Foodstuffs South Island, part of the group of two cooperatives that constitute New Zealand's biggest supermarket operator, aims to drive down its costs amid a slowing economy, using data of its shoppers’ needs gathered through loyalty programmes to earn more business by tailoring its offers.
“In the past year we have seen some big changes in New Zealand’s economy and even more changes are to follow in 2018,” Foodstuffs South Island chair Russell McKenzie told shareholders, pointing to a decline in business confidence with a change in government.
“Drought during the middle part of the year has also affected agriculture and has had an impact on our economy and supply of fresh product,” McKenzie noted. “This may become an issue in the future, as climate change may potentially disrupt production patterns and increase production costs.”
The Christchurch-based cooperative reported annual net profit of $8.8 million, compared to $8.9 million a year earlier, even as revenue advanced 3.3 percent to $3.07 billion and gross margin was maintained at 11.6 percent. Distributions to members rose 2.4 percent to $280 million, of which $268 million was through the cooperative's rebate scheme.
Decreasing its own costs is a key goal for Foodstuffs South Island, which saw its operating expenses rise by $13 million to $234.7 million in the year ended Feb. 28, 2018. A key driver behind rising expenses were the increased volumes moving through the cooperative’s own distribution facilities, adding additional volume-related costs, as well as higher interest and depreciation expenses as significant store refurbishment investments and key IT-capability projects were completed.
“We focus on actively driving cost down by improved decision making which is underpinned by excellent information systems,” according to McKenzie.
Loyalty programmes are an important tool for the supermarket retailer, and embership for the PAK’nSAVE Sticky Club, launched in September last year, “is growing exponentially,” McKenzie said, adding that the “New World Clubcard continues to be a winner and its success is unparalleled.”
“We are starting to use the data to gain actionable insights, eg what our customers want, when they want it, where they want it and how do they want it,” according to McKenzie. “The relevancy system used by Sticky Club will be extended to provide New World Clubcard customers with personalised offers based on their personal preferences and relevant promotions.”