for use in textiles, packaging, and construction. 

With substantial innovation in developing sustainable materials, the fashion industry will no doubt turn the corner. It may still take years; however, brands such as Zara integrating sustainable initiatives into their supply chain sets a standard for the entire industry to follow.

Fast-delivery start-up Milkrun has big aims of taking down grocery goliaths such as Woolies and Coles. But the market has turned, and the giants could take it out.

During a conversation with a global Uber executive recently about the Australian tech scene, the topic turned to the much-feted start-up Milkrun.

The executive noted the company would soon face a fork in the road. Would the cash-burning, delivery company turn to the private markets for more funding to keep the electric bikes on the road? Or buckle and look to M&A?

The well-respected founder, Dany Milham, has said publicly he is in it for the long term; that the company that delivers groceries and toilet paper in minutes to inner-city locations can challenge well-funded global giants.

But the Uber executive suggested the “ultrafast delivery” category simply could not survive as a standalone business, and made more sense within a larger retail or delivery company. Those with their eyes on acquiring Milkrun would be retail giants, Uber or another player such as 7-Eleven, the executive said.

Responding over email, Milham said: “That’s the first I’ve heard of this and not something we’re exploring.”

Whether Milham chooses funding or M&A will be a decision for the coming months. A recently leaked pitch deck showed the fledgling firm losing $13 on every order. And while the founder publicly pushed back on the specific numbers published by The Sydney Morning Herald, he admitted the thrust of the numbers was clear.

The start-up is burning through the $75 million of funding it secured earlier this year from the likes of Australian VC firm AirTree and global investment giant Tiger Global.

The situation facing Milkrun and its backers is playing out across the global start-up ecosystem. The era of cheap cash, extravagant start-up perks and the megarounds that have marked the past decade is over.

‘Ripper hangover’

What is left are founders and VCs solemnly taking stock in an environment of rapidly rising interest rates and high inflation. As one European VC put it: “The party’s over, now we’re dealing with a ripper hangover.”

Those feeling the effects of that binge are staggering into view. Last week, Japanese conglomerate SoftBank announced a $US23 billion loss – for the quarter.

The group’s renegade founder, Masayoshi Son, who oversaw the company’s spectacular bets on firms that embodied the decade-long tech boom such as WeWork and Uber, appeared chastened when fronting investors.

Meanwhile, Tiger Global Management – which most recently sprayed billions into the hands of start-ups during the pandemic – ended the first half of the year down 50 per cent.

Cash-burning start-ups will find going back to the private markets a tougher challenge for the foreseeable future. While VC companies continue to raise large sums from investors for tech-focused funds, those asking for funding will need to show more than just customer buzz and growth to score a big cheque.

Take Gorillas, a Berlin-based delivery start-up that was one of the first to spring up during the pandemic. Like Milkrun, the company is run by a charismatic founder, who also found getting early money from big-name investors a breeze.

After collecting nearly $1 billion from investors towards the end of last year, Gorillas has spent months trying to raise more cash.

One of the start-up’s original investors told The Australian Financial Review that US growth funds had baulked at giving money to Gorillas without the young firm taking a haircut on its $US3 billion valuation.

The start-up’s team might need to turn to large sovereign wealth funds based in the Gulf, the investor said, where despite some dodgy bets, investors remain hungry to get into Western pre-IPO companies.

More likely, large incumbents will circle, hoping to acquire the start-ups on the cheap. Gopuff, the delivery start-up which has owned the US market, has received interest from Uber, while talk of Amazon possibly acquiring the $15 billion company continues to fly among VC investors in the space.

What might happen to Milkrun is already happening elsewhere. And the fate of the company continues to be hotly debated among Australian start-ups and investors.

“In my view – I would love to be wrong – Milkrun will fold not because of Metro60 [Woolworths’ competing product] but because cash will run out with no more appetite from investors,” Mayuresh Patole, founder of Aussie presentation software start-up Chronicle, recently wrote in a private Slack group for local VCs and founders.

But considering the rotten outlook, the likes of Uber, Amazon, 7-Eleven or Woolworths will continue to sit on their hands.

