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Inside story: How Woolworths and Coles joined forces to avert COVID-19 disaster

The picturesque gardens of a decommissioned psychiatric facility turned out to be the perfect place to plan for the end of the world.

It was here in the first week of March that Coles chief executive Steven Cain and his executive team gathered for a long-planned executive retreat in the remote Victorian town of Beechworth. They were there to prepare for the year ahead and celebrate steering the $21 billion supermarket giant through the worst bushfire season in Australian history. Little did they know at the time, but Coles, its rival Woolworths and the rest of the Australian supermarket sector would soon be consumed by an even bigger crisis.

Toilet paper became a precious commodity as panic buying swept supermarkets in March.

Toilet paper became a precious commodity as panic buying swept supermarkets in March.Credit:AAP

COVID-19 was not yet a global pandemic, and still largely centred in China. There were only a handful of active cases in Australia, but fears about the coronavirus were building and holes were appearing on supermarket shelves as shoppers started to hoard toilet paper and hand sanitiser.

By the end of the Coles retreat, panic buying had become frenzied. “About halfway through this conference, I realised I was spending more time outside on the phone than inside focusing on the strategy session,” Cain says. “By the end of that week, we were pretty much full-on.”

It’s not very often the Treasurer phones you in the first instance, and it’s certainly not very often he asks you about toilet paper

Woolworths CEO Brad Banducci

In a world turned on its head by the deadly COVID-19 pandemic, the response from Australia’s supermarkets was nothing short of extraordinary. It included daily phone calls between the country’s top grocery executives; and wartime-esque disaster planning involving senior cabinet ministers that nearly saw millions of Australians put onto home-delivered rations.

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Rivalries and differences were set aside in an unprecedented period of co-operation, with the executives devoted only to keeping customers fed. Disasters were avoided, shortages of key goods were minimised and the country’s most vulnerable were protected.

By any measure, the supermarkets pulled off what seemed at times like an impossible task.

The sector mobilises

As Coles’ executive retreat got underway and as panic buying was intensifying, Cain’s counterpart at Woolworths, Brad Banducci, received an unexpected call from Treasurer Josh Frydenberg.

“He phoned me and asked, ‘what’s going on with toilet paper sales?'” Banducci says. “It’s not very often the Treasurer phones you in the first instance, and it’s certainly not very often he asks you about toilet paper.”

Hundreds of kilometres away in the quiet South Australian town of Millicent, Doug Cunningham’s phone was ringing for a different reason. As the local managing director of multinational consumer goods company Kimberly-Clark, Cunningham was responsible for manufacturing 20 per cent of the country’s precious loo rolls and he’d never been more popular.

Calls were flowing in from retailers thick and fast, asking if they could ramp production up further and if he might be able to send stock through any quicker. On a dime, the experienced executive made a number of changes: cutting non-essential product lines, changing pack sizes and ramping up production to its maximum.

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Kimberly-Clark managing director Doug Cunningham.

Kimberly-Clark managing director Doug Cunningham.Credit:Louise Kennerley

“We did that within hours, which is actually unprecedented in our business,” Cunningham says. “Normally it would take a week or so, but we just did it straight away.”

The companies were moving fast but flying blind, with no chapters in their crisis handbooks on how to deal with a global pandemic. In that first week, both Cain and Banducci received a direct call from Prime Minister Scott Morrison, inquiring into how the supermarkets were coping and asking if there was anything the government could do in support.

In a follow-up call with Frydenberg, it was Cain who planted the seeds for what would become the Supermarket Taskforce, asking the Treasurer if it would be possible to establish a working body to focus on cross-industry collaboration.

Brad Banducci, chief executive of Woolworths.

Brad Banducci, chief executive of Woolworths.Credit:Joel Carrett

“He said ‘no problem, we’ll sort that out’, and true to his word he set one up the next day,” Cain says.

A series of unprecedented events

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The taskforce, headed up by Home Affairs Minister Peter Dutton, was then granted authorisation by the competition watchdog to co-ordinate and collaborate without falling foul of competition law.

Before the virus hit, the Australian boss of discount supermarket chain Aldi, Tom Daunt, had never met nor spoken to any of his close competitors, despite serving six years in the role. But the typically taciturn executive was profuse in his praise for the working group.

While the taskforce was strictly prohibited from discussing issues such as product pricing, the group shared their plans and best practices across issues like in-store cleaning and social distancing.

