Woolies hits back over 'dirty tricks' campaign

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This was published 11 years ago

Woolies hits back over 'dirty tricks' campaign

By Eli Greenblat

A "dirty tricks" campaign has broken out between Woolworths and its arch rival in the hardware sector, Bunnings, over the style and format of Woolworths' new hardware chain, Masters.

Woolworths issued a statement today saying that a critical report was being circulated to brokers and the media by an organisation called Madison Cross, a management consultancy associated with Bunnings. Bunnings is owned by Wesfarmers, which also owns Coles, Target and Kmart.

Masters hardware stores criticised as 'female friendly' in a report prepared for competitor, Bunnings.

Masters hardware stores criticised as 'female friendly' in a report prepared for competitor, Bunnings.Credit: Rebecca Hallas

The Madison Cross report is believed to criticise Masters over its profitability, costs and the 'female friendly' format which it claims is turning away traditional tradesmen. Woolworths said it will refer the report to the competition regulator.

In a statement sent to BusinessDay, Bunnings denied any wrongdoing on its part although said it had paid Madison Cross in the past for work.

"Madison Cross work widely in the retail sector, including in the past for Bunnings. Bunnings categorically rejects any suggestion of impropriety. ‘’

"[It] is further evidence of a dirty tricks campaign being waged against the Masters Home Improvement business," the Woolworths statement said.

"The unreasonable nature of the assumptions makes the Madison Cross report misleading and Woolworths will refer it to the ACCC.

"Since opening its first store in September last year, Masters is providing much needed competition in the destination home improvement sector against Bunnings who hold a market dominant position."

"Masters has created healthy competition, is winning market share and enjoying strong customer support. It appears this report is designed to generate negative, ill informed commentary about Masters," Woolworths said today.

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"This report is incorrect in its assumptions and its projections, and can only be viewed as an attempt to damage the credibility of the Masters' business strategy."

High stakes

Since announcing its intention to break into the $40 billion Australian hardware market two years ago, Woolworths and its US-based partner, Lowe's, have spent nearly half a billion dollars buying up land and buildings for their Masters hardware joint venture.

The duo currently has 22 Masters stores and plan to roll out 150 stores over the next few years.

It is believed Madison Cross has provided advice to hardware rival Bunnings in the past. The Maddison Cross report estimates that Woolworths' joint venture with Lowe's lost $104 million in 2012 and forecasts the losses to rise annually before peaking at $237 million in 2016.

Bitter rivalry

Woolworths and Bunnings, which is owned by conglomerate Wesfarmers, have been fighting it out for the hearts and minds of customers in the hardware sector for more than two years with claims of dirty tricks made by both sides.

Last year the chief executive of the Masters, Don Stallings, accused some suppliers of refusing to sell him stock because they feared repercussions from the market leader Bunnings.

"There were some vendors that sell to some of our competitors, not naming any names, that did not sell to us," he said in August last year.

It was reported late last year that the Australian Competition and Consumer Commission was investigating claims that Bunnings had strong-armed suppliers over dealings with Masters. It is believed that any review by the ACCC failed to find any evidence of wrongdoing by any party.

Soon after United States paint giant Valspar, which in 2010 bought leading Australian paint brand Wattyl for $142 million, decided to supply Masters its Wattyl brand it was delisted from Bunnings stores.

Bunnings consistently denied there was any link between the two events.

In 2010 Bunnings accused the supermarket giant Woolworths of thwarting planning and zoning laws to avoid outside scrutiny as it pushed ahead with its national rollout of its Masters big-box hardware stores.

In a blistering assault on Woolworths and its plans to initially set up its first 11 hardware outlets in Victoria, Bunnings claimed the retailer and its US joint venture partner Lowes were getting a "free kick" and a "valuable gift" from the rezoning of industrial land to be used by the duo.

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