Aldi to grab 15pc of market, says Hamish Douglass

    The Australian
    September 10, 2015 3


High profile fund manager and founder of Magellan Financial Group, Hamish Douglass, believes German discounter Aldi will capture as much as 15 per cent of the nation’s $90 billion grocery market with Woolworths and Coles to also gain more power, while independent grocery wholesaler Metcash might not exist in 10 years.   

Mr Douglass, whose funds look after more than $36 billion of clients’ money, said unless Metcash’s independent supermarket operators could match the heavyweights on price they might disappear from the market.

Turning to Woolworths, which Magellan has been a buyer of since late last year, Mr Douglass said the supermarket giant needed to renegotiate with its joint venture partner, US hardware group Lowe’s, over the future of its loss-making hardware chain Masters.

Mr Douglass said unless the partnership could rework the investment, especially the put option Lowe’s has to sell its one-third stake back to Woolworths after October 2016, Masters should be jettisoned from Woolworths.

He also said Woolworths struggling merchandise chain Big W did not have much of a future within the group.

Mr Douglass told financial planners at a business lunch in Melbourne today that Woolworths boss Grant O’Brien “did a dumb thing’’ last year by raising prices after customers didn’t seem to notice that Woolworths was matching archrival Coles on price.   

Woolworths was wrong last year to lift prices as shoppers didn’t react to its perception of cheap prices, meanwhile removing staff from the store to help it reach earnings guidance and lack of goods in the store hurt the company’s performance and angered shoppers.   

“The shelves were half empty,” he told the lunch.

“Shoppers decided this is terrible. Not only are they charging me more, there is no service in this place and they are running out the goods I want to buy. It was like a perfect storm of mismanagement,’’ Mr Douglass said.

Australia had one of the most attractive grocery markets in the world in terms of margin and profitability, with Aldi looking to capture around 15 per cent of the market compared with its current 10 per cent market share, he said.   

“Aldi is squeezing the independents out of the market, and Metcash over a 10-year period I think is very highly probable won’t exist,” he said.

He said the independents’ share of the market, as much as 8 per cent, would then be shared around to Woolworths, Coles, Aldi and Costco as its model came under intensive competitive pressure.

“We will have an industry structure where Coles and Woolworths have 80 per cent of the market between them, and a hard discounter (Aldi) 15 per cent,” he said.

Mr Douglass said Woolworths needed to restructure its arrangements with Lowe’s over the Masters hardware business, particularly the put option that could see Lowe’s walk away from the venture.

“If the Masters numbers don’t stack up, they should look at divesting it and realising the property in the business. They need a hard-nosed approach on that.

“And Big W, we just don’t see Big W being part of the Woolworths portfolio.”

Competition is a natural and wonderful thing Crook.

Natural selection.  Evolution and all....

Competition motivates innovation, enterprise effort. 

....all the things that the anti-competitive labour cartels otherwise known as the Union movement is against

Sad isn't it 

Have the Friends of Theo Albrecht been slacking off, of late ?

Are we exiting the longest break in promotions for the 100% German multi-millionaire owned retail chain we've ever witnessed ?

The popular media have been just as quiet
Perhaps Theo has got behind in paying his advertorial bills ?





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Swagman wrote on Sep 12^th, 2015 at 11:04am:


It's a pity the libbos couldn't handle the competition from the renewable energy camp instead of trying to stamp it out

Sir lastnail wrote on Sep 12^th, 2015 at 2:48pm:


They welcome efficiency, innovation and enterprise so you are telling porky pies.