Woolies pitch to local councillors
January 7, 2014
Here is the text of a speech delivered by incoming Woolies CEO Grant O'Brien to more than 900 delegates at the Australian Local Government Association conference in Canberra on June 21, 2011.
ALGA Board Members, Mayors, Shire Presidents, Councillors, Ladies and Gentlemen…
I grew up in a small town called Penguin on the North-West Coast of Tasmania.
When you grow up in a family of nine, in a town of just 2,000 people, it's hard to simply mind your own business.
Our family was close-knit and invariably someone in the family would know just about everyone else in town.
We didn't have the same facilities, or many of the same opportunities as people in a big city, but we had each other and a real sense of community.
To this day I believe that real satisfaction in life comes when you are a part of something bigger than yourself – a family, a team and a community.
I learned that growing up in Tassie.
I learned that from my days as an Aussie Rules football player.
I learned that also, working for Woolworths.
My career with Woolworths started twenty-four years ago at our Tasmanian subsidiary Purity Supermarkets, as an assistant accountant doubling as a shelf-stacker at night, to make some extra money as my wife Mary and I started our new life together.
Twenty-four years later, it was with great humility and pride that I accepted an offer to be the next CEO, a job I officially start in September.
Woolworths is that sort of an organisation – where you can start as on the shop floor and work your way up to become CEO.
And if you are really lucky, you are invited to join our 25 year service club… a small club of more than 4500 people – I hope to qualify next year!
It's fitting that one of my first public engagements during my transition is with the peak body representing local Councils, who in turn represent local communities.
I say this not only because I come from a small town, but because I think our organisations actually have quite a bit in common.
Both Councils and Woolworths are fixtures in communities across the country.
We each employ around 170,000 Australians.
We each deliver important services.
For Woolworths, this was best highlighted during the summer of natural disasters, when our local supermarkets became lifelines, and the efforts of our staff to support their communities were extraordinary.
We are both without airs and graces.
We both work at the community coalface, and are accessible.
Our organisations are made up of everyday people, meeting the everyday needs of everyday families.
Both Councils and Woolworths are also constantly asking ourselves what we should be doing next?
How can we be meeting the different needs of different communities? As well as the changing needs of changing communities.
We each have detractors and critics, but we understand that scrutiny and accountability comes with the territory.
Ultimately our successes – and rewards – come when we do a good job in delivering what people want and need.
In referring to ‘rewards' I'll forgive you for thinking there's one clear difference between us.
After all, who in this audience was elected into local government for the money?
I know Councillors work for the satisfaction that comes from doing what you consider to be the right thing by your communities.
And then, if you are judged to have done that, getting re-elected so you can keep on doing it.
By contrast, we are in business to make a profit, and for that we make no apologies.
As a high-volume, low-margin business, Woolworths makes around 5 cents profit from every dollar of sales.
This then provides dividends for 418,000 shareholders, most of them Australian ‘mum and dad' investors.
It provides capital for investment. And it provides valuable retail jobs and apprentices, infact more than 5000 young apprentices and trainees nationwide.
I was asked to talk today about partnership, but to be a good partner you must first have something to offer, so allow me to briefly recap Woolworths history and modern approach.
Woolworths began as a single store in Pitt Street in Sydney, 87 years ago.
At the time, one of the founders – a man by the name of Percival Christmas – said “every town needs a Woolworths, because every man, woman and child needs a handy place where good things are cheap.”
That philosophy is simple and timeless.
A handy place where good things are cheap, is what we still strive to deliver.
We haven't always succeeded.
When I started with the company in 1986, Woolworths was in trouble.
In that year, profits dived 85% and we failed to pay a dividend for the first time in our history.
Interviews with store managers who left their jobs identified consistent problems:
- rundown stores,
- goods continually being out of stock
- and a lack of price competitiveness.
At first he focussed our turnaround efforts on a single store in Neutral Bay, Sydney.
Here, despite having double the floor space, we were making just half the sales compared to the Franklins over the road.
The turnaround at this store came through getting back to basics, with senior executives spending many hours on the shop floor, paying close attention to every detail.
