Australasian Supermarekt Retailing Review 2008
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Australasian supermarket industry: Backwater, Behemoth or Beachhead Appendix 1: Australasian supermarket retailing review 2008 August 2008 PROJECT OBJECTIVES & SCOPE − Coriolis regularly reviews the results and strategies of all the key Australasian supermarket retailers as part of our ongoing knowledge building activities. From this, and other research, Coriolis publishes an overview of the key Australasian supermarket retailers on a semi-regular basis (see www.coriolisresearch.com for past editions). − We are not sharebrokers. We have no axe to grind. With this document, we are trying to provide a single source of basic overview data of all the key Australasian supermarket retailers that is useful to retailers and manufacturers alike. − Comments from our clients and other industry participants, as well as the log files from our website, indicates this review is of significant use to a wide range of people and companies. We hope it is of use to you and your company. − For the 2008 edition, we put more effort into developing the “so what?” element of our research; this was published as “Australasian supermarket industry: Backwater, Behemoth or Beachhead?” as presented at The Leading Edge’s Future Retail Australasia conference May 2008. This document acts as an appendix to that document and should be read in conjunction with that document. 2 SUMMARY The major retailer vary widely in size, scope and growth rates Major Australasian retailers: by the numbers (2007) Total sales Food and liquor 5 year # of (A$; b) sales (A$;b) sales CAGR* supermarkets $42.3 $36.51,4 13.3% 766 $44.4 $26.21 10.8% 7483 1,2092 4 $9.7 $9.7 10.9% +2,500 (independents) $1.357 $1.35 n/a 710 NZ$7.24 NZ$7.2 6.1%5 6286 $0.8 $0.8 20.5% 82 *Food and Liquor CAGR (Compound Annual Growth Rate); 1. includes petrol and convenience sales; 2. excludes AUR/Foodworks; 3. excludes liquor and petrol stores; 4. includes 3 sales to wholesale; 5. CAGR on total group sales 6. includes convenience stores 7. Included in Metcash wholesale sales above STRATEGY Australasian retailers are increasingly diversifying their businesses Major Australasian retailers by strategy (2007) Non- Metro Private Banking Hyper- Asian Pharm- Internet Fuel foods stores Liquor Hotels label & credit markets growth acy Services1 Tesco 0 0 0 0 0 - 0 0 0 0 0 0 Woolworths 0 0 0 5 0 0 0 0 - - 5 - Wesfarmers 0 0 0 5 0 0 0 5 - - 5 0 Metcash - - - - 0 - 0 - 5 - - - Foodstuffs - f - 5 f - 0 5 5 - - - Pick ‘n Pay - - - - - - 5 - - - - - 1. For example travel or optical 4 5 WOOLWORTHS CORPORATE STRUCTURE Food & Liquor accounts for $32 billion (75%) of Woolworths $42 billion turnover Woolworths Corporate Structure (A$;b; FY07) Sales: $42.3B Food & Liquor Petrol Hotels Big W Consumer Wholesale2 Electronics Sales: $31.6B Sales: $4.8B Sales: $1.0B Sales: $3.5B Sales: $1.3B Sales: $0.1B Caltex joint venture Woolworths/Safeway1 Sales: $23.6B Liquor Sales: $4.1B Progressive NZ Sales: $3.9B Note: Food and Liquor includes online shopping via Greengrocer, HomeShop, Foodtown online; 1. Safeway stores in Victoria only 2. Wholesale is 60% ownership of Overview 6 Statewide Independent Wholesalers (SIW) operating in Tasmania; Source:: Corporate Annual Reports STORE FORMATS Woolworth’s have broadly similar businesses across Australia and New Zealand, with the current lack of a liquor offer in New Zealand as the major stand-out portfolio gap Woolworths food and liquor store formats (2007) Format Australia # of stores New Zealand # of stores Supermarkets Conventional 774 33 supermarket 64 57 Urban - Independent F 31 41 supermarket V 41 FG 35 Petrol Petrol 361 +135 22 Liquor Liquor Store & 436 (ALH) wine shop 68 (DM’s) - 1,039 Total Liquor store Integrated attached to Beer & wine supermarket Wholesale Cash & Carry 3 C&C Progressive (Tas) 2 DC’s exited Rattrays C&C * Includes 4 agreements signed in 2008; 1. 