So where do our two big supermarket chains think we’re going in 2019?
The Australian newspaper recently ran a survey to the leaders of some of Australia’s biggest businesses and the following are the answers from the CEOs of our biggest supermarket chains;
- What should be the key issues in the next federal election?
Woolworths
While there are a number of issues facing the nation currently, for us the cost of living pressures our customers are experiencing is a key focus area. As I mentioned last year, sustainability also remains a key issue for us. The phase out of single use plastic bags was only a first step and we all need to work together to deliver on the “circular economy” to ensure a more sustainable future for Australia.
Coles
Economic growth: Maintaining Australia’s solid economic growth track record requires government policies that increase the underlying productivity of the economy. Four priorities in this regard are:
Productivity and innovation: After several years of subdued wages growth, it is imperative that government does all it can to continually improve productivity so that all stakeholders may share in the benefits of economic growth.
Cost of living pressures: we are committed to continue delivering value to our customers, but the growing strain on household budgets requires a concerted effort across all parts of the economy, particularly in areas that account for a large proportion of living expenses such as utilities and health care.
Transport infrastructure: continued economic growth requires targeted public funding for and timely delivery of high priority transport infrastructure.
Tax reform: Proposals to make the corporate tax rate more internationally competitive would help Australian businesses not only to attract more investment capital to fund growth, but also lower the hurdle rate of return for viable investments.
Customer data collected through Flybuys helps us to assess new store locations and make ranging decisions to meet the needs of local customers, as well as provide more relevant offers to customers.
Each week, we survey 35,000 customers and hear from another 20,000 through social media and 25,000 via our Customer Care team. We use this information to help guide our thinking and assess how well we are executing against our aim of making life easier for our customers.
- What are they key challenges for your company next year?
Woolworths
A key ongoing challenge is meeting our customers growing demand for convenience, both in terms of how they shop but also how they eat. We’ve come a long way in 2018 in terms of further improvements to our pick-up and delivery services, as well as the introduction of express delivery to a number of our supermarkets, but there is more work to do to continue to meet the changing needs of our customers in this space. The other big challenge is working hard to improve our key business
Coles
Cost of living pressures, low real wage growth and a slowdown in the housing market remain headwinds for consumer spending. The impact of drought on fresh produce and some agricultural commodities is also expected to add to input costs, while the competitive landscape continues to rapidly evolve in response to the entrance of new offshore competitors and the growing importance of technology in all aspects of retailing.
processes to offset wage and input cost increases.
- How can big business regain community trust?
Woolworths
In my view, “big business” needs to behave a lot more like “small business” and be focused on the specific needs of the local communities in which they operate. We are trying to do this via living our Group Purpose of “We Create Better Experiences Together” and our Food Purpose of “We Bring a Little Good to Everyone Every Day”. Trust is not a right, but is earned based both on what we do and also what we choose not to do.
Coles
Trust takes a very long time to build and can be lost very quickly. Therefore it’s not enough to treat Corporate Social Responsibility as simply an add-on to your business. It needs to be embedded in everyday processes that meet and exceed community expectations. At Coles we have worked hard to earn the trust of customers on delivering value by lowering the price of a weekly shop every year for the past decade.
At the same time we have committed ourselves to serving the communities in which we operate through initiatives like our partnership with SecondBite our $50 million Coles Nurture Fund which provides grants and interest-free loans to foster innovation in food production.
We have also done a lot of work to strengthen our relationships with suppliers, including through our work in formulating the Food and Grocery Code of conduct to which we were among the first signatories in 2015.
At the same time, our own Supplier Charter, which has been in place since 2014, is alone in the retail space in including an independent arbitration process that is both binding on us and carrying no cost to suppliers.
- What cost pressures are hitting your company? How are they being offset and do you see any pressure to lift wages and if so by how much?
Woolworths
We are in the process of increasing wages and this is a good thing. Team wellbeing is also a key focus and we break this down into physical safety, mental health and financial security. Outside of wages, we have also increased our team discount from five to 10% on our own brand products, increased paid parental leave from 6 to 12 weeks and we were the first retailer to introduce paid superannuation for up to 12 months for those on parental leave. We’re working hard to offset electricity cost pressures by being much more sustainable in our energy demand management and generation and are making good progress in this regard. For example by the end of FY19, we will have close to 100 stores with solar panels installed.
Coles
Like all Australian businesses we are seeing higher energy costs, the impact of which we are seeking to reduce with more efficient store design. We have called out that we will face higher wage costs this financial year as a result of our new enterprise agreement, which came into effect in April.
Our Supermarkets store team enterprise agreement is in place until April 2020 and increases in wage rates are based on the annual increase applied to the General Retail Industry Award by the Fair Work Commission. Coles has also seen some increase in food commodity, some of which we are absorbing to reduce the impact on customers at the checkout and make their lives easier.
We are also reducing costs throughout our supply chain via the use of technology to better plan transport movements, and the two new automated ambient distribution centres we will build in NSW and Queensland over the next five years will also allow us to reduce costs and improve stock availability for customers.