Supermarket competition set to heat up, says Wesfarmers' Richard Goyder

Date
    February 20, 2014


Competition in the supermarket sector is tough and will only get more competitive in the years ahead, Wesfarmers chief executive Richard Goyder said.                  

Overseas competitors are increasingly looking to Australia as a new source of revenue growth, and despite Wesfarmers’ Coles sharing a near stranglehold on the grocery market with rival Woolworths, the threat is very real, Mr Goyder said.

''The competitive threat from Aldi and Costco is greater now that it's ever been. Both those business have aggressive store rollout plans, and of course we've got a much larger competitor in Woolworths,'' Mr Goyder told ABC Radio National.      

''It is, I think, a very competitive sector and will only get more competitive in the years ahead.''


The German-owned supermarket Aldi has grown rapidly since launching in Australia in 2000. Aldi originally planned for a modest 100 stores, but has now 340 stores on the east coast of Australia and has been planning the launch of 115 stores in South Australia and Western Australia.      

Aldi now holds a market share of 10.3 per cent, however this pales in comparison to the combined 72.5 per cent held by Coles and Woolworths. In 2007, Aldi held a market share of just 5 per cent, according to Roy Morgan Research.

Price battles have helped households manage with rising costs of living, but Mr Goyder conceded Coles's ‘Australia first’ sourcing policy did squeeze some in the supply chain.

''Unfortunately as we do this and as we improve our offer, there are some winners on the supply side of things and some losers, and of course, it's understandable that we hear from the losers,'' Mr Goyder said.

''That's unfortunate, ultimately I think we're doing the right thing by all our stakeholders, our shareholders, our employees, our suppliers, our customers and the communities in which we operate.''

Many business have long pushed the federal government to cut penalty rates which reward those workers who work on weekends or unsociable hours. Earlier this month, the Abbott government urged the Fair Work Commission to review penalty rates.       

However, Mr Goyder said he was not concerned with penalty rates.          

''For us penalty rates aren't a big issue. The bulk of people at Wesfarmers are in retail and they're not highly paid compared to other sectors. We'll continue to look to improve the conditions as best we can for those people and we're doing that by employing more as permanents and less as casuals,'' Mr Goyder said.

'The big issue for us, frankly, is we've got other rules and regulations that prevent us from competing from the competition we've now got, which is 24/7. The Amazons of the world that operate in other countries don't pay taxes in Australia and don't employ people in Australia, those things concern me more than the issue of penalty rates.''

Mr Goyder would not be drawn into comment about the federal government's decision not to help SPC Ardmona, because SPC supplies Coles with private label products, but noted that the government needs to be careful when handing out taxpayer funds.

''I think government needs to be very careful with shareholders money in any industry assistance and if governments are going to provide it then they've got to be certain, or as sure as you can be, that over time it's going to provide a reasonable outcome for the taxpayer.''

Read more: http://www.smh.com.au/business/retail/supermarket-competition-set-to-heat-up-says-wesfarmers-richard-goyder-20140220-3320b.html#ixzz2top1RJmc