The Foodtown and Woolworths supermarket brands may vanish from New Zealand under a cost saving strategy by Progressive Enterprises.
Supermarket retailer Progressive Enterprises is on the verge of collapsing its three supermarket brands into one chain - the Countdown brand, reports The Independent business newspaper, citing research from Australia.
The move would see the end of the Foodtown and Woolworths brands in New Zealand, leaving just Countdown to be rolled out in a revamped store concept to compete against rival Foodstuffs' Pak'n Save, New World and Four Square chains. The concept, called 2010c, is also being rolled out in Australia by parent Woolworths.
The Independent cites documents from Macquarie Research Equities which say Progressive "appears poised to collapse its tri-banded retail offer into just one brand after just two store trials of the Australian 2010c format''.
Progressive announced this week it will spend $200 million refurbishing and upgrading back-office systems in existing stores and building three to five new supermarkets each year, but it made no mention of store branding. The company has already spent $320 million in New Zealand on refurbishment since Woolworths bought the business three years ago. It has also rebranded two prominent Auckland Foodtown stores in a new Countdown format.
Woolworths (Progressive's Australian parent company) released second-quarter sales results last week revealing poor New Zealand performance, fuelling speculation it needs to do something to turn the business around.
New Zealand sales in the second quarter were expected to increase by 6 percent compared to the same period last year but they lifted only 3.9 percent to A$1.1 billion ($1.27 billion).
Adding fuel to speculation about a collapse of the brands is Progressive's managing director Peter Smith's response to the Macquarie report this week, said The Independent. Smith didn't deny the report, saying only there was no news to announce.
Statements by Woolworths' chief executive Michael Luscombe have also been interpreted as indicating a brand change. He was asked by Credit Suisse analyst Grant Saligari during a webcast where Progressive was in repositioning the New Zealand supermarkets business. "We've got no doubt that the new store format is the way to go,'' said Luscombe.
"The two stores that we put on the ground as our tests have been performing very well. They were existing stores that were big stores with big numbers and they've been doing very, very strong double-digit growth since that opening. "So we've got the right format, we just need to now get the critical mass of them out there.''
Rival Foodstuffs boss Tony Carter said he had heard the rumours about Progressive restructuring its branding but declined to comment further.
Woolworths paid $2.5 billion in 2005 for Progressive and signalled it would turn around the business within three years by using the Australian model of bulk buying on both sides of the Tasman, centralising distribution systems, lowering margins for suppliers while increasing its own margins, and introducing its own brands with the result of lowering prices for customers. But the plan met with a backlash from suppliers and Progressive's workers, and more customers have moved over to Pak'n Save.
Progressive's profit growth has slumped to under 4 percent in the last two quarters at a time when total grocery and supermarket sales have increased by more than 5 percent in the period, according to the Department of Statistics. Progressive owns 148 Countdown, Foodtown and Woolworths supermarkets. Woolworths will post its half-year results on February 27.
