Lee Nicholson: Con Sciacca, thank you for taking part in 10 Minutes With. The Foodland brand is considered one of the strongest in the state. What do you put that down to?
Con Sciacca: There’s not another brand comparable, not another independent brand comparable, to the Foodland brand anywhere in Australia that holds the market share that we do.
It’s due to some great work by the early founders that continually reinvested and drove the psyche of being leaders in the industry rather than followers.
What differentiates us from national chains is we have the icing on the marble cake which is the Foodland brand.
We’ve got the marble cake that consists of the Romeo family, the Chapley family, Eudunda Group, the Drake group and every one of these has a unique flavour and mixture to how they go to market.
If they’ve got a store in the western suburbs it’s going to be more focused on Mediterranean range.
If you’ve got a store in Glen Osmond Road there is a greater demand for health-type foods.
It is what the basic principle of good retailing is all about. Retailing is about providing what the customers want.
I think in Australia today the really fundamental problem with retailing is we’ve got multi-nationals providing what they want to sell to consumers not what consumers want to buy. It’s progressively getting worse. We see their de-ranging and concentrating on their own brand of products or products that aren’t recognised by customers. If they’re going left, we’re going right.
We’re constantly increasing the range and the diversity of range rather than narrowing that range and diversity of range. I think that’s a great position for us because everyone seems to be going to the left and very few people seem to be going to the right.
The brand itself has the capacity to take on national chains. Very few independent brands would even contemplate building a supermarket next to a multinational. We do that without fear because we know we have an offer and a brand that consumers reward with their patronage because we actually do a better job meeting what they require.
LN: That loyalty to a brand is quite unique.
CS: There’s 96 per cent awareness of the Foodland brand and the comment is ‘potentially hitting the ceiling’. It’s at the top end.
Three quarters of South Australians’ supermarket shopping is bought from a Foodland store.
We don’t take that lightly though. Those sorts of numbers mean that we have to work even harder to maintain them.
LN: When did that customer loyalty begin?
CS: That loyalty has been entrenched in South Australia for Foodland for almost a couple of decades.
The brand has got some heritage. It’s a 50-year-old brand and often you get people saying it’s dated, particularly our boomerang logo and the “Mighty South Australians”.
It is what people value. It is what generations have grown up with and it says to them ‘hey, these guys are local’.
Coming to the role I said “guys let’s articulate what we see are the five key planks of the business”. In the core area, Foodland sits up there as one of the most trusted brands in South Australia.
If you’ve got that title you’ve got to respect it and you’ve got to protect it. Already we know we’ve got to be really, really mindful that whatever we do we’ve got to make sure that we don’t put at risk our community trust and reputation.
In 2013 we were ranked the most trusted brand in South Australia ahead of Panadol.
When people trust you that comes with an absolute obligation hence we don’t even look at trading off price for an opportunistic buy from somewhere where trust might be damaged.
If there’s a risk or it’s inappropriate or a risk we’re sourcing from an operation that hasn’t been ethical, we’re just not even going to take that risk.
That comes from the fact that our owners of the supermarkets live here, their families live here, their relatives live here and their friends live here.
We think we’ve got an obligation to ensure that we help facilitate an environment where lifestyle is something that is enjoyed by all South Australians. That’s why we put so much effort into sponsoring things like the Crows.
LN: How important is that community relationship to your business model?
CS: People say it’s a commercial decision but the interesting thing is when you’ve got 36 families [running stores], it’s more about saying ‘what’s the right thing to do?’.
We don’t very often say what’s the commercial benefit from being part of this.
If people show us through their actions that they actually value something, that says to us we should support it. It’s not the other way around. It’s not the commerciality of it.
Communities are why we exist. It’s not for any other reason. If we don’t somehow add value to the local community down on Torrensville or Adelaide or South Australia then what’s the purpose?
You just can’t take and not add something back to the general community.
I think when you take out a corporate shareholding model, which is measured on its economic benefit to shareholders, and you add people to it who not only have a financial interest but have a direct relationship and live in those communities, it’s almost nature that they’re going to say we’ve got to take care of that situation.
It’s about demonstrating. It’s not just about giving money.
