Coles secretly buys Woolworths store as battle of giants heats up

Posted by AFN Staff Writers on 25th March 2013

Supermarket giant Coles has surprised its rival Woolworths by secretly buying one of Woolworths’ most profitable Sydney stores.

Woolworths confirmed that Coles recently bought its store in Neutral Bay, which is on Sydney’s lower North Shore. A Woolworths spokesperson said the purchase by Coles had not been anticipated.

According to internal reports obtained by Fairfax Media journalists, Coles paid $40 million for the centre that the Woolworths store is part of, concealing its involvement in the purchase by using a $10 company based in the tax haven of the British Virgin Islands.

The lease on the Neutral Bay store reportedly expires in 2014 but can be renewed for a further 10 years. Under the terms of the lease as the landlord, Coles would have a right to inspect the store’s sales records for the site, since part of the rental is based on a percentage of sales.

It is rumoured that the Coles surprise move included an element of revenge for the earlier Woolworth move that pushed Coles out of its Katoomba site in the Blue Mountains in late 2012. Woolworths bought the site in 2000. Coles had operated on that site for 30 years.

Meanwhile, both Coles and Woolworths are facing  barrage of angry criticism from suppliers. Yesterday, one supermarket supplier told the Australian Broadcasting Corporation’s (ABC) ‘Background Briefing’ investigative radio program that the supermarkets have a “culture of constantly attempting to revise their terms of trade to the detriment of suppliers”. Another anonymous supplier claimed that he had been blackmailed by a supermarket buyer.

“The supermarkets expect a certain quantity of sales from your products and if that is not met they request a lump sum of money to be passed on to pay for that shortfall. Or another example is being asked to pay to be on the shelf in the first place, and that would mean a lump sum that has to be paid,” the anonymous supplier told the ABC.

Yet Coles Managing Director Ian McLeod told the ABC that the supermarket thoroughly investigates every allegation of illegal market behaviour.

Australian Food News recently reported that the current talks of a ‘supermarket code of conduct’, which have been presented as a solution to the troubled relationship between the supermarkets and their suppliers, could simply be rehashing the existing voluntary Produce and Grocery Industry Code of Conduct and the grocery industry Ombudsman.