Last week, Woolworths has announced that it will be divesting Endeavour Drinks alongside the ALH Group within half a year after successfully merging the two businesses.
Now called Endeavour Group, it has been measured to be the largest combined segment that spans both the drinks and hospitality sectors. Woolworths is expected to continue holding an 84% stake in the business during the second half of the year, but will eventually just hold a minority stake after demerging.
The decision was said to be for the sake of simplifying and streamlining Woolworths’ core grocery business and it was certainly a good move as far as its shareholders see.
However, retail analysts and thought leaders are also noticing that the grocery giant is actually exhibiting a familiar pattern of behaviour.
“We already had the demerger of Coles from Wesfarmers. Now, Woolworths’ streamlining its operations in a likewise manner,“ said Phil Chapman, director of retailer lease consulting firm Lease1. “It is clear that the Big 2 are preparing for the new wave of competition from foreign giant Kaufland. Retailers who rely on supermarket traffic need to be aware that the pressure is building.”
Kaufland is part of the fourth largest grocery conglomerate in the world and made its move into the Australian market back in March earlier this year. Industry analysts have observed that its arrival has prompted immediate response from the country’s famed Big 2 in the form of ramped up efforts to streamline their respective businesses. These include simplifying their organisational structure and preparing for more digitisation across several areas of their company.
And without a doubt, this may extend to retailers who position themselves close to the Big 2’s many giant supermarkets. Kaufland’s inevitable clash may require them to either seek new ways to depend on getting foot traffic outside with less dependence on grocers or reposition themselves to gain from Kaufland’s arrival.