Alternatives to Coles and Woolies (retail?)

[DionM]

I'm trying to keep some diversity in my share portfolio.

Have banking, miners, infrastructure, energy sorted.

Retailers ... have got Coles at present and that's all, and going to lose that to Wesfarmers (not sure if I'm happy or not about that). I'd like to get more retailers ...

However, I don't want a 'specialist' like Harvey Norman or DJs ... I like having a "foodie". Does that only really leave me Woolworths?

 

[Julia]

I'm trying to keep some diversity in my share portfolio.

Have banking, miners, infrastructure, energy sorted.

Retailers ... have got Coles at present and that's all, and going to lose that to Wesfarmers (not sure if I'm happy or not about that). I'd like to get more retailers ...

However, I don't want a 'specialist' like Harvey Norman or DJs ... I like having a "foodie". Does that only really leave me Woolworths?

What's not to like about Woolworths?

 

[Judd]

Have a look at Metcash (MTS). Supplier to IGA and other grocery stores.

http://www.metcash.com/

And there is not much wrong with WOW, except that the shares cost a bit and if you are like us and only have $5k or so at any one time, you don't get many of them.

 

[doctorj]

What about Metcash (ASX: MTS)?

 

[YELNATS]

I'm trying to keep some diversity in my share portfolio.

Have banking, miners, infrastructure, energy sorted.

Retailers ... have got Coles at present and that's all, and going to lose that to Wesfarmers (not sure if I'm happy or not about that). I'd like to get more retailers ...

However, I don't want a 'specialist' like Harvey Norman or DJs ... I like having a "foodie". Does that only really leave me Woolworths?

You could try Metcash Ltd (MTS). Has a $3.5 billion market capitalisation and pays a reasonable fully franked dividend.

Business is summarised as:
Quote
Metcash Limited (MTS) is a leading marketing and distribution company operating in the food and other fast moving consumer goods categories. MTS operates via three business units: IGA Distribution (retail), Campbells Cash & Carry (wholesale) and Australian Liquor Marketers (ALM; liquor wholesale).
Unquote.

 

[DionM]

Metcash - never heard of 'em before! Thanks. Looks interesting and certainly up my alley.

And yep there's probably nothing wrong with Woolies except that the share price is a bit steep when buying smallish parcels (like me) and the dividend yield is okay but not spectacular.

 

[Julia]

I understand the reservation about WOW's SP being fairly high, but there's no comparison between WOW and MTS when it comes to growth. Just a quick look at the one year chart of each shows WOW with about a 50% growth and MTS about 14%.

If you'd invested the same amount of capital in each of these two companies, wouldn't you be happier with the result from WOW?
I can't quite see why the number of shares really matters but perhaps I'm missing something.

I don't have anything against Metcash at all, but if I were picking one food company it would be WOW who have demonstrated year after year their capacity to grow their business.

 

[DionM]

I don't have anything against Metcash at all, but if I were picking one food company it would be WOW who have demonstrated year after year their capacity to grow their business.

This is true. I guess another motivation for asking is to compare Woolies with others in the same sector as well (and do what you have done, compare Woolies with them). And I am looking long term - 10+ years - so recent performance I'm not too concerned about. (Though by that token, I guess I shouldn't baulk at buying Woolies at it's all time high ...)

I might still end up getting a bit of each, just for some diversity within the sector.

 

[Kauri]

And yep there's probably nothing wrong with Woolies except that the share price is a bit steep when buying smallish parcels (like me) and the dividend yield is okay but not spectacular.

If you buy two loaves of bread for $5000 a piece it doesn't matter whether you cut one into 4 slices and the other into 44 slices, they are still both worth $5000.... rather than count the slices go for the one with more yeast...
Cheers
..........Kauri

 

[nioka]

I understand the reservation about WOW's SP being fairly high, but there's no comparison between WOW and MTS when it comes to growth. Just a quick look at the one year chart of each shows WOW with about a 50% growth and MTS about 14%.

