David Jones to open first stand-alone food store in South Yarra in 2019

Sue Mitchell
January 31, 2018
AFR

Undaunted by weak sales, David Jones is pressing ahead with its ambitious food strategy, announcing its first stand-alone gourmet food store.

Under new owner South African retailer Woolworths Holdings, David Jones plans to spend at least $100 million over three years building a world-class retail food business aimed at restoring its reputation for gourmet food, differentiating the department store from rival Myer and protecting sales from new competitors such as Amazon. 

The strategy includes building a new food hall in the flagship Elizabeth Street store to replace that in Market Street in Sydney, refurbishing its existing food hall in Bourke Street in Melbourne, and opening stand-alone stores and food halls in suburban stores. 

After refurbishing its Bondi Junction food hall and opening a food hall in Wollongong last year, David Jones has unveiled plans to open its first stand-alone store in the up-market Capitol Grand development on Chapel Street in Melbourne’s South Yarra in 2019.

David Jones will also open a food hall in its suburban Malvern store in Melbourne in March.

The Capitol Grand store will be about 500 square metres and will carry a curated range of private label and branded gourmet groceries, liquor and premium convenience foods such as pre-packed meat, seafood, salads and fruit and restaurant-quality ready meals to be taken away rather than consumed on-site.

Most of the products, including 90 per cent of the store’s fresh food offering, will carry the new David Jones Food brand, which was launched last year. 

David Jones chief executive David Thomas said the new food store would be ‘world class’ and designed to meet customer demand for provenance, freshness, convenience and accessibility.

“We are confident the new David Jones Food proposition will resonate strongly with the local customer, delivering a new level of food quality and experience to the area,” Mr Thomas said.

Most of the fresh produce and ready-made meals will be supplied by In2Food, a South African-based company which is the largest food supplier to Woolworths Holdings and which established a joint venture in Australia in 2016 to support David Jones’ food strategy.

Last week, In2Food bought out its local joint venture partner Yarra Valley Farms, taking full control of the business and ready-made meals offshoot Inspired Food Solutions, and acquired Brisbane-based providores T&F All States and BrizFresh to expand its presence in Australia.

In2Food chief executive Bill Kollatos, who owns Yarra Valley Farms, says the acquisitions will boost In2Food’s sales to about $100 million, making it one of the largest providores in Australia. It now supplies about 1500 outlets including David Jones.

“We are excited about the opportunities Australia has to offer, including what David Jones wants to do,” Mr Kollatos told The Australian Financial Review. “And we felt we needed to get critical mass to really give us the best chance of growth.”

“Consumers are looking for fresh, healthy, natural and convenient food and there’s certainly a large gap in the Australian market.”

David Jones has released no food sales targets but JP Morgan’s South African retail analyst Stephen Carrott estimates the food business will generate sales of $700 million within five years.

Retail observers fear David Jones will make the same mistake as its failed Foodchain venture in the early 2000s. David Jones opened a chain of gourmet food stores dubbed Foodchain in 2000 but was forced to pull the plug three years later after racking up losses of more than $120 million. 

However, Woolworths Australasia chief executive John Dixon is confident the food strategy will boost David Jones’ foot traffic, shopping frequency and “dwell time”, lifting sales across the chain, which have come under pressure in the last year.

Last week Woolworths slashed the value of David Jones by $712 million, or 34 per cent, citing poor execution of turnaround plans and structural changes in retailing. 

David Jones’ reported earnings fell 25 per cent in 2017, dragged down by about $31 million in one-off costs, and earnings are expected to fall again this year following a 3.3 per cent fall in same-store sales in the 26 weeks ended December 24.