News

2 Sep 2016

Masters of nothing. How to lose a lazy billion

Biz Talk, By Julius Grafton

About fifteen years ago McDonalds brought a US concept restaurant to Sydney called Boston Market. They built nine stand-alone restaurants and quickly discovered Aussies like their roast dinners different to Americans. What? No roast LAMB? What kind of place is this? They also had a revelation that costs here are somewhat higher than in the USA. Like we are supposed to pay real wages to our crew, right?

Some of the Boston Market buildings still stand, a memory of a time when you could slip in and have a full meal and a beer on the fly. I liked it, but I’m a roast dinner kind’a guy. The Golden Arches chalked up a big loss on that one. But at least they stopped at nine stores.

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In the late 1990’s Burger King decided to open their own stores in Australia in direct violation of their deal with Hungry Jacks. For historical reasons the Burger King trademark was not previously available thus the Australian operation (licensed from Burger King) was branded Hungry Jacks. Owned by Jack Cowin, the Australian network grew to 350 stores until the Americans, led by some new hotshot from some Ivy League uni, breached the franchise deal and opened their own set of places. It was messy – you got the same Whoppa wherever, with a different wrapper.

Hungry Jack took them to court for being dickheads and won a reported $75 million in damages and an order for the Americans to bugger off. The Burger King brand went away, Hungry Jack bought the best sites cheap, and Jack Cowin today rules the griddle – and the deep fryer too. He’s one of our hero’s here at CX HQ! He part owns one of our favorite pubs in Balmain.

These screw-ups are nothing compared to the disaster that is Masters Home Improvements. It was Woolworths answer to arch enemy Wesfarmers (who own Coles) and who dominate the hardware and home improvement market with the ginormous Bunnings chain.

Soon the Masters stock and the 61 enormous new blue warehouse stores and 20 empty sites will be flogged off at a massive loss by Woolworths. 8,000 workers will be boned. A ‘fire sale’ of the stock is underway right now, which has underwhelmed consumers.

Bunnings are laughing like maniacs, and are set to buy 19 of the best sites. They also have a flock of household name brands grovelling to come back into the fold, including Hills Limited which licensed its bread and butter domestic lines to Woolworths. Bunnings cleverly divided and conquered the market by forcing brands to choose where they would be ranged. (CX legal note: we do not allege they have broken any competition laws).

The story of Masters will be essential reading at every management school for the next fifty years, and the idiots responsible at the top of Woolworths at the time will never again trouser multi-million bonuses. They will or have retired hurt and bewildered to their beach houses, and continue to blame their former partner, Lowes.

Lowes are a massive American hardware chain who had the poor judgment to partner with Woolworths and who, Woolworths say, led them to destruction.

Lowes is run by a conservative bunch of good ole’ boys from the South who, it is joked, would go to bed wearing their suits. They have not taken well to the treatment that the Woolworths board has dished up, nor the insensitive statements.

For example, Woolworths told investors that they had ‘ranging issues’ because the Lowes guru sent to drive the chain had messed up his seasons and forgot that Christmas in Australia is inconveniently hot. As if anyone would be that dumb!

Then when he was recalled to Austin, the next CEO of Masters was a Woollies appointment.  She was a little too honest at an investor briefing when she admitted that Woolworths had been making it all up as they went along, and didn’t have control over the details. Like for example, what would the store manager do with the KEYS at the end of the day? Really. She said it.

Experts were calling Woolworths out from the minute the first huge blue Masters store opened in Baybrook Victoria – probably the worst place for a new concept, with two Bunnings stores nearby.

Rather than monitor the first store and make changes, Woolworths went nuts and shot for scale by opening a slew. In doing so, they ‘baked in’ the problems with the first store.

The big guy at Woolworths had so many hormones over his Big Blue Boxes he threw caution to the wind – along with his career and the investors money. The cool aid was on tap and the whole board were guzzling it. Losing $200 million a year quickly led to the tap being turned off but not before they had sunk well over one billion dollars.

At presstime Lowes were in the Federal Court attempting to insert their liquidator into the mess so they could get one over the Woolworths goons. That move threatens the allegedly orderly shutdown that Woolies have started, which can only increase the cost of this most masculine disaster.

 

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