I never thought I’d ever be on a call to anyone in government around how they could help us reduce our sales. And I hope I’m never in that position again.

Coles chief executive Steven Cain

This prevented situations where customers might prioritise one store over another due to one chain having buying limits when another didn’t.

“There were some really practical reasons why we needed to find industry-wide agreement on those sorts of things … and I think the federal government did very well to recognise that,” Daunt says.

At one point, Woolworths directed its own suppliers to independent wholesaler Metcash to help supply remote Indigenous communities in the Northern Territory. Woolworths had no stores in the areas, but Banducci didn’t want to let his supply lines go to waste.

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“It was never about our sales, it was about Australia,” he says.

Coles chief executive Steven Cain.

Coles chief executive Steven Cain.Credit:Luis Enrique Ascui

For three weeks during the peak of the panic buying, Cain and Banducci convened in daily phone calls at 5pm each night, accompanied by their respective general counsels to ensure no competition laws were broken. Similar, less regular calls also occurred with Daunt and Scott Marshall, Metcash’s chief executive of supermarkets.

In the third week of March, the four took out full-page advertisements in major newspapers in an attempt to quell the unrest amongst shoppers, calling for calm and assuring customers supply would return soon. There was a brief moment of confusion, Banducci recalls, when deciding the order in which the four companies’ logos would be displayed on the ad.

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“Of course, there was only one answer: alphabetically,” he laughs. “But that move set a really important tonality that we were all in it together. There wasn’t any point-scoring.”

As March became April, the supermarkets’ top teams were pulling 18-hour days, seven days a week. Panic buying had begun to slightly subside, but the virus had not, with Australia’s daily new COVID-19 cases peaking at 460 on the 28th. It seemed to be getting out of control.

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That Saturday, Dutton posed a challenge to the supermarkets: how could they provide food to two million vulnerable Australians if they were unable to leave the house? It was the government’s worst-case scenario, and an unfathomable task for the companies’ ill-suited online delivery systems.

“It was the combination of a large vulnerable population, a flu season about to hit and many in isolation due to risk of infection,” Cain says. “You could easily conjure up a scenario where millions were at home and needed servicing, and the capacity in the industry at the time was significantly less than that.”

Banducci immediately rang Australia Post chief executive Christine Holgate to determine what could be done. On Sunday, together with logistics business DHL, the group organised an $80 box of essentials which the postal service would courier to houses in need. By Monday, the service was live.

“Turned out we actually only delivered about 80,000 of these boxes, but we were ready to do whatever it took,” Banducci says.

Christine Holgate and Brad Banducci at the launch of the $80 basics box.

Christine Holgate and Brad Banducci at the launch of the $80 basics box.Credit:Peter Rae

A socially-distanced Easter came and went and, in its wake, a recovery began. Pantries across the country were stocked and buying limits were eased off, though the country was still devouring some 16 million toilet rolls a week.

For the executives, the relief couldn’t come soon enough. Supply chains were utterly spent, gnawed to the bone by the solid month of frantic buying. Even suppliers’ buffer stocks, reserved for emergency cases, had been rolled onto the shop floor.

“There’s enough length and stock in most supply chains to enable some fluctuation, but the demand surge we saw was so steep and so dramatic, it stripped supply chains around the country,” Daunt says.

“I don’t just mean supermarket shelves, I mean the stock in the back of the store, in the distribution centre, and on the production line. I don’t think consumers really understood the true extent of it.”

At the end of April, Coles and Woolworths revealed their third-quarter sales figures, a set of record numbers which showed sales in the month of March alone rose a massive 30 per cent.

But for both Cain and Banducci, the unrivalled sales numbers were no measure of success. Community trust and customer satisfaction were far greater KPIs for the two executives as they steered their companies through a moment in history.

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“We talk a lot about purpose, and we use all these soft words, but over the COVID period Woolworths actually lived its purpose,” Banducci says. “My metric of success during the course of the crisis was not sales or profit, it was actually doing the right thing, emerging with our reputation enhanced, not tarnished.”

For Cain, navigating coronavirus was a challenging and rewarding experience with “outstanding” performances across Coles and the broader industry. But as sales return to normal and the pressure subsides, he admits there were some parts he’d prefer not to repeat.

“I never thought I’d ever be on a call to anyone in government around how they could help us reduce our sales,” he laughs. “And I hope I’m never in that position again.”

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