1 00:00:05,559 --> 00:00:08,440 Speaker 1: Welcome to Fear and Greed, summer investing series brought to 2 00:00:08,440 --> 00:00:11,840 Speaker 1: you by Vanta specialists in Compliance lead Growth. I'm Sean Aylmer. 3 00:00:12,000 --> 00:00:15,160 Speaker 1: Twenty twenty four is a challenging year for the supermarket giants, 4 00:00:15,160 --> 00:00:19,200 Speaker 1: headlined by the consumer watchdogs allegations of sham specials and 5 00:00:19,239 --> 00:00:22,800 Speaker 1: price gouging. So what next in the battle between Coles 6 00:00:22,880 --> 00:00:25,480 Speaker 1: and Woolworths and what's it mean for investors? As always, 7 00:00:25,480 --> 00:00:28,600 Speaker 1: this is general information only and you should seek independent 8 00:00:28,680 --> 00:00:32,000 Speaker 1: advice before making investment decisions. Ben Gilbert is the head 9 00:00:32,040 --> 00:00:35,240 Speaker 1: of Australian research at Jarden. Ben, welcome back to Fear 10 00:00:35,240 --> 00:00:35,640 Speaker 1: and Greed. 11 00:00:36,080 --> 00:00:37,479 Speaker 2: Thanks Sean. Thanks having me. 12 00:00:37,720 --> 00:00:40,240 Speaker 1: Have a shock at twenty twenty four for the supermarket's Ben. 13 00:00:41,159 --> 00:00:42,960 Speaker 2: Yes, well, I think just about everything that could go 14 00:00:43,000 --> 00:00:45,279 Speaker 2: wrong has gone wrong. We've had multiple inquiries, we've had 15 00:00:45,280 --> 00:00:49,559 Speaker 2: senate inquiries, we've had some strikes. More recently you had 16 00:00:49,600 --> 00:00:52,279 Speaker 2: a New Zealand now launching a case against will Worse 17 00:00:52,360 --> 00:00:54,320 Speaker 2: and the pricing site. So it hasn't been a great 18 00:00:54,320 --> 00:00:56,280 Speaker 2: time to be in supermarkets. 19 00:00:56,840 --> 00:00:59,560 Speaker 1: How big a risk is this for the supermarkets going 20 00:00:59,600 --> 00:01:01,320 Speaker 1: forward as an investment option? 21 00:01:02,200 --> 00:01:04,080 Speaker 2: Yeah? Look, I think what we're going to find is 22 00:01:04,160 --> 00:01:05,880 Speaker 2: that the noise and the rhetoric is going to settle 23 00:01:05,920 --> 00:01:08,280 Speaker 2: down over the next year with respect to supermarkets, and 24 00:01:08,840 --> 00:01:12,399 Speaker 2: hopefully consumer trust in the two big majors can't get 25 00:01:12,440 --> 00:01:14,920 Speaker 2: any lower. And so ultimately I think it's going to 26 00:01:14,920 --> 00:01:16,520 Speaker 2: be up to Coals and all Ways over this next 27 00:01:16,560 --> 00:01:18,760 Speaker 2: year to really get in the best position to engage 28 00:01:18,800 --> 00:01:21,520 Speaker 2: with shoppers and get them back into store and build confidence. 29 00:01:22,040 --> 00:01:23,920 Speaker 2: The other thing I'd envisaged as well is as we 30 00:01:24,040 --> 00:01:27,240 Speaker 2: move into a more normal macro backdrop, if there is 31 00:01:27,280 --> 00:01:30,640 Speaker 2: such a thing, as we start to see inflation stabilized 32 00:01:30,640 --> 00:01:32,280 Speaker 2: through this year and we get a bit more confidence, 33 00:01:32,319 --> 00:01:34,280 Speaker 2: so our grocery prices aren't going to be jumping around 34 00:01:34,280 --> 00:01:37,320 Speaker 2: all over the place. Consumers will start thinking more broadly 35 00:01:37,360 --> 00:01:39,399 Speaker 2: around what they want when they go in supermarket, things 36 00:01:39,440 --> 00:01:41,640 Speaker 2: like service, things like range, all these sorts of things 37 00:01:41,640 --> 00:01:44,160 Speaker 2: that we've added a lot more. Probably pre COVID will 38 00:01:44,200 --> 00:01:47,919 Speaker 2: probably come more backfront to mind. Which interiory should benefit 39 00:01:47,960 --> 00:01:50,240 Speaker 2: Coals and Wolley's being the two big full service supermarkets 40 00:01:50,280 --> 00:01:51,200 Speaker 2: in Australia. 