Just Around the Corner

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-By Anne Lindert-Wentzell

Everyone loves a bargain, especially those who are conscious of their spending. Yet we still want good value for our hard earned dollar. In fact, good value for money is the primary factor for grocery store choice according to the global market research firm Nielsen Company. Today’s shopper wants the best of both worlds – to be the bargain hunter whilst expecting a wide selection of quality brands and service.

After more than 50 years in Australia, 4 Square still caters to consumer needs through the Friendly Grocer brand. It’s earned its place as a household name. 4 Square is a grocery chain that originated in New Zealand in the 1920s, emerging from the Foodstuffs grocery buying co-operative. Foodstuffs founder J. Heaton Baker was concerned with grocery chains that were making life difficult for the independent chains in Auckland. By 1924 the 4 Square name was a familiar one in New Zealand. It was introduced to Australia in 1956 and then in 1958, 4 Square Stores (QLD) Ltd was established.

Chris White, 4 Square Stores (QLD) Ltd’s CEO, has over 30 years experience with independent supermarkets. He acknowledges that it was time for a name change. “We wanted to try something different. The 4 Square name was getting a little stale.” In 2006, 4 Square’s board signed an agreement with Metcash Limited, Australia’s leading wholesale distribution and marketing company. “We had a deal with Metcash that if we changed our name from 4 Square to Friendly Grocer, we would get management rights in NSW to look after those stores,” says Chris. As there were no Friendly Grocer stores in QLD, this move would give the Friendly Grocer group a national brand.

With 300 stores in Queensland, NSW and ACT, Friendly Grocer hopes to maintain its momentum by opening 50 new stores in 2012. All stores operate under strategic planning and must meet 4 Square’s selection criteria. “We have a vast range of stores, large and small. Our criteria relates to turnover, size, location and standard of store. We’re in the process of revamping our standards,” says Chris. If a store does not meet selection criteria in terms of size, for example, Chris notes that there is an option. “We would offer them an associate membership of our group. They wouldn’t be branded Friendly Grocer but we would still look after them.”

As an independent grocer under the Friendly Grocer brand, stores have their administration, promotion and buying managed by the organisation. The main focus, “Is to get as many stores as possible with the cheapest price,” says Chris, a capability attributed to the organisation’s group buying power. There are many independent grocery stores in Australia, most buying their stock through Metcash which serves them well. Continues Chris, “With the job Metcash is doing for us with the buying, I think we’re doing well. We can keep our prices down.”

At least 50 per cent of Friendly Grocer stores are in rural areas, yet they still aim to maintain convenience and accessibility. The company’s slogan, “Just Around The Corner,” means simply that. The stores, aside from convenient, are clean and offer variety. “We offer a lot of imports from such places as New Zealand, America and England. We need to make sure we have a choice for our customers,” says Chris. As for customer service and a pleasant shopping experience he goes on to say that the stores, “are easier to get in and out of compared to larger stores. You don’t have to line up and you’re always dealing with the owner.”

It’s a fact that food price inflation in Australia has been greater than overall inflation in the past ten years. The cost of feeding an average Australian family has increased dramatically – at least 40 percent since 2000. A number of factors have contributed to the overall increase, such as rising energy and fuel costs; the price to deliver produce and products has steadily increased. “A combination of things has put prices up,” says Chris. “Supermarkets haven’t increased prices to make more money. It’s been a necessity to survive – especially for the independent stores.”

Of course Mother Nature has certainly been a resounding influence contributing to rising produce prices in Australia. Chris relates how natural disasters have dictated the cost of certain produce, like bananas, the nation’s number one fruit seller. “Queensland is the biggest supplier of bananas. Last year, most of Queensland was under water due to a cyclone [Yasi].” With 75 per cent of the nation’s banana crop lost, the fruit was in short supply, consequently raising the price to $15 a kilogram. Needless to say, they were bought only by those who could afford them. “There was such a shortage,” adds Chris, noting that, “We don’t import bananas. It’s government policy. We want to protect the banana growers in Australia.” Presently, with Yasi now a memory and the drought over, banana prices have stabilised to former levels. Growing conditions are now deemed favourable, with a steady supply for the moment. Some farms have yet to recover. It’s estimated that the floods in Queensland and neighbouring NSW caused $50 million in damage.

Coping with a ten year drought was similarly detrimental to fruit growers. The reality remains that Australia is the driest continent aside from Antarctica; drought threat is a part of life. Since the first recorded drought in 1791, there has not been a decade when some area of the country was not in drought, costing the economy billions of dollars.

Competition can be fierce for independent stores, especially when the two major grocery chains, Coles and Woolworths, account for 80 per cent of groceries sold in Australia. Some would consider competition between larger grocery chains advantageous in keeping costs down across the board. However, a price war between Coles and Woolworths could have an adverse affect on sustainability, particularly for farmers. Some would argue that farmers should not be expected to work and show little profit. Many farmers simply succumb to the fact that it is not a viable source of income. Smaller retailers could also be adversely impacted. As to price wars and competition from big name chains Chris says, “We don’t consider Coles and Woolies as our competition. The major stores like Super IGA’s do that… We’re obviously smaller stores. We just look for a niche in the market. We cater for the community and local people.”

Some would like to see a restructuring of Australia’s competition laws; it’s an issue that MPs are currently looking into. Chris agrees that more government focus should be on small business if only because, “The way things are going, the independent won’t be around in the future. Some stores struggle to make ends meet.”

Many consumers, in an effort to reduce their grocery bill during the financial crisis, have become generic converts. But being cheaper does not necessarily mean a compromise in quality. In fact, the quality of private labels is constantly improving. At least 50 per cent of Australians believe private label products are viable alternatives to brand names. These private labels comprise approximately 15 per cent of total grocery spend in Australia. Friendly Grocer carries a number of generic brands in response to this money saving trend, and “The quality is very good,” says Chris.

The company prides itself on having good promotions and specials which can be found on the company website and in its catalogues. As far as social media is concerned, Chris admits that the company is, “looking at Facebook at the moment. Being a small company we have to make sure we have the manpower to actually keep it up to date.”

As an independent, non-profit organisation, Friendly Grocer members have access to collective buying and marketing power. Chris and the members of the Board of Directors are active operating retailers, so they can appreciate the diverse elements that need to be incorporated to ensure long term survival – namely a clear vision and a stable environment for all members. It requires a constant improvement in service, not only for customers, but for members. All profits return to franchisees, not shareholders. The company believes in a sense of community. “We’re involved with a lot of community events in each area,” says Chris, for which many rely on sponsorship. Friendly Grocer is proud to sponsor local sporting groups and community events. “We try to look after our local communities.”

Chris concludes that it’s imperative that independent stores like Friendly Grocer are supported.
“It’s a tough business, but it’s good to be an independent… We’re holding our own.” Perhaps Nixon Waterman, the prominent 1800s American newspaper writer and poet expressed it best – “Life would be an easy matter, if we didn’t have to eat.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

September 22, 2018, 6:08 PM AEST