According to CEO Brad Banducci, Woolworths, a leading supermarket giant, is prepared to accept lower profits if it means delivering significant value to its customers. During a session with the South Australian legislative council investigating grocery prices, Banducci defended Woolworths’ $1.62 billion profit in 2023. He emphasised that the company would prioritise customer benefits over profits when necessary, citing a decision to reduce meat prices before Christmas as an example.
“We will make those decisions,” Banducci stated, highlighting the company’s sensitivity to the pricing of essential items like milk and lunch box products.
To support customers, Woolworths lowered the price of half-leg hams to $8 per kg in October, the lowest since 2014, and reduced the prices of 26 lamb products by 20% from November 8 to December 27.
Accusations of price gouging or unjustified price increases have targeted Woolworths and its competitor, Coles. Both companies reported significant profits amidst widespread inflation affecting many Australians. Both retailers argued that the supermarket market is competitive and supply chain cost increases are a primary factor in price hikes.
Banducci maintained that Woolworths strives to balance the interests of suppliers, employees, customers, and shareholders. “It’s always a balance, and we’re not claiming always to get it right,” he said.
Woolworths employs about 10,000 people in South Australia and has approximately 26,000 shareholders. Banducci described grocery retailing as a “very low margin business,” noting that the company makes about 3.6 cents in profit for every dollar of revenue after covering various costs.
In contrast, Coles reported a net profit of about 2.5 cents per dollar of revenue.
For the half-year ending December 31, 2023, Woolworths Group reported a 4.4% increase in revenues to $34.6 billion compared to the same period in 2022. The Australian Food division contributed $25.9 billion, a 5.4% increase. However, due to a writedown of its New Zealand business and a decrease in the value of its stake in Endeavour Group, Woolworths posted a $781 million loss for the half-year, compared to an $845 million profit in the previous period. Without these impairments, the company would have recorded a $929 million profit, a 2.5% increase.
Banducci also noted that prices in Woolworths stores are falling, with inflation running at less than 2%. The average cost of a shopping basket dropped by 1% from January to Easter.
Greens member Robert Simms chairs the South Australian inquiry. A federal Senate inquiry into supermarket prices concluded that price gouging is likely prevalent in the sector. The report, released on May 7, indicated that minor price increases accumulate, creating an industry focused on profits at the expense of consumers.
The committee recommended that the federal government amend section 46 of the Competition and Consumer Act to prohibit excessive pricing and to establish divestiture powers specific to the supermarket sector.
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