BUSI­NESS

The Australian - - FRONT PAGE - ELI GREENBLAT RE­TAIL

Damien Gance, co-founder and group di­rec­tor of Chemist Ware­house, the na­tion’s largest phar­macy chain, has joined the cho­rus of Aus­tralian chief ex­ec­u­tives and cor­po­rate lead­ers tes­ti­fy­ing to the in­ten­si­fy­ing pres­sure on busi­ness and con­sumers of mount­ing en­ergy bills, with the na­tional re­tailer work­ing harder than ever to limit the im­pact on shelf prices.

Mr Gance told The Aus­tralian the is­sue of en­ergy prices had “bub­bled its way” through his man­age­ment ranks and he was aware of the threat it posed to the chain’s com­pet­i­tive of­fer as con­sumers be­came more cau­tious about dis­cre­tionary pur­chases.

“Chemist Ware­house is a busi- ness grounded on pass­ing the best prices to con­sumers so any in­put price that ma­te­ri­ally changes af­fects our ca­pac­ity to con­tinue to charge com­pet­i­tive pric­ing as we do,” Mr Gance said.

“We do what we can to off­set any elec­tric­ity price rises. There are nu­mer­ous things you can do with our own busi­ness and we have done that and con­tinue to en­gage to look at ways we can do that bet­ter.

“And in our busi­ness elec­tric­ity is a ma­te­rial ex­pense but not one yet that has ne­ces­si­tated sig­nif­i­cant price changes. We con­tinue to be able to man­age our way through it … we have had (large elec­tric­ity price in­creases in our own busi­ness). It has bub­bled its way up the man­age­ment lev­els within our busi­ness and has come to my at­ten­tion.’’

Mr Gance is the lat­est se­nior ex­ec­u­tive to warn of swelling en- ergy bills af­fect­ing busi­ness oper­a­tions and con­sumer prices, and over the past few months a grow­ing army of cor­po­rate lead­ers has high­lighted en­ergy se­cu­rity as a key threat and chal­lenge to prof­itabil­ity, the econ­omy, liv­ing stan­dards, em­ploy­ment and house­hold bud­gets.

Re­cently the boss of BlueS­cope

Steel, whose plant at Port Kem­bla, in NSW’s Illawarra re­gion, is the largest steel pro­duc­tion fa­cil­ity in Aus­tralia, warned the na­tion was fac­ing an “en­ergy catas­tro­phe”.

The bosses of lead­ing con­struc­tion ma­te­ri­als com­pa­nies Brick­works and CSR have pin­pointed spik­ing en­ergy costs as a spec­tre that could see man­u­fac­tur­ing shift off­shore, while this month Rio Tinto CEO Jean-Se­bastien Jacques warned Aus­tralia was an en­ergy-rich coun­try that had seen its global rep­u­ta­tion di­min­ished from hav­ing some of the most com­pet­i­tively priced en­ergy in the de­vel­oped world “to hav­ing nearly the most ex­pen­sive’’.

At The Aus­tralian’s Global Food Fo­rum this year, Wool­worths boss Brad Ban­ducci said that ul­ti­mately the con­ta­gion of steeper en­ergy bills for cor­po­rates such as the su­per­mar­ket gi­ant would spread to con­sumers in the form of higher prices for goods and ser­vices.

“We man­age what we can man­age with en­ergy ef­fi­ciency,” Mr Ban­ducci noted on Wool­worths’ at­tempts to swal­low higher en­ergy costs, “but given the cost in­creases that are com­ing through right now, we are try­ing to out­run a bear, but I am not sure we can”.

Trou­bling for re­tail­ers such as Chemist Ware­house and its more than 350-strong store network is that in­creas­ing util­ity bills come at a time when the re­tail sec­tor is highly com­pet­i­tive and con­sumers are weary of spend­ing money, and of­ten re­quire dis­counts and pro­mo­tions to act. “We are see­ing it takes a lot more to get con­sumers to spend on dis­cre­tionary items … in mo­ti­vat­ing peo­ple to buy more dis­cre­tionary prod­ucts and we are find­ing that we need a bet­ter promotional of­fer, a bet­ter call to ac­tion, a bet­ter re­tail ex­e­cu­tion,’’ Mr Gance said. “And it is some­thing we have spent the last 17 years per­fect­ing and we are mak­ing sure we have the right promotional of­fer to mo­ti­vate peo­ple to get off the couch.”

Mr Gance said the re­tail en­vi­ron­ment now was as tough as the chain had ex­pe­ri­enced dur­ing the GFC and when it was first es­tab­lished. “We have had mul­ti­ple chal­leng­ing pe­ri­ods, trad­ing through the GFC, the ini­tial build­ing of the busi­ness was dif­fi­cult and it is cer­tainly an area we are find­ing that you need to con­tinue to in­no­vate, you need to con­tinue to do more in or­der to get the same growth that was com­ing some­what eas­ier his­tor­i­cally,” Mr Gance said.

The co-founder said Chemist Ware­house was not for sale to pri­vate eq­uity and there were no plans at this stage to float it in an ini­tial pub­lic of­fer­ing.

Damien Gance

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