The Organic Meat Specialist
ACCC approves Woolworths' purchase of Macro Life organic supermarkets
ACCC approves Woolworths' purchase of Macro Life organic supermarkets
AAP
June 17, 2009 12:01pm
THE competition watchdog has given the green light to Woolworths' acquisition of organic supermarket operator Macro Life.
The acquisition is unlikely to substantially lessen competition in the retail and wholesale organic food and grocery markets due to key differences in the companies' product offerings, the Australian Competition and Consumer Commission (ACCC) says.
The acquisition, announced in May for an undisclosed price, will see Woolworths acquire up to nine store leases from Macro and re-badge up to eight of them as Thomas Dux Grocer stores - Woolworths' premium supermarkets.
Currently the grocer has two Thomas Dux stores at Lane Cove and Paddington, both in NSW.
Organic products are only a small component of the range in Woolworths' Thomas Dux Grocer stores and comprise less than one per cent of sales in Woolworths' supermarkets, acting ACCC chairman Peter Kell said in a statement.
By contrast, Macro focuses almost entirely on organic products, is less competitive on price and its closest competitors are smaller, independent retailers with a similar focus.
"These competitors will remain in the market after the acquisition, continuing to provide consumers with a choice," Mr Kell said.
If the acquisition was blocked, Macro was unlikely to operate as a strong competitive force in future due to its "declining financial position", the regulator said.
The ACCC said the acquisition would have little impact on wholesale markets and Woolworths' would not be able to significantly influence prices after its planned launch of the Macro brand as a private label.
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Consolidation in organic foods
Morris Kaplan | June 26, 2009
Article from:
WOOLWORTHS' acquisition of grocery chain Macro Wholefoods announced last month has prompted a rethink in the industry of the future of organic food retailing.
Macro, owned by former advertising entrepreneur Pierce Cody, retail veteran Brett Blundy and several private-equity investors including the Smorgon family, heralded a new era in organic retailing, rapidly expanding the range of organic foods offered to customers.
Entrepreneurs in the organic space will be contemplating whether the acquisition heralds opportunity for niche operators as Woolies expands its presence in organic, or whether it signals that organic retail is fraught with difficulty; that supply challenges and a recessionary economy are obstacles.
Woolworths has said it will add Macro to its expanding Thomas Dux premium grocery chain which was launched last year and has two stores in the up-market Sydney suburbs of Lane Cove and Paddington. The Macro chain has eight stores and a development site in the Melbourne suburb of Port Melbourne.
Woolies is set to convert them to Thomas Dux, lifting the number of stores in the new gourmet chain to 12. While neither party disclosed the price, estimates range for $16million to as much as $30m.
Andrew Monk, a director of Biological Farmers of Australia -- representing organic farms and food in Australia -- says the acquisition of Macro by Woolworths is a sign the organic industry is gathering momentum. He says the acquisition signals increasing interest in organic from large and mainstream retailers.
"This sale clearly shows leading retailers are acknowledging the benefits in integrating organic into their broader market offering," Monk says.
He says organic is becoming harder for large operators to ignore. The retail value of the organic market was reported at about $600m last year.
"In addition, organic is now also proving it has the capacity to embrace the mainstream food market. Major brands are now offering certified organic lines and major retailers are looking for organic products to place on shelf."
Monk does concede that there may also be the "fear factor" at play in the Woolies move.
"They may have taken the view that if they weren't to move into that space, then the Macros and others were increasingly going to be doing that. To be fair to them, they realise that organic is a challenge still, in terms of organising and managing the supply chain to get sufficient fresh product.
"They realise that a demand is there, perhaps against the belief of a few years ago where they may have thought demand may not grow significantly. There is a realisation today that it's never going to go away. They therefore need to position themselves in the market. I do believe that Woolies (is) being smart here. They'll have their everyday food at the economy end. Thomas Dux stores are positioned for those who buy on a values basis; that is, the demographic that is concerned about pesticides, chemical-free and organic food. It's a demographic they will work at."
Monk says some BFA members are concerned about the entry of a large dominant player into the organic sector, fearing that Woolworths could use its size to demand deals that will reduce the ability of small retailers to get the supply needed to continue.
It's a position shared by grocery wholesaler Metcash, which supplies more than 4000 independent grocery retailers.
Metcash is preparing a submission to the Australian Competition and Consumer Commission, opposing the acquisition on the grounds that it will remove yet another source of competition in the retail grocery market.
"On the whole, the more business-savvy members understand why this is a good move and see the benefits," Monk says. "There is a sense that in the independent retailer domain, the smaller one, two, three-store businesses are struggling without economies of scale. Macro (itself), with just eight stores, (was) struggling because (it) hadn't reached that critical mass."
Monk says resources and skills of professional retailers in the organic market will be valuable and should, among other things, "allow medium and larger-sized organic producers more volume and certainty in demand".
He says an increasing uptake of certified organic by retailers is also allowing more consumers to buy organic items than ever.
"It's all about expanding the range and availability of organic products for consumers."
A growing organic sector offers opportunity for smaller operators who remain an integral part of the industry to service consumers seeking to re-connect with food at farmers and local markets in economically tighter times.
TO MARKET, TO MARKET
* Woolworths' acquisition of Macro Wholefoods seen as possible watershed for the industry, for good or ill.
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*The retail value of organic market has grown to $600 million a year.
* Organic food is seen as increasingly mainstream.
* There are fears Woolworths' move will reduce competition.
www.theaustralian.news.com.au