Getting out of liquor and pokies good for Woolworths

Cross posted from The Conversation

by 

The Woolworths Group proclaims it celebrates “family-friendly values”.

Within its supermarkets the company has sought to demonstrate this commitment. Woolies gives out free fruit to kids, for example, and no longer gives out plastic bags.

Its goal, the group states, is to “inspire our customers to consume all of our products in a healthy, sustainable way”. It’s a noble goal – but one undercut by its profits from pubs and pokies.

The company announced yesterday it will separate from its liquor and gaming businesses. This should be be welcomed as a bold step showing its stated commitments aren’t just PR gimmickry.

The company’s hotels division encompasses 323 licensed venues, many operating poker machines. Its liquor retailing division is bigger still, and includes the well-known brands Dan Murphys, BWS, and Cellarmasters.

Alcohol and gambling both represent significant social problems in Australia. The number of alcohol-induced deaths in 2017 – 1,366 – was the highest in two decades. Per capita gambling losses are the highest in the world.

Just last month, several Woolworths-owned hotels in New South Wales were accused of serving free drinks to encourage patrons to continue gambling.

As much as Woolworths might have done to ensure these business divisions operate as responsibly as possible, there is a stigma associated with their profits. They do not fit easily with “family-friendly values”.

Reputational risk

Continuing to operate these businesses would represent a clear reputational risk for Woolworths at a time when consumers increasingly expect organisations to walk their talk and demonstrate they make a positive impact on society.

Protestors outside the Woolworths Group’s annual general meeting in Sydney, 2015. David Moir/AAP

This trend in consumer sentiments is demonstrated by the result of Swinburne University’s Australian Leadership Index. The index is based on a nationally representative survey run quarterly. It tracks consumer perceptions about whether organisations show leadership for the greater good.

At the aggregate level, perceptions of big companies like Woolworths are consistently negative. More consumers think they do little to nothing to contribute to the greater good than those who think they make a positive impact. There is clear desire for businesses to contribute more to society.


Read more: One-third of Australians think banks do nothing for the greater public good


Research by global professional services firm Accenture indicates 61% of Australian consumers  consider a company’s ethical values and authenticity when making their purchasing decisions, and 40% have boycotted a company over its actions on a social issue. Younger consumers are particularly adamant that companies have clear social values.

The Woolworths Group will first combine its pubs and liquor retail divisions into one, then spin off that division into a separate company, listed on the Australian Stock Exchange.

It will be Australia’s largest drinks and hospitality businesses, with expected annual sales of up to A$10 billion.

Losing the revenue will cost Woolworths. But the potential long-term benefits are considerable.

The separation presents an opportunity for the group to create a clearer perception among consumers of the company’s values – a smart move in an evolving marketplace of empowered consumers demanding organisations be social leaders

Comments

  1. Yes, I’m sure all those protesters won’t go to Aldi and will be regulars in Big W.

    • That photo was from 2015, they’ve moved onto Adani i suspect, while at the same time eliminating their own coal usage. BTW, the annoying cvnt I used to see on my train wearing the “Stop Adani” t-shirt has changed to a plain black number. I guess his heart just isn’t in it anymore.

    • Strange Economics of IO and NG

      Where is the ethical limit (rating out of 10)??
      They go from 3/10 on ethical investing to 7/10 now. –
      Yep – but
      1) They still have cross promotion with the booze and hotels.
      2) There is still a big pokie (pretend to be hotel) company there, free to exploit punters.
      3) They still will be in cigarettes for 10% of sales. The only reason they have checkout workers is because of the cigarette sales.
      4) Still no refund to all the pokie punters they encouraged to lose the lot ! Class action time?

  2. reusachtigeMEMBER

    Vice is always a great way to maximise profits. So stupid to get out of it especially having rare legit avenues like these. All they needed was to invest in a chain of brothels, happy massage joints and legalised marijuana, and then they would have been fully diversified.

  3. How does spinning it off into a new division equate to getting out? What an utter load of bullsh1t

    • The90kwbeastMEMBER

      “The Woolworths Group will first combine its pubs and liquor retail divisions into one, then spin off that division into a separate company, listed on the Australian Stock Exchange.”

      Spin off means selling… the whole division will be sold. Not part of woolworths.

      • China PlateMEMBER

        What you reckon they won’t hold a substantial share holding in the spin off

      • haroldusMEMBER

        Yeah I heard in the car that they want to keep something like 15% for the loyalty cards, however that works.

      • Every current shareholder ofwow will get free shares?
        Hence every wow shareholder will still own it, just under a different name. Those that want will then have the option to sell, but seriously this will equate to say the 10% who have no idea how to make money.

    • Great call Timmeh, if they were serious about their social responsibility they would either 1) shut the outlets down (meaning someone else would just take up the market anyway – so not a lot better than selling) or 2) use the profits to invest into improved controls, monitoring and education so alcohol and gambling can be enjoyed responsibly. The PR over this profit gaining sale/spin off is a joke.

  4. JunkyardMEMBER

    Ultimately the market will decide if Woolies is a better buy without pubs and pokies.

    However capitulating to outrage culture also has its risks due to the slippery slope phenomenon. First it will be pokies (which I think are cancer btw) then it could be GMO produce to placate the naturalistic nutters. Woolies has basically just painted a big target on itself for these types of groups to push their agendas.

    At the end of the day the pubs will still be full of pensioners putting the food money into pokies so what difference does it make?

    • Probably better to look at the decision in economic terms, IMO, rather than social terms (secondary).

      I’d say they are smelling the Australian downturn, and figure that growth of gambling, pubs and liquor going forward is poor, given that they are discretionary items (more so than supermarket groceries).

      Minimisation of future losses.

      • This was my guess as soon as i saw the news, when budgets get tight gambling and liquor will fall off harder than a supermarket. They definitely wont go away though as pointed out alcohol will do fine probably for the cheaper liquors though, those craft beers and specialty liquors will be the ones to struggle i would say. but hey im no expert so well see.

      • Gambling, liquor and drowning your sorrows in a pub are probably some of the most recession resistant industries I could imagine I would think. When people are in strife they are more willing to take negative bets on the off chance they will win it big since they are in trouble anyway. Pokies in particular is mostly welfare money which in a recession isn’t really withdrawn.

    • Divesting from vice is not “getting woke”, it’s exactly the opposite, an appeal to traditional values rather than progressive.

  5. kiwikarynMEMBER

    I thought the bulk of their profits came from the liquor business? Anyway, I bet they aren’t going to stop selling alcohol in their NZ supermarkets any time soon. And in further Woolies news, NZers are now being charged 20c per paper bag to put your groceries in.

  6. I wonder when gold medal virtue signallers Qantas are going to disassociate themselves from their murdering partners in the middle east?

    • Funny how little press this gets due to Qantas’s ad spend?
      Alan, talk about a guy who just got lucky with the macro/oil price.

  7. My thinking is I’d say wow coles know they are f ked, hence just setting themselves up to be bought out by say amazon, Uber etc.