Minda, for example is an absolute great organisation. What we do in our relationship with Minda is to be able to provide meaningful work for their clients. Minda manufacture or bottle a range of Foodland products. Could we get a better price somewhere? Easily. But it’s not about the price. It’s about the fact that we go to the Minda facility.
LN: Foodland has been part of the push for liquor to be sold in independent supermarkets. What are you asking for and what do you want to achieve?
CS: We put in a submission [as part of the SA Independent Retailers Association] on behalf of all independent supermarkets. We believe competition has been inhibited as a consequence of legislation.
The first and fundamental thing we’re asking for is the needs test to be removed out of the current state legislation.That means that any retailer that believes they can bring an offer to market that will resonate with their customers will not have the barrier of an existing operator putting in an objection.
LN: And the needs test has been one of the biggest challenges to date for local applicants?
CS: Correct. It’s anticompetitive, first and foremost.
We believe if you remove the needs test they’ve got the opportunity to have a liquor offer which, in our mind, is just an extension of the dinner table in today’s society.
We’re happy to have a designated area, we’re happy for it to be even encapsulated and have its own point of sale.
If the retailer thinks they can bring something to the market that they believe will resonate with their customers we should have the right to do that.
But what it also does is it helps us support some of the smaller producers that exist in South Australia that have no opportunity to enter the market. The barrier to that outcome is the needs test.
The government’s got to be accountable to a certain extent.
LN: What is Foodland’s relationship with government?
CS: We see our role as partnering with government to educate, we’ve had some really good conversations.
We’re only at the embryonic stage but there is a program that [Premier] Jay Weatherill is supporting about healthy eating and healthy options.
We see an opportunity to give more knowledge to people in the retail space and supermarket space.
It might be a range of products that is specially designated for the right choice or a cookbook that might say here’s some simple ways to have fast food to the kids without providing fast food.
There’s a real fit here because it’s not about a healthy choice on a menu in a club or a pub, but it’s about being able to facilitate that so when a busy housewife or househusband comes into the store there’s some genuine options.
When you look at it, we’re a supermarket, our customer base is the young adults all the way to the 80-somethings.
The world today is a flat-aged society and all the needs and wants and aspirations of the 60-year-olds are no different to the plus-18s. We’ve got to make sure that we’re catering for the holistic population.
LN: Does supermarket trade reflect the economic health of the state?
CS: We’re certainly an indicator. We’re probably a lag indicator rather than a lead indicator. We feel the aftermath of economic change. We don’t feel it at the front end.
The loss of industry, that happens first so the economic challenge for manufacturing is the lead indicator for us because it’s when that industry is impacted that we feel the pain.
There is the tightening of the purse strings. We are the outcome.
LN: How do you respond to this? How do you prepare for something as big as the impending Holden closure?
CS: What I think it does is changes the commercial calculations of potential go-forward projects.
Where you would run a set of numbers relative to potential growth scenarios, you’re actually narrowing that calculation and saying well there’s not a growth in the market so for us to make that investment it’s got to be our ability to share from an existing retailer to us.
That would reduce the number of projects you would bring to realisation as a consequence of that.
But the reality is in existing stores you have to make the corrective decisions to ensure sure you’re sustainable in the different marketing environment.
It might be that you change the way you market because the consuming public may decide that convenience is less important than a price.
You might go back to promoting a product that is at the early stage of production. Potatoes and mince rather than things like steaks and salads. Many years ago I was in Victoria in the days of disputes on wharves near Williamstown. Every time there was a strike all they sold was rice and mince.
You’ve got to be agile and adaptive and I think that’s business today.
LN: What is Foodland’s philosophy toward local produce?
CS: Our philosophy is to get the best we can. It’s really difficult in a globalised market.
We have a range of product that has the Foodland brand on it. There is absolutely 100 per cent surety that product is either South Australian or Australian.
We will never go through and trade off an Australian product for an imported product where we’ve got a comparable product here in Australia. That’s the best you can do today in a globalised world.
It really frustrated me to an extent but then I suppose I had to accept the reality.
When there was the scare on frozen fruits the first thing we said was “why is this product even in our supermarket” and then “how do we actually chose an Australian product”?