It was when these start-ups started “sweating for cash”, the Uber executive said, that the M&A season would begin.

Wattie’s, the New Zealand subsidiary of Heinz, has launched a subscription and gifting service for its popular baby food pouches.

Customers can choose from a variety of 23 different food pouches in a Wattie’s to Home Infant Subscription bundle to feed babies aged from 4-8 months and above. They can be home delivered on a weekly, fortnightly or monthly basis.

The company’s 6+ months gifting bundle includes a mixture of 10 baby food pouches with both sweet and savoury options for parents to choose from. All flavours are available in 120g pouches and come in a twin pack.

Flavours include Wattie’s Tropical Custard, Apple Peach & Mango, Organic Beef, Butternut Pumpkin & Rice with Spinach, Banana & Apple Porridge and Organic Sweet Garden Vegetables. Packs retail for $40.

Apart from baby food pouches, the Wattie’s to Home 8 months+ gifting bundle also includes a branded silicone sippy cup and a snack container.

Flavours in this bundle include Wattie’s Organic Pumpkin, Kumara and Courgette with Quinoa 6+ months, Creamy Custard with Banana 6+ months, Chicken Sweetcorn & Mango 6+ months, Smoothies Oatilicious Brekky 8+ months and Little Skippers Creamy Mash with Salmon 6+ months. Packs retail for $50.

Neil Heffer, MD at Wattie’s, said: “Our Wattie’s to Home subscription service takes the pressure off making quick decisions in the supermarket aisle and allows parents to browse and purchase baby pouches with the flexibility of updating their choices as their baby’s preferences change.”

Claire Peters, Woolworths’ MD of B2B & Everyday Needs, has resigned to take up a new role with Amazon in the US.

Peters joined Woolworths as MD of supermarkets in 2017, before taking on her current role in 2020.

She will leave the company at the end of this year to relocate to Seattle, Washington, to take up the role of VP worldwide at Amazon Fresh. 

“In her five years with Woolworths Group, Claire has played a key role in transforming Woolworths Supermarkets and building the foundations of B2B and Everyday Needs,” said Woolworths Group CEO Brad Banducci. 

“As the MD of Woolworths Supermarkets, Claire elevated the focus on our customers while also materially improving our retail operations. Since September 2020 Claire has helped to guide the transformation of Big W, establish our end-to-end meat business Greenstock, and progress our partnerships including Endeavour Group, PFD and Ampol,” he said.

Banducci paid tribute to “the biggest imprint” Peters will leave on the business – “her care for team and communities, on show in the leadership role she played during the repeated waves of Covid, and her purposeful work on reconciliation with the support of the First Nations Advisory Board”.

Endeavour Group has acquired McLaren Vale winery Shingleback Wines, which will now be part of the group’s wine portfolio under its Paragon Wine Estates subsidiary.

The acquisition by the liquor retail giant, which owns Dan Murphy’s, includes Shingleback Wines’ entire brand portfolio, a long-term lease of the McLaren cellar door, and an ongoing grape supply agreement.

“We are thrilled to add Shingleback Wines to our Paragon Wine Estates as part of our strategy to grow our premium wine portfolio,” said Paul Walton, director of Endeavour Group’s products and services arm Pinnacle Drinks.

“Shingleback Wine has been producing beautifully rich and full-flavoured wines for 25 years, and we look forward to continuing to offer it to wine lovers in Australia and around the world as part of Paragon Wine Estates.”

The addition of Shingleback Wine expands Paragon Wine Estate’s regional coverage to brands across six premium key wine regions in Australia and New Zealand, including Chapel Hill (McLaren Vale), Oakridge Wines (Yara Valley), Isabel Estate (Marlborough, NZ), Josef Chromy Wines (Tasmania), Riddoch (Coonawarra), and Krondorf (Barossa Valley).

Founded in 1997 by brothers Kym and John Davey, Shingleback Wine is said to be a product of their love of winemaking, farming, and business. It was awarded the Jimy Watson Memorial Trophy in 2006 and, most recently, secured four trophies at this year’s Sydney Royal Wine Show.

