Leaked document reveals Woolies’ woes as manager hits out at ‘devastating’ mental health issues

FRANK CHUNG
SEPTEMBER 24, 2015
news.com.au

Woolworths and Aldi have come under fire from the ACCC over supplier contracts.
A LEAKED Woolworths document has revealed the dire state of the supermarket’s relationship with its suppliers, while one senior manager has slammed the company for forcing staff to clean up for mistakes at the top.
The revelations come as the Australian Competition and Consumer Commission today said it was investigating reports about the conduct of Woolworths and Aldi towards suppliers, potentially in breach of the Food and Grocery Code of Conduct.
The watchdog is concerned about Grocery Supply Agreements (GSAs) which “might give the impression that the supplier is not able to negotiate the terms”, such as requiring payment for wastage that occurs at the premises of the retailer.
Meanwhile, results of a confidential survey that measures suppliers’ attitudes to retailers versus their competitors shows Woolworths’ relationship with suppliers at the lowest level ever.
The 2015 Advantage Mirror Report shows Woolworths Net Favourable Score (NFS) has plummeted to 14 points, down 10 points from last year and 10 points below the average score of the top five.
One senior category manager who spoke to news.com.au on the condition of anonymity said the changes over the past eight years had been “devastating”.
“You guys see the face of it at our stores, but internally we push our KPIs, push our vendors to the limit,” he said. “You’ve got blokes here like myself who have been here 20 years coming in every day waiting to get out the door at night. The culture is so bad.
“Vendors don’t want to deal with us anymore because every time there’s a call it’s about money — getting more out of them for nothing. We know our suppliers are going to Coles, going to Aldi, because they work with [the suppliers for mutual benefit].
“We’re at the point now where we might as well ask them to leave their wallet at the door when they come to a meeting. It’s not a relationship exercise anymore, it’s like being a banker. You can’t continue to do that. The mental health effects are huge. It’s a blight on all of us.”
A graph, contained in a presentation given by Woolworths head of buying Steve Donohue and obtained by news.com.au, shows a dramatic plunge in the company’s NFS between 2010/11 and 2012, around the time Tjeerd Jegen took over as director of Australian supermarkets and petrol.
In 2008, Woolworths’ NFS was 67, more than double the average score (32) of the top five, before plunging from 58 in 2010/11 to 30 in 2012, matching the average. In 2013, Woolworths’ NFS hit 18, nine points below the average, before recovering to 24 in 2014.
“This was a briefing to some suppliers last week where our senior managers updated them on the business,” a Woolworths spokesman said. “It was largely based on the information given to investors earlier this year and at our full-year results presentation.”

Advantage, ‘2015 — The Mirror Report’.Source:Supplied
The senior staffer who spoke anonymously to news.com.au blamed the woes on a string of overseas hires who didn’t understand the market. “It used to be Australians bought for Australians, they understood the business, the relationships, the culture, the geography,” he said.
“Then when they brought in all these overseas people — Alex Dower, Tjeerd Jegen, a lot of English category managers, it’s a bit like ‘get off the plane with all your friends’ — they’re from a different stable, style of negotiation, size of country.”
He said while it “should be about delivering your customer the best possible product, and the best possible service”, it had become “all about getting as much money as you can to cover the mistakes that have been made with senior management”.
“We used to call them ‘heads of trade’. That’s changed to ‘merchandise managers’. What do they say? Changing deckchairs on the Titanic. That’s the impression we get. We’re just sick to death of the punishing we’re copping.”
He said the $65 million facelift announced earlier this week was “not going to fix a third” of the problems, and expressed concern that category managers would be “asked to hunt the suppliers to inject more money” to pay for it.
“They’re going to have to get the money [for the refurbishment] from somewhere. It’s not going to come from shareholders’ pockets, it’s going to come from suppliers.”
He added that the woes were felt both at work and at home as many senior managers held Woolworths shares. “A heap of us have lost significant amounts of money through our shares in the company,” he said.
His comments echo those of the suppliers themselves, contained in the Advantage report, which criticise Woolworths for a lack of strategy, siloed structure and lack of empathy.
The anonymous comments include:
• “The senior people at Woolworths have historically understood where suppliers are coming from and what they need at times, however, there is a total disconnect between messaging or intent and what happens in the business at present, it is not consistent or reasonable.”
• “Woolworths is siloed between departments. They are less clear than their major competitor when it comes to their command and control processes. Personalities have got in the way of well connected and aligned dialogue and it has seemed more important than good quality business with partners.”
• “Woolworths’ strategy is not clear. Their competitor has a clear strategy and plan that they stick to. When retailers stick to a plan, they can spend time on the execution to make it perfect. Woolworths’ plans change all the time.”
• “Empathy is a critical ingredient in our relationship with Woolworths. It sends a clear signal that they at least understand and acknowledge the challenges suppliers have and how we try to do things for them. In the day to day business environment, Woolworths’ words and behaviours do not match up or currently deliver to that.”

