Woolworths under fire as suppliers list their complaints

Eli Greenblat
SEPTEMBER 28, 2015
THE AUSTRALIAN
The boss of Woolworths’ under-pressure supermarkets division, Brad Banducci, along with his two most senior executives, presented a frank assessment of the retailer’s ills to a meeting of suppliers this month, pledging to repair their ­relationship.
And suppliers haven’t held back. A recent feedback survey of food and grocery manufacturers revealed a litany of complaints about Woolworths, citing mixed messages, personalities getting in the way of good business practices, unclear or ever-changing strategies and a disconnect between what Woolworths supermarket management says and what actually happens in the business.
The presentation two weeks ago to key food and grocery ­suppliers, which included Woolworths’ supermarkets director Dave Chambers and head of ­buying Steve Donohue, also ­unveiled that the retailer’s net ­favourable score — a survey of suppliers — had sunk to its worst level in seven years and was now well below the average performance of the top five grocery retailers, including archrival Coles.
Woolworths’ net favourable score, as measured by research group Advantage, had fallen as low as 14 this year, against a peak of 67 in 2008 — when it was the top-ranked supermarket in the supplier survey.
According to a slide shown to suppliers at the meeting and ­included in Mr Donohue’s ­presentation, Woolworths’ favourability among suppliers first slid below the average of the top five players in the supermarket sector in 2012, and for the past three years has ­remained below the average.
Qualitative feedback, also ­provided by Advantage and shown to suppliers at the meeting, highlighted the many points of friction between the supermarket managers and their supplier base.
“There is total disconnect ­between messaging or intent and what happens in the business at present, it is not consistent or reasonable,” one anonymous ­supplier was quoted as saying in Mr Donohue’s briefing.
“(Woolworths) are less clear than their major competitor when it comes to their command and control processes,” said another unnamed supplier. “Personalities have got in the way of well-­connected and aligned dialogue and it has seemed more important than good quality business with partners.”
Another supplier was quoted as saying: “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 then 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,” said another supplier. “It sends a clear signal that they at least understand and ­acknowledge the challenges ­suppliers have and how we do 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.”
It’s a predicament not lost on recently appointed supermarkets boss Mr Branducci, who will spearhead an investment program of more than $500 million that will be directed at reducing shelf prices, improving service in the supermarkets and refashioning its marketing approach to win back shopper loyalty. Part of the new charm offensive has also been aimed at the nation’s $114 billion food and grocery sector, getting the key brand owners on side to generate a more innovative offer for shoppers.
Mr Donohue, who this year had a short stint running Woolworths’ supermarkets in New Zealand and before that had also been national merchandising manager for Dan Murphy’s, said the key call-outs for the retailer from the Advantage survey of suppliers included focusing on mutual outcomes, consistency of dialogue and improving access and the speed of the business.
Mr Chambers, who in February replaced Tjeerd Jegen as director of supermarkets when he announced his shock resignation and Woolworths issued its first of two recent profit downgrades, said the positive momentum at Woolworths would start when they all put customers first.
He said availability of grocery products, the supermarket’s fruit and vegetable offer and time spent waiting in check-out queues were increasingly important to shoppers and would be the focus of the Woolworths executive team.
Mr Banducci has also implemented a daily survey of customers — a first for Woolworths — to ask them about their shopping experiences and especially as it relates to the availability of products on the shelf, its fresh food, check-out waiting times and staff service.
Mr Banducci is considered a strong candidate in an international field of executives vying for the chief executive role at Woolworths following the resignation plans of present CEO Grant O’Brien.
The Woolworths board, led by new chairman Gordon Cairns, has begun interviewing candidates and is expected to name the replacement by the end of the year.