Monday, 18 May 2009

Vale Macro

Macro Wholefoods Market, The Glen, Glen Waverly, Victoria

Macro Wholefoods set a whole new standard in endeavouring to bring to the competitive marketplace good quality organic food which was as up front as the major retailers and in first class positions and premises.  While Sydney operations commenced over two decades ago, Melbourne only got its first Macro - in Bridge Street, Richmond - in 2005.  My nearest one is at The Glen in Glen Waverley, pictured above.

Macro has given every appearance of taking its marketing of organic food seriously.....

Macro Wholefoods Market is dedicated to providing people with,

and enlightening people to, a healthier, cleaner way of eating and living. 

We actively nurture all of our communities

and strive to sustain our environment at all times. 

Whilst doing this we will always be focused on our customers.

Now Macro has been swallowed up 

by Australia's largest food distributor and retailer, Woolworths.

A leviathan is Woolies.

It appears that Woolworths has plans for expanding one of its branded retails outlet which, at this time, does not exist in Melbourne - Thomas Dux.   Macro's store positions are attractive to Woolworths.

As well, the sale includes the acquisition of a development site and the Macro organic private label brand.  Existing Macro staff of those stores will be offered roles within Thomas Dux or other Woolworths brands. However, please note, that while Macro was a specialist organic retailer -Thomas Dux is not.  This is clear from a visit to their website - but I wanted to be sure so I rang Thomas Dux and was put through to Mark the grocery buyer.  I asked him what percentage of their stock would be organic.  He told me 25%.

And while I take Macro's assurances on quality at face value because I have no knowledge of complaints about food quality - the same cannot be said for Woolworths, particularly in the light of events.  If you wish to enter into discussions with Woolworths on their proposed expansion plans for Thomas Dux, the organic food component, the quality and the cost please see here for contact details.

PRICE INSENSITIVITY

Now, let's turn to the subject of organic food and its availability.  I have a problem with organic food which, in the main, hinges on pricing.  However, the Thomas Dux affair brings out into the open issues of price insensitivity and middle-class values and incomes on a wider scale.

There has been a lot of discussion about price insensitivity and price distortion in relation to Fair Trade marketing.  What price insensitivity, as a generality, refers to is that there are consumers out there who are insensitive to price.  This means that they may base their choice of particular products on factors other than price or it can mean that, where price might be a factor, it will not be the primary factor. 

For instance, purchasers of Fair Trade products may be prepared - even though they may be price sensitive on other products - to pay a premium above that of comparable products because of the social justice component in the manufacture of the product.  

However, there are consumers out there who are insensitive to price in regard to some goods because of their high incomes and  their instinct for status products.  For high income earners, what's a few more bucks on a bottle of coffee or a package of coffee beans?  And there's the warm inner glow of do-gooding.  Then there is the product that gives the consumer a certain panache, conveys a certain status, let's those around know just who's who in the consumption zoo.  What price on that when a statement is to be made?

This is the sort of stuff that Thomas Dux is tapping into. It could also be said that Macro had tapped this market too. How can I suggest that? By store positioning.

In Victoria, Macro stores are situated at Armadale, Blackrock, Glen Waverley, Richmond. In New South Wales, Bondi Junction and Crow's Nest. Please note, no stores in the western suburbs of either city. In Melbourne, none in the Northern Suburbs – trendy and organic desiring though they may be. However, note that in Sydney, where the first Macro store opened, the stores are limited to two inner city sites. Perhaps real estate prices might be a factor as well? In Sydney, Thomas Dux stores are situated in Lane Cove, Paddington, and Surry Hills. Please note, these are all well-heeled areas which could be seen to harbour a high proportion of price-insensitive consumers.

WHAT'S THE POINT

The point is that so many people tell us and tell themselves how good organic food is for us. And I don't deny this. But why is it the province of the well-to-do?

Basically, the old supply and demand thing.

Most fresh food is grown with the aid of chemicals. However, the numbers of organic growers is increasing. It is not easy nor is it cheap to establish an organic farm and to get the produce of that farm to market. It is costly and time consuming for growers to make the switch from chemical farming to organic growing. There are requirements and standards to be met. They need to be certified. For further information on certification in Australia, please see here. This can affect quantities and cost of products. Then there is the demand thing. Price sensitive consumers – like families having to stretch a budget – will steer of "organic" because of the price. In short, price sensitivity limits demand for what might otherwise be a desirable product.

Which raises the question. If organic food is food of first quality and, possibly, superior quality – why can it not be accessible to all?

Perhaps we are in the beginning of a transition that may take many years to achieve full penetration. Because organic food is not only sold through trendy or specialist stores attracting status-conscious price-insensitive consumers. Farmers markets abound. Plain old fashioned community markets with people selling fruit and vege from their gardens abound. The grow your own mentality is storming ahead – even for people who only have room for crates on a balcony.

But let's come back to Woolworths – and to Coles. We think of these two firms as a duopoly in food retailing. Certainly they are. However, I would encourage consumers to consider them as the two largest food distribution networks in Australia. This, I believe, gives us a very different view of how they operate and how they might operate.

Woolworths is a significant influence on the Australian economy as well as a significant reflector of the Australian economy. Its marketing and pricing influence our choices. Our choices reflect our economic behaviour not only to Woolworths but to governments and their statisticians. So influential is Woolworths that a former CEO, Roger Corbett, sits on the Board of the Reserve Bank of Australia. Please note the listing of his current business positions: Chairman – ALH Group Limited; Deputy Chairman – PrimeAg Australia Limited ; Director – Fairfax Holdings Limited ;Director – Wal-Mart Stores Inc.

Roger Corbett AM

Picture from here

So let's examine this one person's influence. He is a talented, popular, well thought of Australian. He may no longer be CEO of Woolworths – but he has hardly left that network behind. Woolworths, through the ALH Group, are one of the most significant poker machine operators in Australia. Coles has poker machines too but trails some way behind. See what Senator Nick Xenophon, the independent senator for South Australia, has to say about that here. At PrimeAg, Roger Corbett is regarded as a "highly respected authority on farm-gate to point-of-sale supply chain management". Please note this description. It relates to the price, quality, and decision-making in relation to our food purchases. Corbett's involvement with Fairfax means he can even influence (though this would be strongly denied) the media. Please note, that in all this is the company one keeps as well – so please note who sits beside Corbett on these Boards. Significant people. Decision-makers. Influence formers at the centre of Australian life: finance, economics, government, food & beverages, agriculture, distribution, gambling, addictive substances and practices. About the only things I can see missing from this resume that impact our daily lives are: housing, energy, sport and the military. You will note, dear Reader, my wry assumption that somewhere in all this is politics.

Picture from here

And I have left to last the Wal-Mart connection. This scares me more than all the other centralised influences. Woolworths imports Wal-Mart practices into its own stores and practices. I have a friend who is a Manager in a Woolworths store. I once told him that he would know when the Wal-Mart influence had gone way overboard when Woolworths people sang the company song each morning. My friend visibly shivered. He made no comment, but he knew – as did I – the long reach of WalMart. And of course, there is or has been the race and gender discrimination and poor employee relations. WalMart, it must be remembered is the world's largest public corporation by revenue. And our Roger sits on that Board. I might write further on that another day with Michelle Obama's indirect links to WalMart included.

To conclude, with so much influence abounding through Woolworths, with such an income as they reap why can they not assist Australians – whatever their socio economic status or wherever they live – to access organic food that is priced to compete favourably with chemically produced food.

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