If you'd invested the same amount of capital in each of these two companies, wouldn't you be happier with the result from WOW?
I can't quite see why the number of shares really matters but perhaps I'm missing something.

I don't have anything against Metcash at all, but if I were picking one food company it would be WOW who have demonstrated year after year their capacity to grow their business.

At one stage I was a supplier to woolworths. They have prospered on the back of their suppliers. They operate a cash business with high turnover but they are the slowest payers I ever encountered, sometimes about 80 days behind. I was in a high cost, low margin business so it was not profitable to continue to supply them. This is OK for them when there is a queue of potential suppliers but they have helped send a lot of local suppliers to the wall and now rely heavily on imports. They will not continue to enjoy the benefits of past trading methods. I suggest that they will continue to increase market share but with decreasing profitability. When I stopped supplying them I lost 30% of my business but increased my overall profit.
I also supplied Coles at the time and they were good to deal with. This was the reason Coles did not match Woolies. That is in the past. The future, I think, looks like Coles has room to improve, Woolies could have peaked.

 

[DionM]

If you buy two loaves of bread for $5000 a piece it doesn't matter whether you cut one into 4 slices and the other into 44 slices, they are still both worth $5000.... rather than count the slices go for the one with more yeast...
Cheers
..........Kauri

I know I know. Just a mental thing that's all.

Now, where's those < 1c shares

 

[Dukey]

At one stage I was a supplier to woolworths. They have prospered on the back of their suppliers. They operate a cash business with high turnover but they are the slowest payers I ever encountered, sometimes about 80 days behind. I was in a high cost, low margin business so it was not profitable to continue to supply them. This is OK for them when there is a queue of potential suppliers but they have helped send a lot of local suppliers to the wall and now rely heavily on imports. They will not continue to enjoy the benefits of past trading methods. I suggest that they will continue to increase market share but with decreasing profitability. When I stopped supplying them I lost 30% of my business but increased my overall profit.
I also supplied Coles at the time and they were good to deal with. This was the reason Coles did not match Woolies. That is in the past. The future, I think, looks like Coles has room to improve, Woolies could have peaked.

Interesting nioka...
can I ask how long ago was that? and what line of goods were you supplying?

I sound like a woolies manager now don't I - but I'm not - just interested.

It sucks how big business can get away with breaking the rules that the little guys have to abide by.

 

[nioka]

Interesting nioka...
can I ask how long ago was that? and what line of goods were you supplying?

I sound like a woolies manager now don't I - but I'm not - just interested.

It sucks how big business can get away with breaking the rules that the little guys have to abide by.

It was a little while ago, over 15 years but I have kept in touch with other suppliers and they say things are no better now. I was running refrigerated trucks handling a range of chilled products from cheese to smallgoods. By the way they didn't break the rules. THEY MADE THE RULES.

 

[chops_a_must]

What's not to like about Woolworths?

Umm. They are pure evil?

 

[YELNATS]

It was a little while ago, over 15 years but I have kept in touch with other suppliers and they say things are no better now. I was running refrigerated trucks handling a range of chilled products from cheese to smallgoods. By the way they didn't break the rules. THEY MADE THE RULES.

Back in the 1980's I had 5 years experience working in logistics/physical distribution management with a major Australian and worldwide food products manufacturer.

Then, and I believe it would still be the case, the Australian food distribution/sales industry was dominated and controlled by the major retailers such as Woolworths and Coles.

ie. between them, with near monopoly power in retail, ie. these two major players call the shots and control the rest of the supply chain, ie. the wholesalers and manufacturers, so as to serve their own needs.

 

[Julia]

I have assumed that Dion was asking the question with the aim of making money. My answer re WOW was in direct response to that.

The philosophical / ethical question of how the company makes that money is another question altogether . I suppose Woolworths would say that their responsibility is to deliver to their shareholders.

