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South Australian supermarket
group Foodland is preparing
to boost its promotional
efforts to further build its
market share and meet the stiff
competition from Woolworths and a
The local supermarket scene also
faces the prospect of new competi-
tion, as groups such as Foodworks
move into the state and Germany s
Aldi looks at potential sites.
As one measure of the competi-
tion, Coles reportedly spent more
than $900,000 in the first four
months of this year on advertising
and promotion in SA.
At a special presentation to
its manufacturers and suppliers
last week, Foodland chairman
Roger Drake said market growth
was slowing at a time of "highly
competitive" pricing in the fresh
This was putting pressure on
margins, adding to uncertainty for
the industry following the end of
the economic stimulus measures
for consumers, he said.
But Mr Drake, who owns about
30 Foodland stores, maintained
a positive outlook, with the
Foodland group of 109 independent,
in South Australia -- and another
eight in the Northern Territory and
Broken Hill -- preparing to increase
its promotional efforts in 2010.
After it gained six new stores in
the past year, Foodland hopes to
add another four or five in 2010 and
carry out further store refurbish-
ments following four store upgrades
Foodland s managing director,
Russell Markham, said trading
conditions had been "terrific" in
the first half of 2009.
"There has been a falling off
since then, but there have been very
positive signs in the past month
that people are spending again.
It s not an easy climate but we are
optimistic about the year ahead."
The Foodland group was founded
in 1962, bringing together 39
stores which had operated under
such banners as Four Square and
It operates as a unit trust with 41
owner-investors led by Mr Drake,
the Romeo Group and the Chapleys
Group. Its membership also includes
Eudunda Farmers, which operates
under the Foodland program in
several SA country stores.
The group is supplied through the
Metcash-IGA distribution network,
and that group also provides help in
identifying new sites and financing
But, Mr Markham is quick to
say, "Foodland is our own brand,
controlled by us, and we set the
Under its slogan of "The Mighty
South Aussies , the group has
grown steadily, and helped the
independents -- of which it is easily
the largest group -- to capture about
28 per cent of the SA market.
"The latest figures show the
independents market share is still
growing, and we re only a couple of
points behind Coles now."
One of the major points of dif-
ference is strong support for local
producers and manufacturers.
More than 50 per cent of its
Foodland branded products are
sourced in South Australia, and all
the home brand products of more
than 200 items are 100 per cent
Among the benefits of local
sourcing is lower transport costs,
and Foodland s policy has helped
some local suppliers whose
products have been dropped by the
national chains in favour of their
Home brands are growing across
the supermarket industry and
Mr Markham said the growth rate
in the SA group was well above total
Combating promotion by Coles
and Woolworths is a major issue.
"We ll never be able to match
their budgets," Mr Markham
concedes. The SA group uses TV,
radio and print media to advertise
but its cornerstone tool is its
weekly catalogue, distributed to
households across the state, which
contains the weekly specials. The
group also places much emphasis
on its local community involvement
and its stores are strong supporters
of sporting and other community
groups. The message is effective,
although it requires "constant
tweaking", he says. And, in such a
highly competitive environment, it
needs to be effective.
"Supermarkets are a high-
turnover, low-margin business," Mr
Markham said. "Net margins are so
tight, only a couple of percentage
So, if turnover falls, it can spell
big trouble for an operator.
Because of its unit trust struc-
ture, Foodland s turnover figures
are not published. And its wholesale
spend, like its promotional budget,
is "closely guarded , to avoid giving
its competitors guidance on its
Meanwhile, it is closely assess-
ing online trading, following the
Coles launch of its online service
in July, and would like to add liquor
trading. "Liquor is not off the
agenda, and we think we could help
the local wine industry to increase
sales, but SA licensing laws make
it very difficult to break in, unless
you own a pub or buy an existing
Taking on the
Photo Kate Elmes
SOUTH AUSTRALIAN BUSI
Foodland is taking the
fight up to supermarket
giants Woolworths and
Coles. Chris Milne reports.
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