ACCC assessing impact of Woolworths’ Macro acquisition
Woolworths is looking for a swift expansion of their Thomas Dux upmarket grocery chain with Wednesday’s purchase of Macro Wholefoods but will the competition regulator block it?
A deal was struck by Woolworths with Macro this week which will see the supermarket chain’s Thomas Dux subsidiary takeover eight stores, one development site and Macro’s organic private label brand. The price of the acquisition was not revealed by Woolworths but that hasn’t stopped speculation from The Australian Financial Review ($16 million) and The Australian ($30 million).
Macro founder Pierce Cody said he was just pleased that the organic chain could be reborn as a gourmet retailer.
“It’s not like they’re turning into 7-Elevens or little supermarkets,” he told The Australian. “The best thing we did is to prove that you could take organic to a large-format, mainstream model rather than little folksy corner stores.”
Mr Cody denied that Macro was operating at a loss, although recent sales had not reached the levels they had planned. “The areas that have been a little more difficult are those where shoppers have a little less discretionary income, because people are having to decide whether they can afford to buy an organic banana rather than a non-organic one,” he added.
Thomas Dux expansion
Thomas Dux, which sells a range of upmarket products from fruit and vegetables to smallgoods and bread, was created by Woolworths to compete with the proliferation of gourmet grocers – particularly in Sydney. Their first two stores opened last year and have been “enormously successful”, according to CEO Michael Luscombe.
After the rebranding of Macro outlets there will be at least 11 Thomas Dux stores, with the imminent opening of a store in Surry Hills (Sydney) to join outlets at Paddington and Lane Cove and the eight Macro outlets (they also have Macro’s Port Melbourne site, which still requires development). That is, of course, assuming they get approval from the ACCC.
How the regulator views this acquisition will be a key to how quickly the Thomas Dux brand is able to grow.
If Macro was to go directly under the Woolworths banner the deal would be highly unlikely to get the green light – but that is not the proposal put forward by the supermarket operator. As such, the ACCC is currently conducting market inquiries to determine whether the deal could still result in a substantial lessening of competition.
One of the issues raised is the extent to which organic retailers compete with the supermarket chains and whether the purchase by a subsidiary of the largest Australian supermarket chain could reduce competition.
For those keen to put their point of view forward, the ACCC is inviting submissions until the 27th of May, with a final decision expected by the 17th of June.
Submission details and more information about the analysis the ACCC plans to undertake can be found by clicking here.