“As a long-term, proud supplier to Endeavour Group, we know that the Shingleback family of wines has a bright future as part of Paragon Wine Estates,” said the brothers.

“We are very proud of our team’s stellar achievements over the last 25 years and are confident that Endeavour Group has the passion, people and capacity to continue to build on that success.”

Supermarkets are facing pressure to increase the price of eggs, as farmers face soaring input costs, including transport, fuel, grain and chickens.

As the egg industry faces a structural shift in demand from consumers, shortages are emerging, and Coles has placed a temporary limit on purchases.

Egg farmer Brian Ahmed says consumers need to pay $10 for a dozen free-range eggs at the supermarket or risk seeing producers go out of business as input costs rocket.

Mr Ahmed, who is the Victorian director of Egg Farmers Australia, said grain prices, which account for about 60 per cent of his production costs, had risen 50 per cent in the past six months, and the cost of chickens had risen 36 per cent.

Farmers are not getting a big enough cut from supermarket sales, he says, to make up for the “double whammy” of rising input costs and the growing demand for free-range eggs, which are more expensive to produce because of higher mortality, lower production and increase in feed consumption.

Free-range eggs now represent 59 per cent of the value of supermarket egg sales. Cage eggs make up 28 per cent, barn-laid eggs 10 per cent and organic free-range eggs account for the balance, according to the latest data from Australian Eggs.

But Mr Ahmed, who is also president of the Victorian Farmers Federation egg group, said a colder than normal winter had contributed to the country’s egg shortage as free-range birds had not laid as many eggs.

‘Hit from every angle’

“Production costs have gone through the roof for egg farmers. We’re being hit from every angle – transport, fuel, grain, chickens, and packaging,” he told AFR Weekend.

“We cannot absorb those increased costs. Consumers have to pay for the inefficiencies of that farming system as well as the rising input costs – $10 for a dozen free-range eggs is where it needs to be. But the farmer has to get an increased cut, that’s the important thing. It’s got to be fair.”

Mr Ahmed produces cage eggs himself and has had to raise the farmgate price of his biggest seller, a 700-gram tray of a dozen eggs, by a dollar to $5.

Adam Crew, financial controller of the nearby Casaccio Egg Farms, said the price of basic feed, which made up at least 50 per cent of his business costs, had gone up by $111 per tonne to $614, and the monthly feed bill was coming in at nearly $200,000.

Casaccio, he added, had placed purchase limits on its eggs as “panic buying” had exacerbated the shortage.

Finding the happy medium

“There’s a huge shortage at the moment. We’ve had to cut back our supply to cafés and restaurants,” Mr Crew said.

Casaccio has also had to raise its egg prices by 25 per cent and Mr Crew said egg farmers turning over $10 million would now be lucky to make $300,000 in net profit. He agrees with Mr Ahmed that the price of eggs on supermarket shelves had to rise, but he reckons $10 is too steep for consumers.

“Eggs are the most affordable protein source that low-income families can buy, so I’d like to think there’s a happy medium around $8.50. Supermarkets have to revise their margins though,” he said.

Egg Farmers Australia chief executive Melinda Hashimoto said that at the national level, egg farms were paying 20 per cent more for pullets (young laying hens), 25 per cent more for fuel, and 141 per cent more for canola on top of rising feed grain costs.

Australian Eggs managing director Rowan McMonnies said COVID-19 had contributed to the country’s egg shortage.

“Free range production is more complex than other systems as there are more variables to manage, including seasonal weather conditions,” he said.

“Egg farmers are usually able to meet demand across the year through planning, but COVID disruption has made this difficult.”

The industry body says demand is rising, and the average Australian consumes 249 eggs a year, up from 221 in 2015.

Woolworths and Aldi have not placed a temporary limit on egg purchases.

Moving beyond its IGA brand, Metcash is making a play at the low-cost, bulk-buy market with its latest venture Supa Valu – a range of warehouse-style supermarkets that showcase products by the pallet, as well as featuring local butchers and bakers.

With the first three stores launching across New South Wales and Victoria over the last year, Supa Valu targets a growing segment of Australians looking to find ways to cut their weekly food costs, as well as those overwhelmed by the options presented at major supermarkets.

