Progressive plans five new supermarkets a year

By SIMON HENDERY retail writer

Some smaller names will disappear but the number of supermarkets will continue to grow as a strengthened Progressive Enterprises squares off against its larger rival.

The number of supermarket groups fighting for the grocery shopper's dollar will be cut from three to two by the $690 million sale of Woolworths to Progressive, owned by Australian retail giant Foodland Associated.

Announcing the long-awaited deal, Foodland's Perth-based group managing director, Trevor Coates, said the company intended to expand store numbers through an investment programme which would involve opening at least five new supermarkets a year.

He said the company expected to spend more than $45 million a year on the Woolworths chain and its support facilities. Foodland has spent $200 million upgrading Progressive's stores, which are made up of the Foodtown, Countdown and 3 Guys chains.

The 85-store Woolworths group (comprising Woolworths, Big Fresh and Price Chopper supermarkets) had sales of $1.6 billion last year.

Coates said: "We expect that synergy benefits of the combined [Progressive/Woolworths] group will emerge over a three-year period.

"These will be driven by a combination of brand rationalisation, reduced marketing costs and supply chain economies."

Some brand rationalisation has already been occurring within the industry.

Progressive has been phasing out its 3 Guys chain in favour of the more popular Foodtown and Countdown stores.

At the same time, several Big Fresh and Price Chopper stores have been converted to the Woolworths brand.

Rival Foodstuffs (Wellington) has been phasing out its Write Price brand.

Coates said the increased purchasing power of the expanded Progressive group which has a 40 per cent share of the supermarket market would make it a more effective competitor to Foodstuffs, resulting in increased competition and better choice and value for the consumer.

Foodstuffs has a combined market share of 55 per cent.

The remaining 5 per cent of the market is held by the SuperValue and Fresh Choice chains, which are mainly South Island-based independent stores supplied by Progressive.

Foodland bought Woolworths from Hong Kong-based food and chemist group Dairy Farm International after a 10-month legal tussle with Foodstuffs, which fought the merger between its two smaller rivals all the way to the Privy Council.

Tony Carter, managing director of Foodstuffs (Auckland) - the largest of the three Foodstuffs co-operatives - said it would be "business as usual" for the company, which was happy with its mix of full-service New World stores and its value-focused Pak'N Save format.

Carter said Progressive's five-stores-a-year expansion plans were "not that significant in the scheme of things" because Foodstuffs (Auckland) alone planned to open four new stores over the next 12 months.