Trade

Woolworths unveils big plans for ‘Lean Retail’ model

Jon Condon, 08/05/2015

THE company’s red meat offer will be front-and-centre in plans unveiled by the nation’s largest supermarket retailer yesterday to reinvigorate its business, and respond to ‘evolving customer expectations.’

wooliesWoolworths outlined its three year growth strategy, based on a ‘Lean Retail’ operating model designed to lower prices and deliver annual cost reductions worth $500 million.

Woolworths is the largest red meat retailer in Australia, maintaining market share above 35 percent of all retail beef sales, according to industry data.

“The new initiative will enable investment in improving all aspects of the customer experience including lower prices, better convenience, improved service and access, and a commitment to innovation,” Woolworths CEO, Grant O’Brien, said.

“Woolworths is a strong business with lots of growth potential, and we are absolutely aware of the challenges we face to realise that potential,” Mr O’Brien said.

“We place the customer at the centre of everything we do, and have updated our operating model to reflect evolving customer expectations.

“Our Lean Retail model builds on our historical approach of driving growth via seeking efficiency and investing in our customers but with a clear recognition that the approach needs to be tailored to a modern era,” he said.

The program is focused on three key outcomes:

  • Cost: Improving efficiency and cost position through taking ‘real dollar’ costs out in a low inflation environment
  • Customer: Investing in a multi‐faceted and seamless offer to customers; and
  • Growth: Growing customers and market share.

“Investment in the customer offer will be funded through a significant and ongoing focus on cost management within our non-customer facing operations,” Mr O’Brien said.

“Price is of course a key driver, and we will invest in ensuring we will not be beaten on price, but our customers also now expect greater use of technology and innovative offers to make their shopping easier and more enjoyable.”

“Woolworths Food has already deployed $125 million into lowering prices. In addition, we have boosted in store service levels and stock availability,” he said. However, this is just the beginning and the majority of the investment program

Mr O’Brien suggested actions this year were ‘just the beginning’ with full deployment next financial year.

More than 80 stores will be refurbished each year and further steps to widen Woolworths’ multi‐channel retail approach.

Food Group managing director, Brad Banducci, said placing the customer at the start of everything the company did would result in lower prices, more compelling offers, and greater innovation.

“What is clear is that while lower prices are essential, the true battleground is the overall customer experience. So we will not be beaten on price, and we will provide better convenience, superior freshness and a more appealing range, and a focus on innovation,” he said.

The company had already spent $125 million of price reductions for customers since January, “taking Woolworths’ value position to its most competitive level since January 2014, with more to come.”

A new pricing and value strategy will be implemented to “neutralise Coles and contain Aldi’s impact on our sales”, with measures including lower pricing, better ranging, targeted customer offers using a revised and improved loyalty system, and a detailed strategy for improving Woolworths’ Own Brands.

“Own Brands will play a key role in competing with limited range discounters,” Mr Banducci said. “Woolworths will create higher quality and better priced Own Brands to close range gaps where no branded alternative exists.”

 

New FoodCo division will have strong VA connection with beef

Woolworths has established a new division called Woolworths FoodCo, with responsibility for developing new value-added product categories, improving fresh meat supply and processing facilities, and developing strategic sourcing relationships with Woolworths’ primary industry partners.

As part of this process, Woolworths will partner with Western Sydney based high‐quality food manufacturer Beak & Johnston to deliver Australia’s first dedicated facility for ultra‐fresh ready‐to‐cook and ready‐to‐heat meals. Company head David Beak provided early details on this development to Beef Central during his visit to Beef 2015 in Rockhampton yesterday.

Under a 12‐year contract, this facility will make a growing range of meals for Woolworths. Stay tuned for further updates on Beef Central on this development, as it applies to beef and lamb, in coming weeks.

 

Growth online

The Woolworths Food strategy aims to expand on Woolworths’ already strong online retailing presence by increasing investment in multi‐channel programs. Online pricing has been aligned to in store pricing and a range of new ‘Click & Collect’ pick-up locations will be opened including drive-thru collection points to increase customer convenience.

“We have 14.6 million regular customers and 500,000 online customers, and they are visiting us more frequently than ever before,” Mr Banducci said.

“But they are also getting fewer of their needs exclusively from us. Put simply, we need to gain customer trust and a greater share of their shopping basket, and we have a clear plan and the investment capacity to do so.”

 

Management changes

In management changes the company’s Australian and NZ supermarkets have been streamlined into one division which will be called Woolworths Food Group, under the direction of Brad Banducci as Managing Director.  Dave Chambers is Director, Woolworths Supermarkets and Steve Donohue is Director, Countdown Supermarkets. Steve Greentree will be Director, Woolworths FoodCo.

 

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Comments

  1. Aaron Neal, 04/02/2016

    As a tradesman, a butcher I don’t think anyone one could call themselves a tradesman if they completed a (so called trade cert) in a supermarket. It’s ridiculous. While not the most revered of trades, a true tradesman knows meat, can cook it, cut it, advise about it, cure, pickle and sell. There is a lot more experience to be had, and a better tradesman made by learning the skills required well outside of a major supermarket chain. These people have held down proper wage growth and recognition from this humble but skilled trade for long enough, good I say. They are NOT the fresh food people anymore. And if you have only worked for a supermarket to qualify, good luck in the real world.

  2. Mary Ellerman, 24/01/2016

    How Woolworths think they are improving customer service by not having butchers in the supermarkets and having more “improved” home brands is beyond me. I buy all my meat from WW because I know how fresh it is and the butchers will always cut an extra thick slice of rump or offer advice on other cuts etc. That is personalised service! I try and avoid home brands (even tho I’m a share holder) because I try and support all Australian producers. If WW do this they will be just like Aldi and why lower standards to “give better Service” Sounds like a man who never does the shopping is trying to run the shop!!

  3. Kevin James, 24/06/2015

    Update.
    Since my last comments re the restructure of Woolworths, things have gone from bad to worse. It would appear that not only smaller Woolies stores are getting rid of butchers in their meat Departments, however, larger more successful stores are also losing their butchers. In addition, all managers have allegedly been advised they will no longer receive any bonus. This bonus varies from store to store however, it can be in the order of 10k to20k.
    As all meat in the smaller stores is now cut, packed and dispatched to stores from a central cutting/packing room, I would be interested to know what customers think of the way meat is now presented for sale. As a former butcher, I would be ashamed to call myself a butcher if I presented meat like they are now doing. Woolworths have lost the plot and all I can say is “thank goodness I am not a shareholder”

  4. Kevin James, 08/05/2015

    It is interesting to note Mr.O’Brien states Woolworths will improve customer service and access whilst at the same time removing butchers from stores. I would dearly like to know how you can improve customer service when they do not have anyone to answer their questions regarding meat, in particular beef.
    I had an experience yesterday when I went to my local Woollies store and saw a pack of chicken marked down as it was almost out of code. When I asked the girl at the checkout if it was o.k she said she could not tell me as their were now no butchers in the store as they had been transferred or had taken leave. In fact the item should not have been on sale as it was out of code yesterday and Woolworths policy is that an item having a code expire that day cannot be sold but must be dumped. So much for improved customer service. Until such time as they reduce the number of managers in a store and have people who can service the public nothing will change.

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