Woolworths Group chief executive Brad Banducci has said that its proposal to merge and divest its pub and liquor businesses is not about distancing itself from its controversial pokies business.
The hotel and gaming segment of Woolworth’s business came under fire last year when it was revealed that staff were keeping track of customers’ gambling and drinking preferences in an effort to extract more money.
“It’s not about gaming, it’s about helping both businesses unlock their full potential,” Banducci said about the proposed merger of ALH and Endeavour Drinks and subsequent divestment of Endeavour Group, the AAP reported.
But Bruce Methieson Snr, who owns 25 per cent of the ALH joint venture, believes the gaming business’s reputation had a “major influence” on the group’s plans.
“Realistically, that was a major thing because there are people who don’t like poker machines. You weigh up everything in your business. It was certainly, I think, part of their reasoning… but I don’t think it was the be all and end all,” Mathieson said, according to the Sydney Morning Herald.
Mathieson will swap his 25 per cent stake for a 14.6 per cent interest in the merged Endeavour Group.
According to Banducci, however, the move is about realising the full potential of Woolworths Group’s remaining businesses: the Woolworths and Countdown supermarkets and Big W discount department store chain.
“Over the past three years we have progressively moved from a period of fixing the basics as part of our turnaround to investing for the future as part of our transformation,” Banducci said in a statement to the ASX on Wednesday.
“As we look to build customer differentiation in all of our businesses, and prepare for an agile and digitally-enabled future, we have decided to simplify Woolworths Group through a combination and subsequent separation of Endeavour Group.”
Mathieson said there is “a lot of potential” in a demerged pub and liquor business, and plans to focus more on the hotels and pubs side of the business moving forward.
“We’ve been concentrating on the retail and liquor side of things for a long time, probably the last 10-12 years, and now it is time to concentrate on the other side,” Mathieson said, according to The Australian.
“We can look at refurbishing and extending the pubs and potentially developing them as well.”
Federal MP Andrew Wilkie, who has previously been critical of Woolworth’s involvement in the pokies industry, called poker machines a “toxic” product which any responsible business should have nothing to do with.
“Poker machine money is blood money and it was always unconscionable for one of the country’s biggest supermarkets, and most well-known brands, to profit from human misery for so long,” Wilkie said, according to AAP.
Sources previously said the retail conglomerate would not consider exiting ALH Group until it had completed a turn-around of struggling department store chain Big W, according to a report in Fairfax.
However, the group recently revealed a down-sizing plan for Big W that will see 30 stores and 2 distribution centres closed over the next three years in an effort to improve profitability – though this will occur in full after the proposed Endeavour Group demerger, which is expected to occur in 2020.
Though Big W is expected to report up to a $100 million loss in 2019, Banducci said the group was “not at all” considering selling the department store chain.
“We made some very tough calls on the business earlier this year,” Banducci said to analysts, according to The Australian.
“We are very comfortable having it in our portfolio.”
