Woolworths Group CEO Brad Banducci’s opening statement to Senate Inquiry on Supermarket Prices:
On behalf of Woolworths, I welcome the opportunity to appear before you and I hope I can help the Committee understand the key drivers behind grocery inflation.
As we sit here today, we have lived through a very tumultuous five years – with COVID-related disruption, followed by rising interest rates and a period of sharply elevated inflation in the last two years.
While at Woolworths, we are now seeing falling rates of grocery inflation, nevertheless, we understand that many of our customers are under immense cost of living pressure. This is primarily due to rising mortgage repayments, rent and transport costs, which have all gone up in double digits.
Grocery represents 10% of household income and grocery prices have gone up by a compound annual growth rate of 6 per cent over the last two years and we have a key role to play in helping our customers find ways to spend less on their groceries and get the best possible value in very challenging circumstances.
Throughout this recent inflationary period, we have taken, and continue to take, steps to provide affordable grocery products for all Australians.
These include holding our Own Brand Products at Everyday Low Prices across pantry essentials; compelling Weekly Specials; a ‘Best Unit Price’ search filter on our digital platform; and donating more than 34 million meals to our food rescue partners in the 2023 Financial Year.
Woolworths is a proud Australian company. Our first store opened in the Imperial Arcade in Sydney on the fifth of December in 1924 and this December, we will mark our 100th year serving Australian communities.
Woolworths’ success in the last 100 years, and indeed in the years that lie ahead, has been based on providing a strong focus on providing real value for our Customers, meaningful employment for our Team and treating our Suppliers and other Stakeholders fairly.
We are Australia’s largest private sector employer and a vital participant in regional and rural communities.
We seek to work in partnership with suppliers to develop our collective business and play a critical role in building resilience in the Australian grocery supply chain.
We support Australian retirement incomes through Superannuation Funds and provide an important source of income through dividends for over 350,000 Australian retail investors.
Given a key focus of this inquiry is the degree of competition in the supermarket sector, I’ll provide a very brief summary of our view on this.
In short, we are part of a highly competitive, efficient and innovative grocery sector.
In 2008, the Australian Competition and Consumer Commission determined that the industry was ‘workably competitive’ and now it is much more so. With the arrival and growth of three of the world’s biggest and most competitive retailers – ALDI, COSTCO and Amazon – in Australia, consumers have never more choice and this is a good thing.
In this context, it has never been more important to be price competitive – it is critical in trying to win our customers’ shopping basket, which we need to do on a daily and weekly basis.
Australian consumers are savvy and have high expectations. The vast majority of consumers shop across multiple retailers. The growth of online shopping and new digital tools are making it ever easier for consumers to compare prices and cross-shop.
That doesn’t mean that consumers are finding it easy to make ends meet – grocery inflation is real and has been substantially driven by cost increases from our largest global Consumer Goods Suppliers, and cyclical impacts in domestic fresh food markets. It is important to note that our top 100 suppliers have driven over 60 per cent of our overall grocery inflation.
But, as I mentioned at the outset, I am pleased to say grocery inflation is falling and we all need to continue to work hard to ensure this continues.
Grocery retailing is a high-volume, low-margin sector and Australia has one of the most efficient and productive grocery sectors in the OECD.
We make a reasonable profit – both a 10% Return on Funds Employed after tax and also a 10% Total Shareholder Return over the last five years – and, as I said earlier, much of that goes back to Australian households in the form of Superannuation and Dividends.
We also make considerable investments back into our business so that it is more resilient, innovative and efficient.
I look forward to answering any questions the Committee might have.
Thank you for having me.
