Woolworths boss clashes with Greens Senator at supermarkets inquiry
Woolworths CEO Brad Banducci has been accused of trying to ‘bulls**t’ the supermarkets inquiry and threatened with jail time for contempt after refusing to answer a question.
Woolworths chief executive Brad Banducci has been accused by the Greens-led Senate inquiry into the supermarkets of trying to “bulls**t” the committee over the true profitability of the retailer by “cherry-picking” facts and engaging in spin, in what has been a fiery start to his appearance.
Appearing before the Senate inquiry on Tuesday – with Coles boss Leah Weckert to be questioned by Senators at noon – Mr Banducci was immediately savaged by inquiry chairman, Greens Senator Nick McKim, who accused Woolworths of profit gouging, misusing its market power and profiteering at a time when many Australians are dumpster diving to feed themselves.
After repeatedly asking for financial information, Senate inquiry chairman Nick McKim, warned that Mr Banducci could face jail of up to six months if found in contempt for not answering the question about the Woolworths’s return on equity.
“It is open for the Senate to find you in contempt”, Senator McKim said after asking Mr Banducci again what that return on equity figure was.
Earlier, an increasingly irate Senator McKim asked if Mr Banducci was struggling to understand the words he was using in his question.
In his opening address to the inquiry, Mr Banducci said the recent high inflationary environment had caused many of its customers to live under cost of living pressures, pushed by higher mortgages, energy bills and grocery prices.
He said however that inflation was starting to fall.
In this environment, Woolworths made a “reasonable profit”, Mr Banducci said, while also making “considerable investments” in its operations.
Mr Banducci said the supermarket had acted to offer cheaper groceries, especially under its private label offering, as well as offer tools on its digital platforms to help shoppers plan and budget their shop.
Mr Banducci also denied the supermarket chain engaged in ‘land banking’ – the strategy of buying up land or properties to limit or stop competitors entering into specific neighbourhoods – as the retailer was always looking for returns on investment rather than leave a property empty.
Mr Banducci was asked by Senator McKim if he could provide the committee with a list of all the sites owned by Woolworths that did not currently have a Woolworths store on them.
“The reason why I am just following this up, Mr Banducci … is an indication you will provide that information to the committee on notice because we have heard allegations of land banking by the supermarket duopoly and the committee takes that very seriously.”
In a series of heated clashes through the morning session of the public hearings at Parliament House in Canberra, Senator McKim berated Mr Banducci over his refusal to divulge Woolworths’s return on equity, with Mr Banducci only willing to discuss Woolworths’s return on funds employed.
Senator McKim said return on equity was an accepted measure of profitability, and he demanded Mr Banducci detail that figure.
“Senator, the numbers we always look at are our return on funds,” Mr Banducci said.
Senator McKim them cut off the Woolworths boss, saying: “I’m not interested or asking about the numbers you are looking at. I am asking about numbers that the committee is interested in and at the moment that is return on equity.”
Senator McKim said that Woolworths’ return on equity was around 26 per cent, which was around 2.5 times higher than Australian banks, which he described as “rapacious”.
He then accused Woolworths of “making off like bandits” with its high profits.
Return on equity (ROE) calculates financial performance by dividing net income by shareholders’ equity whereas return on funds employed is a financial ratio used to measure how good a business is at generating profits from capital.
Mr Banducci several times refused to say what Woolworths’ return on equity was, rather pointing to its return on funds employed, which he said was around 10 per cent and was an average performance compared to other large companies listed on the ASX.
He said return on funds was the commonly used metric.
This only infuriated Senator McKim who became increasingly angry and demanded Mr Banducci divulge the return on equity figure.
“I’m not interested in your spin here today,” an angry Senator McKim told Mr Banducci.
Senator McKim then asked Mr Banducci if he was “struggling with the words” over his demands for certain financial measurements.
Senator McKim continued to push Mr Banducci to supply the committee with the return on equity, not the return on funds employed, in the last financial year when Woolworths made its $1.7bn profit.
Senator McKim argued Australia’s banks had the highest return on equity in the world, and that Woolworths had a return on equity 2.5 times that.
Mr Banducci said although Woolworths recently reported a full-year profit of $1.7bn, those large numbers could be deceptive because it also faced huge costs and investments to run its supermarket business.
Senator McKim asked Mr Banducci why he “wouldn’t answer a simple question” over what Woolworths return on equity was, and said Mr Banducci refused to talk about return on equity because he “didn’t like the story it tells” that Woolworths is profiteering.
The Greens Senator accused Mr Banducci of repeatedly refusing to answer the question, engaging in spin and trying to “bullshit the committee”.
Senator McKim continued to demand Mr Banducci focus on return on equity and supply that figure, rather than return on funds employed, with Mr Banducci repeatedly refusing to answer the question and focusing on Woolworths return on investment which is 10 per cent.
“We will come to those points later” Senator McKim told Mr Banducci, “but I’m not interested in those figures right now” he added.
Later Mr Banducci disputed the view that Woolworths had a high market power and argued that including food and grocery stores, retailers like Chemist Warehouse and Amazon, as well as traditional supermarkets, then the chain’s market share was much lower.
Senator McKim asked Mr Banducci if he accepted the fact that between Woolworths and Coles the two large supermarket chains controlled around two thirds of the food and grocery sector.
Mr Banducci in response said Australians “cross shopped” which was a good thing and showed how savvy they are, visiting other non-traditional food and grocery stores such as Chemist Warehouse and Reject Shop.
He said that if you included this broader range of retailers, including Amazon, then Woolworths only had around a 20 per cent market share.
“This is as competitive as any place in the world,” Mr Banducci told Senator McKim.
He said the “arrival and growth” of Amazon, Costco and Aldi in Australia – the world’s biggest retailers – “consumers have never had more choice, and this is a good thing”.
“Consumers shop across multiple retailers”, he said, with digital platforms helping consumers to compare prices among all the retailers, which was helping to boost competition.
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