According to Metcash’s head of Supa Valu Steven Stewart, the business came about as an effort to deliver a simple, affordable grocery experience for disconnected shoppers. 

“If you go into a [typical supermarket], there are so many messages that we’re trying to communicate to shoppers,” Stewart told Inside Retail. 

“It’s a bit out of control – from car insurance, to mobile phones, or the next multibuy deal you can get. I think customers are responding really well to Supa Valu, because it does what it says on the tin. There’s the product, there’s the price, and there are no bells and whistles.”

And while the first three stores have launched, and there are plans for more to potentially open, Stewart said he doesn’t expect to see hundreds of Supa Valu stores across the country. Instead, the business will seek to grow organically, when and where new stores make sense, rather than expanding for the sake of growth.

Keep it simple

Created in collaboration with McCartney Design, Supa Valu not only feels different to a traditional supermarket, it looks different as well. Pallets of products are placed on a largely empty concrete floor, giving customers the chance to buy in bulk, while in-house butchers make up cuts of meat based on what the business has secured. 

According to McCartney Design’s creative director Gary McCartney, Supa Valu’s customer journey is a variation of the traditional supermarket visit. 

Beyond offering fresh fruits, vegetables and protein up front where customers enter the store, Supa Valu also highlights ‘meal makers’, products such as sauces or key ingredients, which can help to cut down on confusion for customers and make the act of planning meals easier. 

“We’re literally putting pallets in front of customers, whether it be tuna fish or toilet paper, and that creates more space for big trolleys, so people are actually buying more of less – there are fewer SKUs than a conventional supermarket,” McCartney told Inside Retail. 

“That’s where the warehouse aesthetic comes from, we’re keeping it very simple.”

In taking this simple approach, Supa Valu is not only able to keep prices down for its customers, but also keeps the cost of its operations down as well – two things that are increasingly important in today’s retail environment. 

“We noticed no one else in the market was really delivering a simple supermarket experience, and it suits us really well,” Stewart said. 

“I think it’s really critical that every retailer finds a way they can be themselves, while also giving their customers what they want.”

Inflation bites both sides

Supa Valu’s wider debut comes at a time when the cost of living is rising  as a result of supply chain disruptions caused by international factors, and Australians are being warned that inflation is likely to hit 7 per cent by the end of the year, driving the cost of everyday items, mortgages and petrol prices even higher.

Low-cost supermarket Aldi has signalled further price rises are inevitable across the wider industry as its own costs go up, though it will aim to remain more affordable than its rivals Coles and Woolworths.

According to Federal Treasurer Jim Chalmers, things are going to get worse before they get better.

“A lot of people are living paycheque to paycheque, [and] inflation will be devastating because it’s getting harder and harder for them to substitute things out of their household budgets,” Chalmers said last week.

Many of Australia’s lowest paid workers benefitted from a 5.2 per cent increase to the minimum wage just a few weeks ago, but inflation is expected to outstrip that within months. It makes sense that, under financial pressure, more Australians will start looking for ways to cut costs – and after nice-to-haves like Netflix, the weekly grocery bill is likely to be next in line.

In a recent survey by McKinsey & Company, 80 per cent of respondents said they were concerned about rising inflation, and nearly 45 per cent said they have already decreased their spending in response, signalling a broad shift towards value-based purchases.

Daniel Hawkins has been appointed as Domino’s New Zealand’s newest GM of operations, effective immediately.

Hawkins has more than 20 years of experience in technology and digital leadership roles at companies such as Michael Hill and Zarraffa’s Coffee. He joined Domino’s 18 months ago as the chief information officer overseeing the business’ IT functions in both markets.

David Burness, CEO of Domino’s ANZ, said: “As a market with more than 140 stores, and a strong growth plan to build to more than 200 stores in the coming years, I am confident that Daniel is the right person to lead Domino’s through the next stage of growth and development in New Zealand.”

In his new role, Hawkins will work closely with franchisees and team members in 144 stores across New Zealand driving growth, innovation and products.

He succeeds Cameron Toomey, who has returned to Australia after four years in the role.