It was at this time that Woolworths made a promise: to be the Fresh Food People.
We did this because we realised it was the key to earning trust from our customers – delivering great quality fresh food, every time.
Today, we work very closely with around 4,000 Australian suppliers.
More than 80% of these have been partners with Woolworths for more than 10 years.
More than 97% of our fresh fruit and vegetables, and 100% of our fresh meat, is Australian.
It has defined and shaped our business.
Another key to our turnaround was slashing inefficient bureaucracy.
We completely restructured the company across three core areas –
- IT,
- purchasing
- and logistics.
Over 10 years, $7 billion of savings were re-invested: 80% to customers through better value and better stores, and 20% in dividends for shareholders.
Importantly, Woolworths took steps to ensure we don't slide back into complacency.
For our executives this means the chandelier, silver-service, three-course lunch culture of the 1980s was banished.
We are now based in a modern, efficient, yet spartan building in Sydney's outer growth corridor.
Domestic business class flights are never an option for anybody, including me.
Alcohol is banned during work hours.
And these days our idea of a lavish lunch only happens when the staff cafeteria decides to cook one of Margaret Fulton's recipes.
Every month, a different team in our support office connects with a charity, fundraising and volunteering.
And every year at Christmas, executives are expected to work in a store, to make sure they see Woolworths from the vantage point of customers and staff at our busiest time.
Had we not made these changes, I would not be here speaking on behalf of Australia's most successful retailer.
To anyone begrudging the success of Woolworths, or large companies in general, I ask you to consider the following:
· We're not successful because we do something wrong, but because we do many important things right.
· Success does not come by doing what we want, but by delivering what customers want.
· Market share isn't taken, it is earned.
· And we don't decide where people shop. Customers decide where they shop, and most like to shop around, so we need to work very hard for their business.
I ask you to consider also, how communities benefit when they are served by well-run enterprises.
In 2008 the Federal Government's Bureau of Infrastructure, Transport and Regional Economics conducted a survey as part of their submission into the Grocery Inquiry.
It concluded there was a 17% difference in the price of groceries, between a town that has a major supermarket and one that doesn't.
A 17% lower price in grocery costs adds up to a lot of money.
When customers save that sort of money, it means they have more in their pocket that can then be spent on other goods and services, creating jobs and opportunities for other businesses.
So wasn't our founder right?
Doesn't every town need a handy place where good things are cheap?
In some cases the entry of Woolworths into a town is perceived to be a threat to existing businesses, or to the retail hierarchy.
On the other hand if we encourage more people to shop in town, rather than drive elsewhere, we become the anchor that benefits small business.
Around Australia there are countless butchers, bakers, delis and greengrocers who set up right next to us.
They like setting up there because we bring foot traffic.
We like them setting up there because customers like diversity, choice and the ability to shop around.
That's actually a unique retail environment, anywhere in the world.
In the US, UK, and even New Zealand, often supermarkets are totally stand alone buildings always on the outskirts of a town.
Whether customers choose to shop in a large supermarket, an independent chain, a convenient corner store or one of 22,000 food speciality shops, customers win when they have choice.
As part of a community, we have the opportunity to earn trust every day,
- by providing good quality, range, convenience and value for customers,
- by providing jobs and apprenticeships
- and by investing in the community.
Last year, the Woolworths group opened 157 new stores, including 26 new supermarkets.
For around half of these supermarkets, we were also the developer putting the application before the planning process.
In some cases, these new store developments received very positive reaction in local communities.
In a majority of cases, they received neither fanfare, nor opposition.
Unfortunately, there are some cases where our plans create controversy, making the process difficult for Woolworths and for Councils.
A recent example was in Newport on the Northern Beaches of Sydney.
In 2007, Woolworths responded to a proactive approach by Pittwater Council to encourage new retail investment.
We purchased retail-zoned land and two adjoining council car parks.
Our plans were for a development including a supermarket, specialty shops and a public car park.
By 2009, after attending community meetings, we got the hint that the proposal we had put forward wasn't popular.
We decided to start again.
Woolworths admitted we had made mistakes and proactively put forward a completely different design.