Advantage, ‘2015 — The Mirror Report’.Source:Supplied
News.com.au understands a number of suppliers took their concerns over the contracts to the ACCC and the Australian Food and Grocery Council.
Under the voluntary code, which as been signed by Coles, Woolworths, Aldi and Sydney-based retailer About Life, there are a number of prohibitions relating to wastage payments, but retailers and suppliers can “opt-out” of such prohibitions.
“We’ve raised concerns with Woolworths and Aldi that they are giving an offer to suppliers which could easily be interpreted as a ‘take it or leave it’ offer, when there is a clear requirement in the Code that the supermarkets and suppliers will deal with each other in good faith,” ACCC Chairman Rod Sims told news.com.au.
“Our concern here is that the way the agreements are structured, suppliers can still be asked to meet arbitrary demands for wastage payments and other things.”
Mr Sims said the ACCC was “a little disappointed”. “We were hoping the Code would bring about a change in approach [from the supermarkets], and our concern is that may not be the case,” he said.
The Code requires that retailers offer code-compliant GSAs. The ACCC says suppliers should “not feel compelled” to sign these agreements and should seek advice before signing them. The Code confers protections on suppliers 12 months after a retailer has signed up to the Code, regardless of whether a supplier has accepted a code-compliant GSA.
“We want suppliers to know that the code is supposed to help them and give them protections,” Mr Sims said. “They need to understand that even if they don’t sign these new agreements, they still get the protection.”
In a statement, a Woolworths spokesman said: “Woolworths is a strong supporter of the Grocery Code. We were the first national retailer to commit to sign up to the Code and have been working progressively with our suppliers since then to implement it.
“A minor wording issue was raised with us in relation to a letter sent to a number of our suppliers offering to amend agreements to amongst other things comply with the Grocery Code.
“The wording in question has been used in letters to our suppliers for many years and was designed to avoid changes to agreements being missed or misunderstood. Wanting to deal with this issue promptly, two weeks ago we changed the paragraph in the relevant letter. We re-sent letters to suppliers, and at the ACCC’s request have agreed to contact suppliers who have already signed new agreements.
“Woolworths considers that the Code process has worked exactly as it was intended to. We engaged quickly and constructively with the AFGC, the ACCC and our suppliers on this issue.
“We were surprised and disappointed that the ACCC today decided to issue a press release which failed to recognise our prompt actions some weeks ago. The ACCC only raised additional, new concerns with us late yesterday, just hours before contacting the media.
“Woolworths will continue to work in the spirit of the Grocery Code that calls for co-operation and openness from all interested parties.”

Aldi says it will “respond in due course” to the ACCC.Source:News Corp Australia
An Aldi spokeswoman said in a statement: “Aldi Australia has always supported the concept of a strong and sustainable Australian grocery industry for retailers, wholesalers and suppliers. We respect the role of the ACCC in maintaining a fair and compliant food and grocery industry, and will respond in due course to the specific claims that have been brought to our attention.
“Aldi’s commitment to sign and implement the Food and Grocery Code 2015 (Code) before any other major supermarket is testament to our business values and dedication to quality supplier relationships.
“The spirit of the Code reflects Aldi’s current practice with suppliers; forging long term, sustainable relationships and working in partnership to provide Australian shoppers with high-quality products at permanently low prices.
“Aldi has long been recognised for its excellent relationships with suppliers. The benchmark industry supplier survey consistently rates Aldi as retailer of the year as well as the highest net rating for quality of relationship.”
Gary Dawson, CEO of the Australian Food and Grocery Council, said: “The AFGC welcomes the ACCC’s oversight and guidance to both retailers and suppliers on the Code of Conduct. It underlines that once retailers sign up the Code is legally binding, and all their supplier trading relationships must be Code compliant within 12 months.
“We are in regular contact with the major retailers and our members on Code matters with a view to ensuring it is implemented in a timely and fair manner. The engagement with the retailers has been positive and they are actively seeking to address issues as they arise.
“The Code strengthens the negotiating ability of suppliers and creates a framework for more transparent and certain trading relationships, to help both suppliers and retailers move on from the adversarial conflicts of the past.”
Do you know more? Email the writer at frank.chung@news.com.au