60% ownership of SIW which operates in Tasmania and supplies both Woolworths and IGA stores; Note: Excludes clothing and 7 hardware stores; Source:: Company annual report and website WOOLWORTHS STORES Woolworth’s has operations in both Australia and New Zealand Woolworths supermarkets by region (2008) 10 168 79 62 237 199 183 TOTAL = 766 27 Source:: Corporate Annual Reports 8 WOOLWORTHS STORE NUMBERS BY BRAND Woolworths is increasing store numbers across all its brands Absolute Change Woolworths store number by brand (93-07) (units, actual, FY1993 - FY2007) 3,302 +2,390 3,205 263 Hotels 250 2,748 400 Electronics +298 366 169 129 142 Big W +84 342 2,187 505 Petrol +493 31 120 491 2,009 330 456 348 111 1,533 104 359 1,027 Liquor +1000 1,358 287 1,015 1,282 366 1,186 1,098 1,114 369 938 1,031 258 96 947 966 257 129 679 912 252 123 576 246 135 90 256 198 221 117 117 Rockmans 186 114 87 166 107 101 85 139 102 108 107 86 82 98 137 130 Crazy Prices 71 81 74 75 78 49 41 60 63 71 3812 38 42 58 27 954 965 Supermarkets +470 723 603 676 694 708 495 500 501 505 518 542 559 585 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: various Woolworths annual reports; Coriolis analysis 9 WOOLWORTHS SALES The majority of WWX sales are through Australian food and liquor; however Woolworths is successfully entering new markets and sectors (petrol, hotels and NZ) Woolworths sales by division1 CAGR (A$m; 1997-2007) (97-07) $42,477 11.1% Hotels $1,032$148 Wholesale -0.2% $1,310 Electronics 19.4% $37,734 $3,465 8.6% $850 BigW $1,167$145 $3,119 $4,837 Petrol 40.6%2 $31,352 $416 $142 $4,390 $27,934 $1,007 $3,940 Food & Liquor (NZ) $2,909 $26,321 $886$137 $24,473 $280 $2,605 $791 $2,718 $3,308 $819 $2,500 $20,915 $659 $2,195 $2,281 $1,711 $18,989 $210 $418$698 $1,119 $17,527 $675$338 $2,070 $16,001 $357 $338 $747 $14,800 $299$521 $1,914 $389$351 $1,788 $473 Disc. $325 $242 $223$152 $1,645 $316 $27,745 Food & Liquor (Au) 8.2% $1,517 $25,458 $23,570 $21,039 $21,998 $19,595 $16,772 $14,247 $15,251 $12,584 $13,375 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1. Sales only excludes rebates, discounts, and intersegment revenue; 2. CAGR 1999- 2007; Source: Company annual report; Coriolis analysis 10 WOOLWORTHS PROFIT INCREASING Woolworths is showing double digit profit growth in all sectors except wholesaling Woolworths trading profit by division (A$m; 1997-2007) CAGR (97-07) $2,227 11.1% $184 Hotels $3 Wholesale -0.2% $67 Electronics 16.4% $139 $1,788 BigW 11.2% $83 Petrol 61.9%1 $151 $155 Food & Liquor (NZ) $64$2 $123 $1,341 $53 $55 $109 $52$2 $1,122 $118 $2 $996 $44 $36 $0 $116 $876 $37 $19 $104 $28$7 $30 $733 $94 $1,597 Food & Liquor (Au) 14.9% $647 $31$5 $13 $83 $528 $547 $11$26$3 $5 $1,286 $479 $74 $16 $17$21 $1,077 $23$15 $56 $62 $942 $48 $825 $735 $614 $534 $398 $453 $452 $(4) $(10)$(4) $(2)$(3) $(1) $(5) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1. Petrol from 1998-2000 made a loss so CAGR 2001-2007; Source: Company annual report; Coriolis analysis 11 WOOLWORTHS SHARE PRICE Woolworths share price has shown substantial growth; particularly since 2000 Woolworths share price (AU:WOW; A$; 04/1994-04/2008) CAGR (00-04/2008) +25% 8 years Source:: BigCharts.com 12 WOOLWORTHS ACQUISITIONS Woolworths has made a number of ‘bolt-on’ acquisitions to expand existing businesses Woolworths Group acquisitions (A$m; FY1998-FY2007) Date Category Acquisition # of Stores Sales Acquisition Price Location Jun 2000 Liquor Booze Brothers 16 ~$64m $12m Adelaide Jul 2000 Liquor Toohey Bros 9 ~$40m Sydney Jul 2000 Supermarkets Advantage Supermarkets 5 $21.2m West Australia 2001+ Liquor MGW Hotels (jv with Bruce Mathieson) 85 $350m1 QLD 2001 Electronics Tandy Electronics 222 ~$200m $112.6m National 2001 Liquor Liberty Liquor 43 ~$180m $71.7m 2001 Supermarkets Part of Franklins Supermarkets 72 $1.5b $268.1m East Coast 2001 Petrol Lease Liberty Oil outlets 69 ~$100m + 2001 2002 Internet 38.1% of GreenGrocer.com.au (additional) - $18.3m 2003 Liquor Le Grog $7.3m South Australia 2003 Liquor Super Cellars $15.2m South Australia 2004 Liquor Baily & Baily $10.7m Oct 2004 Liquor Australian Leisure & Hospitality 263 $465m $1.32b QLD; other Jul 2005 Hotel Bruce Mathieson Group 26+8 199.2m cash Nov 2005 Supermarkets Progressive Enterprises 198 $959m cash & 82m shares Jan 2005 Hotel MGW Hotels $11.7m Feb 2006 Hotel Taverner Hotel Group 33 $85m $377.1m Jan 2005 Hotel MGW Hotels $11.7m Aug 2007 Hotels Saturno Group $118m South Australia May 2008 Hotels ALE Property Gp from Hedley Leisure & 105 pubs $57m Gaming Property Fund (20% stake) 1. Total acquisitions by jv 01-04; Note: Smaller unlisted acquisitions include Figtree Cellars (liquor), Park Cellars (liquor), Andi’s, Caltex Liquor as well as single supermarket “creeping 13 acquisition”; Source: various Woolworths annual reports; Coriolis analysis WOOLWORTHS DIVESTITURES Woolworths has disposed of underperforming or non-core businesses Woolworths Group divestitures (A$m; FY1998-FY2007) Annual Sale Date Category Divestiture # of stores sales price Location Feb 2000 Apparel Rockmans 258 $169m $11m1 National Jun 2000 Printing Chisholm Printing - - $7.4m Oct 2000 Meat Mnfg Chisholm Smallgoods Mnfg.