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Sydney, Nov 3, 2006 (ABN Newswire) - Woolworths has started down a familiar track in trying to shake-up the New Zealand supermarket industry by introducing some of its marketing ideas from Australia, starting with cheaper milkand petrol.
The retail giant hasslashed the price of generic and brand name drinking milk and last week stepped up the pressure on its rival, Foodstuffs, by introducing its four cents a litre off shopper docket voucher system for petrol across the Tasman.
It has also increased pressure on its rivals in the generics side of the business, which is where it and its rivals in Australia are expanding as they chase higher margined sales.
That's a direct transfer from Australia of the milk price cut (which it did about five years ago) and the fuel price voucher.
Woolies' petrol move through its Progressive Enterprises outlet was quickly matched by rival retailer, Foodstuffs which claimed to have been working on a plan for some time.
From this week NZ supermarket shoppers who spend more than $NZ 40 (its $A30) at any of Progressive Enterprise's Foodtown, Woolworths and Countdown supermarkets will get 4c a litre off their fuel at participating 250 Shell and Gull stations. Shell is Coles Myer's partner in Australia.
Foodstuffs' scheme is with BP New Zealand, which operates one with Citigroup through a card loyalty scheme in Australia.
Foodstuffs, which operates New World and Pak'N Save stores, says its scheme will start midway through next month: Woolies started Monday of this week.
It's the latest in a series of moves that have seenWoolies secure a blocking 10 per cent stake in The Warehouse, which founder Steve Tindall and private equity group, Pacific Equity Partners,proposed to take private. Foodstuffs also has a stake in The Warehouse of about 10 per cent.
Foodstuffs hold a 57 per cent of the New Zealand grocery (supermarket) market compared to Progressive/ Woolies' 43 per cent. Both are trying to block The Warehouse from going private and opening between 10 and 12 very large supermarkets of a size not seen in New Zealand.
Tindall called that off this week and it is now it will be a stand off between him, Woolies and Foodstuffs.
Some Australian brokers believe Woolworths will try and buy Tindall out and use the Warehoue to be the basis for aig W-like chain to go with its supermarkets.
That would cost around $NZ 2 billion or thereabouts for 100 per cent of the Warehouse Group, according to some estimates. That might be a bit generous but Woolies can afford to wait for the WHS share price to settle back under $NZ 6 a share and lower.
Foodstuffs already has a fuel scheme with 20 Pak 'N Save stores and a couple of its New World stores. People who buy over $NZ 150 of groceries get 6 cents a litre off petrol bought at dedicated Pak 'N Save fuel stations.
Foodstuffs says it still plans to grow its chain of dedicated petrol canopies, much in the way Woolies started its chain and then got into bed with Caltex when the Coles-Shell combination took off with an initial growth spurt in 2004 that took Woolies by surprise.
Woolies petrol move follows its recent aggressive price attack in the drinking milk segment (which is the third most important category in NZ supermarkets sales).
Woolies recently re-branded a number of its entry price point private label (generic) products in its NZ supermarkets from 'Basics' to 'Homebrand'. This has occurred on staples like bread, milk and sugar.
This re-branding brings the NZ entry point products into line with the same generic products in its Australian supermarkets.
As it introduces each new generic brand Woolies cuts prices in stores and on its home shopping Internet service.
The cuts apply across the range of own brand products from Homebrand to the Signature premium product line.
One point not highlighted in Australia is that some of the 63 supermarkets and 22 Woolworths' Quickstops now operated across the Tasman by the retailer can trace their history back to Woolies.
Woolies sold out of its New Zealand stores in 1979 when L.D. Nathan bought them. In 1990 Dairy Farm of Hong Kong bought them (they also owned Franklins in Australia) and in 2001 it merged with Progressive Enterprises which operated the Foodtown, Countdown, SuperValue and Fresh Choice and Price Chopper banners under the ownership of Foodland Associated (FAL).
Woolies took control when it and Metcash dismembered Foodland in late 2005.
The other leg to the Australianisation of Woolworths New Zealand is in liquor.
The retailer has had talks about buying a chain in New Zealand that would probably form the basis for the export of its Dan Murphy's concept from Australia.
Dan Murphy's is a 'big box' retailer with a large range of wine, beer and other liquor products sold at deep discount and depending on a mixture of volume and higher margin sales (they have a wide range of boutique wines in Australia).
Woolies will get around four billion dollars this financial in liquor sales in Australia (probably as much as $4.2 billion) and they have proven to be an essential part of its supermarket offer here: with stores next to supermarkets (Woolies Liquor), stand alone shops, BWS and the Dan Murphy's-sized stores.
New Zealand reports say the most logical buy would be the 40-store chain The Mill Liquorsave, which is based in New Plymouth and operates throughout the country.
Woolies moved heavily into liquor by buying small operators in Australia (and hotels in Queensland in particular where licensing laws are different). Dan Murphy's was bought in Melbourne and turned into a category killer within five years in Melbourne and then taken interstate.
Coles Myer is just getting around to trying matching it with its underwhelming First Choice outlets.
The irony is that Coles Myer were in new Zealand for much of the 90s with a group of under-performing Kmart stores which it couldn't make work
An updatefrom Wal-Mart after the Air Weekly story last Friday on how the giant retailer was slashing its capital spending on new stores, especially inside the US, its core market.The reason, as explained to the market last week, was to try and match capex to sales growth and to try and improve and then maintain profit margins.But its retail sales are still slowing inthe US and November is now estimated to be as bad as October was.
Last weekend Wal-Mart said in a recorded message at its Arkansas head office that same store sales at its US stores (same store sales are those from outlets open for a year or more, the same as in Australia) in October rose about 0.5 per cent, the smallest gain since August 2004.
The figures compare to an estimate given earlier in the week by the head of the company's US stores business that it was expecting a rise of between two and four per cent.Now the retail giant says November's sales in the US will be no better as well, compared to expectations of a recovery. The newsis especially important for investors as the end of November (post-Thanksgiving) is the best retailing evironment of the year for American retailers.
CEO, Lee Scott, said Wal-Mart has been hurt by weaker-than-expected clothing sales and disruptions from store renovations.
Target, the second-largest U.S. discount chain, says it its same storesales grew at 3.9 per cent last month, at the low end of therange of three to six per cent previously forecast.Target has a better and wider range of more fashionable clothing items than the staid, basic products sold by Wal-Mart (fashion versus cheap and cheerful) and analysts say this greater range is taking customers from Wal-Mart..
In September, Wal-Mart had a same-store sales gain of 1.3 per cent, compared with a 6.7 per cent increase from Target. Wal-Mart confirmed October's same store sales rose just0.5 per cent but the forecast of morethe same this month meansthe world's largest retailer is headed for its worst monthly performance since April 1996. US same store sales rose 4.3 per cent a year ago in November 2005, a sign of how sharp the slowdown is at the moment.
Wal-Mart has been cutting the prices of relatively expensive products like large screen TVs, home theatre systems and the like and introducing new fashion ranges of clothing in an effort to lift impulse sales among shoppers.
But its most watched campaign are the price cuts on items like toys and baby food and especially generic-drugs where they are now available for just four dollars for each prescription in 27 US states.
Also interesting to see Warren Buffett's Berkshire Hathaway company, which owns astake in Wal-Mart, has now emerged owning five per cent ofrival, Target.
He obviously appreciates value in both cases.
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