The reality is there’s not enough supply in Australia to freeze any of the berries that we produce. Fresh demand for berries in Australia is so great. That’s not a bad thing but it says to me hopefully we’ll see scale and that demand filled.
LN: Do you encounter that a lot, that an Australian product cannot meet the customer demand?
CS: I think it’s there too often. There’s not a lot of promotion on frozen peas. Why? Because there’s not enough frozen peas to actually promote.
It would be easier to say should you go buy Chinese but no we’d rather not promote.
There’s not the quality assurance there that we would expect so we’ll just not promote them.
We’ve got to have absolute surety that whatever we buy it, be it Australian or imported, it actually complies to the standard that is recognised by the food industry.
LN: How strong is the desire by producers to join Foodland?
CS: There are many suppliers who want to join. The challenge for us is where the supply isn’t of large enough scale to supply a supermarket network as big as us.
There’s one particular lamb producer from Port Augusta. We’d love to sell his lamb in all of our supermarkets but he can’t produce enough at the quality specifications he does to supply more than six of our supermarkets.
We have a Foodland brand of milk. We haven’t been good at telling the story about ourselves. No one knows that it’s produced here in South Australia and it’s produced by South Australian cows.
Our oats come from Keith, they don’t come from some grain farmer in WA, they come from a little factory in Bordertown and they’re grown in Keith and the carbon miles are pretty short and come to a warehouse here for our supermarkets.
That’s something that we’ve got to evolve into, that’s telling customers more about what the products involvement is in South Australia or the community.
LN: South Australia has only so many customers to go round and with Aldi entering the market the Independent Retailers estimate there could be a six to 12 month impact on independent supermarkets trade. What impact do you think the new entries will have on Foodland?
CS: For every $100 that goes through a corporate chain they potentially might spend somewhere about $7 on servicing the customers.
We potentially spend somewhere between $9 and $11 serving the customers.
I think it’s good to have competition. I’m not sure it’s particularly good for the South Australian economy because that particular competitor spends less than $4 per $100 which means that there is a contraction in head count for supply.
It will normalise. The greater focus for me is the response from the two major chains than the actual new entry.
The new entrant is simply one dimensional. It doesn’t do anything else but try and bring product that’s normally unknown brands to the market at a price.
A Coles and Woolworths is a lot closer to our model. How they respond to the new entrant is probably of greater concern and we’re more focused on that than we are on the new entrant.
That sounds counter-intuitive but we’re not Aldi, we don’t want to be Aldi. It’s not what we want to provide our customers. We think we’ve got more than enough custom that want our model versus the new entrant’s model.
LN: Do you anticipate Aldi will encounter a different retail environment in South Australia to what they have been used to in the eastern states?
CS: I hope so. I don’t know how much of their programming has been specifically to counter what they’ve analysed is our key value proposition but they’ve very much put a strong focus on what we buy from that South Australia supplier.
They’re very good at understanding the markets they’re entering and understanding the strengths and weaknesses but they’ll always try to match the strengths.
At the end of the day, they are a global player and source globally for price because that’s their only value proposition.
People say they’re a supermarket competitor but they’re a mixed variety store. They have 3 per cent of the hardware market. They are a diversified retailer.
They’re going to impact a pretty diverse sector of retailing in South Australia – I don’t know if that’s good or bad.
They sell guitars and violins. I don’t know how many violins get sold in South Australia any given year but if you sell a great wad of them cheaply the chances are you’re not going to get too many violins sold during the next 12 months.
It’s hard to understand what the total economic impact is of that new entry but I don’t see them as a direct competitor, I see them as a disruptor in the environment that might change the behaviour of multinationals.
They will have an impact. It’s about mitigating that impact.
We’re pretty confident we’ll go well out of this.
By the end of 2020 we’ll have put another 19 stores on the ground. That will put us to about 140.
We’ve got some really exciting developments in that range. We’re putting down what will be physically one of the biggest stores in the state in 2017.
Our retailers are really quite confident, but they’re confident because we’ve got a model that seems to resonate with South Australians
In 2013 [in a Roy Morgan satisfied customer poll] it was Foodland, 2014 it was Aldi and in 2015 it was Foodland.
Read all of our “10 minutes with…” interviews here.
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