|
|
 |
|
Viewing report
|
|
|
|
Australia Food and Drink Report Q3 2007
Business Monitor International, Sep 2007, Pages: 64
The Australia Food & Drink Report provides independent forecasts and competitive intelligence on Australias food & drink industry.
One of the most unusual features of the Australian food, drink and grocery retail industries - touched upon time and again in our quarterly reports - is the fact that market maturity has failed to lead to stagnation, as would normally be expected. Instead the industries remain dynamic, attractive and highgrowth and none more so than the mass grocery retail (MGR) industry. In the MGR section of this Q307 Australia Food & Drink Report we assess the impact that the sale of market number two Coles to local conglomerate Wesfarmers will have on the sector, noting in particular how its smaller rivals are reacting.
Despite strong initial interest there ended up being a shortage of buyers for Coles, and Wesfarmers - already a 12.8% shareholder in the retailer - seemed the logical buyer. However, this is not great grounds on which to enter into such a costly acquisition and shareholder concerns explain Wesfarmers’ tumbling share price and the fact that, at the time of going to press, the deal still seemed vulnerable. This has led to there being a strong possibility that Wesfarmers could yet break up and sell various Coles assets in a bid to appease shareholders. Were its food and liquor assets - the most profitable, and yet the area in which Wesfarmers has least experience - to be put up for sale, Australia’s MGR sector would receive another shot of stimulant as smaller players scrambled for the opportunity to boost their scale.
Keeping dynamism high is the fact that market leader Woolworths cannot meaningfully participate in grocery retail mergers and acquisitions activity. Competition commission concerns restrict it, and this prevents further consolidation of the type that normally breeds stagnation. A small number of minor industry players have also helped keep activity levels strong. While Woolworths has been undeterred by the Coles saga, its smaller rivals have sought to exploit the retailer’s struggles. Discounter Aldi continues to expand apace, poaching customers from the market leaders on the strength of its low prices alone.
Meanwhile, independent franchisers Foodworks and IGA have also sought to capitalise, leveraging a very different sort of advantage to that of Aldi, by emphasising their individuality and community-feel to target those fed up with the ubiquity of Woolworths and Coles.
Interestingly, all this talk of dynamism occurs at a time when we have just lowered our MGR sales growth forecast for Australia and when Australia has slipped from second to fifth place in our Asia Pacific Business Environment Rankings. However, we are being more moderate in our sales growth outlook not because activity levels are waning, but because all activity is focused on discounting and price competitiveness, which hinder values sales growth. Likewise, Australia’s rankings slip does not hint at a stale and unattractive market, rather one in which there has been such frenzied activity that attractive opportunities for newcomers are dying out. For those already present, Australia’s MGR sector remains attractive and exciting and the eventual Coles outcome looks set to further this.
Product samples
A sample for this product is available. Please Login/Register to download this sample.
Customers who bought this item also bought
Australia Food and Drink Report Q2 2008
Australia Food and Drink Report Q4 2008
Australia Food and Drink Report Q3 2009
Australia Food and Drink Report Q3 2008
Wesfarmers Limited
Australia Food and Drink Report Q1 2008
Coles Offer Update Call - Wesfarmers Ltd. - Earnings Transcript
Australia Agribusiness Report Q4 2009
Australia Food and Drink Report Q4 2009
Australia Food and Drink Report Q2 2009
Foodservice in Australia
Food Retail in Australia
|
|
|
|
