Belting Brad: Senate turns supermarket CEO flogging into Olympic sport

A photo finish was needed to decide the winner of the gold medal for the most ridiculous performance at a Senate Inquiry – the contenders being Greens senator Nick McKim for his pertinacious questions on just one particular Woolworths profit measure, or the supermarket chief executive Brad Banducci for refusing to answer.

The sparring deteriorated into an unedifying headbutting contest.

This is because there was no great reveal in the answer – it’s contained in Woolworths’ annual report. And if one can’t be bothered sifting through that 187-page document, a quick Google search will do the trick.

Senator Nick McKim and Brad Banducci in full flight.Credit: Dion Georgopoulos

For those not schooled in corporate finance, McKim was doggedly pushing Banducci to publicly state Woolworths’ return on equity in 2023 – which, put simply, is calculated by dividing net profit by the value of its shareholders’ equity.

There is nothing in commercial confidence about it. It isn’t a vital ingredient of Woolworths’ profit-making secret sauce.

So why was McKim so laser-focused on this metric? Because he had become aware that Woolies’ return on equity was two and a half times larger than that of the Australian banks. And he figured that if everyone already thinks the banks are rapacious, then Woolworths must be gouging customers and bear some responsibility for increased instances of ‘dumpster diving’ and families going hungry.

The sparring deteriorated into an unedifying headbutting contest.

McKim wanted this magic metric as evidence supporting his claims that Woolworths “had a licence to print money and was making off like bandits”.

The curious aspect to this brawl is that Banducci didn’t shut it down by simply agreeing with McKim that the number was roughly 26 per cent.

Instead, the Woolworths boss repeated the mantra (at least ten times) that this was not a measure that the company was focused on – and that it preferred to use return on investment, or total shareholder return.

The debate reached farcical levels when McKim threatened to hold Banducci in contempt and brandished a potential jail term of six months.

“We are not interested in your PR [public relations] spin and bullshitting your way through the committee”, McKim growled.

Ultimately, Banducci was bulldozed into saying that he didn’t know the answer to the question. That itself stretches the bounds of audience credulity. (This is assuming that Banducci knows how to search Google or even ask his finance team.)

Banducci has a bit of recent form on poorly handling being interviewed. He walked out of a Four Corners interview a few months back because the cameras continued to roll after he fluffed the answer to a question.

In Tuesday’s Senate inquiry, Banducci was in a particularly unhelpful position because McKim was chairing the Senate committee into supermarket prices, so he had control of the microphone.

It begs the question: Where were those teams of highly paid advisers brought in by Woolworths to oversee its public relations around the various supermarket inquiries currently on foot?

Maybe Banducci, who has already announced he will soon retire, was taking one for the team, or maybe he thought the broader audience couldn’t appreciate why return on equity wasn’t a particularly illustrative metric to use for performance, or was simply difficult to justify.

Banducci’s rival at Coles Leah Weckert, who stepped into the already bloodied arena after him, was a quick study in what to do.

Having witnessed Banducci’s fiasco, she immediately provided McKim with the answer (which was 31 per cent for Coles) and went on to give him a little lesson in finance – explaining that banks, for example, are required to hold higher levels of equity (which remember is the denominator in return on equity), and thus have lower return on that equity.

“I would highlight that equity is a historical number, so it is actually quite difficult to compare return on equities across business,” she advised.

To make her point easier to understand, she used the property market.

“If you bought a house 30 years ago, the equity on that would be much lower than if you bought a house ten years ago,” she explained.

In the space of a couple of minutes she effectively blunted McKim’s attack, on this issue at least.

These segues and diversions hoovered up the precious time the committee had with the respective supermarket chiefs to answer the really important questions of whether a dearth of competition means the supermarket industry is feeding into the cost-of-living strains felt by many Australians.

Not getting sidetracked on financial terminology would have allowed the Senate committee more time to delve into the reasons some small supermarket suppliers – like Hawkesbury mushroom growers, zucchini farmers from the Atherton Tablelands or Tasmanian cherry producers – feel that they get a raw deal from Woolworths and Coles.

Elizabeth Knight: Is Coles raking in profits? The market says no

Ross Gittins: How much do supermarkets gouge us? Time to check it out

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.