Woolworths the well know retail brand in Australia is now punting pubs and pokies out of its business, announcing plans to spin off its drinks and hotel interests next year. Woolworths is spinning off its $11b alcohol, gaming and hotel business
Woolworths which is currently the third biggest gaming business in Australia, behind the Crown and Star now wants its greater focus on its core food and retail businesses only. The Woolworths Group proclaims it celebrates “family-friendly values. Within its supermarkets the company has sought to demonstrate this commitment. Woolies gives out free fruit to kids, for example, and no longer gives out plastic bags.
In a news the company announced that it will separate from its liquor and gaming businesses. The company’s hotels division encompasses 323 licensed venues, many operating poker machines. Its liquor retailing division is bigger still, and includes the well-known brands Dan Murphys, BWS, and Cellarmasters.
The supermarket giant announced that Endeavour Drinks would be combined with the hotels and gaming-focused Australian Leisure & Hospitality (ALH) Group under the new umbrella Endeavour Group Limited. ALH owns 12,000 poker machines across 330 pubs throughout Australia, which makes it the largest pokies business in Australia.
The $10bn new company, which will include 1,500 BWS and Dan Murphy’s alcohol retail chains, will be demerged, either sold off or put out for an initial public offering. The separation has been flagged for 2020.
ALH has long been Australia’s biggest, most aggressive and irresponsible pokies operator, pushing hard on loyalty schemes, offering up free liquor to gamblers and operating for the maximum amount of hours as the laws allow.
Alcohol and gambling both represent significant social problems in Australia. The number of alcohol-induced deaths in 2017 – 1,366 – was the highest in two decades and the per capita gambling losses are the highest in the world.
Be it know that in June 2019 several Woolworths-owned hotels in New South Wales were accused of serving free drinks to encourage patrons to continue gambling. As much as Woolworths might have done to ensure these business divisions operate as responsibly as possible, there is a stigma associated with their profits. They do not fit easily with “family-friendly values”.
Woolworths Reputation is at Stake
Continuing to operate these businesses would represent a clear reputational risk for Woolworths at a time when consumers increasingly expect organisations to walk their talk and demonstrate they make a positive impact on society. This trend in consumer sentiments is demonstrated by the result of Swinburne University’s Australian Leadership Index. The index is based on a nationally representative survey run quarterly. It tracks consumer perceptions about whether organisations show leadership for the greater good. At the aggregate level, perceptions of big companies like Woolworths are consistently negative. More consumers think they do little to nothing to contribute to the greater good than those who think they make a positive impact. There is clear desire for businesses to contribute more to society.
How will Woolsworth will separate pokies and drinks?
Research by global professional services firm Accenture indicates 61% of Australian consumers consider a company’s ethical values and authenticity when making their purchasing decisions, and 40% have boycotted a company over its actions on a social issue. Younger consumers are particularly adamant that companies have clear social values.
The Woolworths Group will first combine its pubs and liquor retail divisions into one, then spin off that division into a separate company, listed on the Australian Stock Exchange.
It will be Australia’s largest drinks and hospitality businesses, with expected annual sales of up to A$10 billion. Losing the revenue will cost Woolworths. But the potential long-term benefits are considerable.
The separation presents an opportunity for the group to create a clearer perception among consumers of the company’s values – a smart move in an evolving marketplace of empowered consumers demanding organisations be social leaders. (With inputs from macro business Australia)