One that took its guidance from community feedback.
Woolworths still has some strident opponents in Newport, but there is a very different mood.
Recently 61 local small businesses, including all twelve shops in the neighbouring arcade, signed a petition in support of our development, citing the importance of more foot-traffic, better parking and revitalisation.
We learned that community engagement needs to be a key part of our process.
Unfortunately, changes to the development design were less effective in easing controversy in Mullumbimby, in northern NSW, where tomorrow we will open our newest supermarket.
This is a town with a real diversity of opinion, ranging from anti-Woolworths protests, to a Facebook group with hundreds of members strongly supporting us coming to town.
Of course we don't like being protested against, however diverse views are to be expected in a democracy and opposition is not in itself a reason to pack up and leave.
We believe in free enterprise and that the views of some shouldn't necessarily dictate the choice of others.
With that said, it is our absolute responsibility to listen, engage, seek compromise where feasible and to be upfront and honest about our plans.
Woolies are part of the local community and we need to fit in, so if there's something we should be doing better, please tell us – I want to know about it.
I recognize that one size does not fit all.
I want to see Woolworths better tailor its stores to the local community who shop there.
Our ranges need to be flexible for the demographics and shopping needs, such as a good kosher range in Sydney's eastern suburbs, or a fresh and vibrant selection of Asian market vegetables in an area like Cabramatta.
Woolworths will be working hard over the next few months to deliver a better range of tailored offerings to local communities.
Woolies is such a part of people's everyday lives, that being a good neighbour, and a good corporate citizen, is not just the right thing to do, it is a business imperative.
When we do the right thing, customers can be better served, communities can be more confident, and 170,000 employees and 418,000 shareholders can be very proud.
In developing our community investment program, we considered it important to not only give back, but to also get involved.
For example, our Fresh Food Kids Hospital Appeal raised $7 million last year for children's hospitals.
This appeal is totally organised and run by our store staff.
Through all types of volunteer work, cake stalls, sausage sizzles and fun runs, our staff have raised more than $50 million over 15 years for children's hospitals.
At a national level, our sponsorship of the Australia Day Ambassador's program is an integral part of local Australia Day celebrations.
Our store managers love being a part of them.
And I would like to thank many of you here for working with them at these events.
Sponsoring agricultural grants and business scholarships, and even the pavilion at the Royal Easter Show, helps us keep in touch with the farming communities that are so integral to our business.
Because we sometimes have food we can't sell, and there are groups who can use this to provide nutritious meals for people in need, our Fresh Food Rescue program makes good sense.
Through this program we're reducing our organic waste, so apologies to local government waste centres, but I would rather send good food to charity kitchens than to the dump.
We believe that with success comes responsibility and that all successful Australian corporations should play their part in tackling significant issues affecting our country and our future.
For our part, last year Woolworths reduced our carbon emissions from stores by 13.5%.
We saved 302 million litres of water, reused 28.7 million clothes hangers and as I mentioned we've reduced food waste to landfill by 9,000 tonnes.
We have made significant strides in indigenous employment.
We have an industry leading approach to the responsible sale of liquor, including a strict policy of asking ID for anyone appearing under the age of 25.
And we have a “don't buy it for them” campaign to stop secondary supply to minors.
Sometimes, it can be the very locally focussed issues that pose the biggest challenge in balancing the needs of customers and the community – for example issues relating to trucks or lost trolleys.
Speaking of lost trolleys, I hope everyone here has our new lost trolley app on your smartphone.
This is a wonderful new solution to let us know faster where a trolley has been abandoned, so we can collect it.
There may be some of these issues that as CEO I am not personally involved with, but I assure you that I will become personally involved if they are left to linger.
Whatever the issues or challenges before us, it is important we face them.
In communities across Australia, Woolworths has a lot to offer and a lot to lose.
As it was for my family in a small Tasmanian town, we can't just mind our own business.
Woolworths are a part of the lives of everyday Australians, part of our communities we serve, and part of the national landscape.
That's a privilege and a responsibility we want to earn well into the future.
My message today is simple: Let's work together.
Thank you.
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