Chops, to say Woolworths are "pure evil" is a fairly exaggerated comment, isn't it? How do you support such a statement?

 

[vishalt]

Pure good for their shareholders, Dad's pretty happy with the basket of $19 shares that he sold at $30 in the express checkout lane.

Who cares if Woolworths dominates the supply chain anyway? There's losers and winners in each games, Woolworths is an awesome supermarket, I don't understand peoples issues with the prices, they're not even high, if you think its expensive you probably have no job or a very poor income or something...

It has all the goods one could want from a supermarket, the bakery section is excellent, they're always changing their delis around, there's always many of the express lanes open in peak hour (unlike Coles...) its beautiful, why all this whining?

 

[chops_a_must]

I have assumed that Dion was asking the question with the aim of making money. My answer re WOW was in direct response to that.

The philosophical / ethical question of how the company makes that money is another question altogether . I suppose Woolworths would say that their responsibility is to deliver to their shareholders.

Chops, to say Woolworths are "pure evil" is a fairly exaggerated comment, isn't it? How do you support such a statement?

Their attempted cultural destruction here in Perth has not been welcome...

 

[nioka]

Pure good for their shareholders, Dad's pretty happy with the basket of $19 shares that he sold at $30 in the express checkout lane.

Who cares if Woolworths dominates the supply chain anyway? There's losers and winners in each games, Woolworths is an awesome supermarket, I don't understand peoples issues with the prices, they're not even high, if you think its expensive you probably have no job or a very poor income or something...

It has all the goods one could want from a supermarket, the bakery section is excellent, they're always changing their delis around, there's always many of the express lanes open in peak hour (unlike Coles...) its beautiful, why all this whining?

Woolies can not continue to operate in the future as they have done in the past. If their suppliers can not prosper they stop supplying. I believe they have peaked or are close to peaking. When the small businesses that pay the high rents in the shopping centres (and subsidise woolies) decide they have had enough what happens then. Woolworths pricing is based on selling at as high a price as possible but to discount in order to force out opposition. Once the opposition folds then they increase their prices. eg. To get a good price on fruit and veg at Woolies you shop at a Woolies that has a good independant fruit and veg shop nearby. Woolies prices are low then to get rid of the opposition. Their petrol price with their discount is no longer the best price in our area. They have edged it up faster than most others. They kept it low for long enough to force some opposition out.
I care that they dominate the supply chain. It will eventually lead to higher prices and less aussie products. Read the labels on their goods to see that it is happening in a big way now.

 

[Whiskers]

Who cares if Woolworths dominates the supply chain anyway?

Farmers care... and many rural communities that rely on agricultural production care, as well as many people and small business operators in the suburbs.

Woolworths encouraged growers to send produce to them at a better price than the central market system in all the state capitals. Once they alienated growers from their traditional marketing agents, they started lowering the price they were prepared to pay. Those growers were often not accepted back by the central market agents, so they got their price screwed down to marginal profitibality levels.

In the suburbs Woolworths opens new stores and undercut independant fruit and veg retailers prices, and keeps undercutting them until they go out of business, then their prices go up because there is no competition.

You might have heard on news bulletins recently where they were giving growers (from memory) 60c for avocados and selling them for just under $2.

Pumpkins were another bad case a couple of years ago. Woolworths would only pay growers $200/tn ie 20c /kg and sold them for just under $1. In that case growers totally revolted against growing pumpkins and the price went between $1,500 to $3,000 /tn wholesale for months. That did no one any good.

Then we could go on with their petrol pricing policy etc.

I still shop at woolworths and their petrol stations, but like many I know in rural areas I only buy their specials and always use the dicsount docket for fuel : Thats our way of getting even.

I get the balance of my shopping from IGA or even Aldi to ensure that Woolworths gets some competition and limit their ability to artifically inflate prices. They may not have as many lines as Woolworths, but they can match and are often cheaper with what they do carry.