41 00:01:51,480 --> 00:01:53,400 Speaker 1: Those two, they haven't had a good twelve months in 42 00:01:53,480 --> 00:01:57,080 Speaker 1: terms of share price appreciation or depreciation. As the case 43 00:01:57,120 --> 00:01:59,640 Speaker 1: may be, what about the next twelve months. Do you 44 00:01:59,640 --> 00:02:02,760 Speaker 1: think the fact that interest rates falling, maybe the cost 45 00:02:02,800 --> 00:02:04,560 Speaker 1: of living crisis comes off a bit the things that 46 00:02:04,600 --> 00:02:07,680 Speaker 1: you're talking about could benefit the super markets in share 47 00:02:07,720 --> 00:02:08,359 Speaker 1: price terms. 48 00:02:09,240 --> 00:02:12,600 Speaker 2: I think so, And generally speaking, we're optimistic the growth 49 00:02:12,600 --> 00:02:15,680 Speaker 2: free market this year should be growing mid single digits. 50 00:02:16,160 --> 00:02:18,600 Speaker 2: In that backdrop, the supermarket should be able to deliver 51 00:02:18,639 --> 00:02:21,600 Speaker 2: mid to high single digit earnings growth. You throw in 52 00:02:21,600 --> 00:02:23,280 Speaker 2: there a bunch of other things that they're doing around 53 00:02:23,280 --> 00:02:27,440 Speaker 2: building out their digital media capabilities, they're driving loyalty and 54 00:02:27,480 --> 00:02:29,600 Speaker 2: adjacencies and all these other fun things. Is there's a 55 00:02:29,600 --> 00:02:32,880 Speaker 2: pretty material profit opportunity. And I think the best case 56 00:02:32,919 --> 00:02:35,000 Speaker 2: in point is Walmart when we look at them off 57 00:02:35,000 --> 00:02:37,359 Speaker 2: sure at the moment. What we saw through last year 58 00:02:37,480 --> 00:02:40,040 Speaker 2: is that they'd put out some results where they started 59 00:02:40,040 --> 00:02:43,079 Speaker 2: some material contributions from some of these other revenue streams, 60 00:02:43,080 --> 00:02:45,840 Speaker 2: being sort of digital subscription, these sorts of things. The 61 00:02:45,880 --> 00:02:48,840 Speaker 2: stock rerated over twenty percent, and what it allows them 62 00:02:48,840 --> 00:02:51,120 Speaker 2: to do is put more money back into price to 63 00:02:51,240 --> 00:02:54,320 Speaker 2: ultimately benefit the consumers. So it's a big opportunity. Now, 64 00:02:54,320 --> 00:02:57,760 Speaker 2: the caveat to all of this is is competition and 65 00:02:57,800 --> 00:03:00,200 Speaker 2: what we're continuing to see out there is whether it's 66 00:03:00,200 --> 00:03:03,680 Speaker 2: Bunnings pushing more into pedal cleaning, whether it's Amazon growing 67 00:03:04,000 --> 00:03:07,280 Speaker 2: significantly and grow through, whether it's Kem Warehouse, whether it's 68 00:03:07,320 --> 00:03:12,079 Speaker 2: Reject Shop. There's definitely a much more blurred lines, if 69 00:03:12,120 --> 00:03:14,400 Speaker 2: we can put it that way, between what we sort 70 00:03:14,440 --> 00:03:16,639 Speaker 2: of see as a traditional supermarket and we're prepared to 71 00:03:16,639 --> 00:03:17,880 Speaker 2: buy groceries each week. 72 00:03:18,919 --> 00:03:21,960 Speaker 1: Final question, where does it sit in a portfolio? Are 73 00:03:21,960 --> 00:03:25,359 Speaker 1: they still defensive investments the big supermarkets. 74 00:03:26,639 --> 00:03:29,639 Speaker 2: It's an interesting question and it's something we've been pondering 75 00:03:29,680 --> 00:03:32,000 Speaker 2: a lot, and through the back end of last year 76 00:03:32,040 --> 00:03:34,320 Speaker 2: we actually put out a big report having a look 77 00:03:34,320 --> 00:03:38,680 Speaker 2: at category killers versus defensives. And what I think we're 78 00:03:38,680 --> 00:03:41,800 Speaker 2: finding now is looking forward, is that the whole defensive 79 00:03:41,800 --> 00:03:44,640 Speaker 2: should trade at premium multiples of the safest place is 80 00:03:44,640 --> 00:03:46,480 Speaker 2: starting to be thrown out the window a little bit. 81 00:03:46,960 --> 00:03:49,120 Speaker 2: And really I think what we're looking for is companies 82 00:03:49,120 --> 00:03:52,960 Speaker 2: that consistently can grow share, consistently can expand margin, and 83 00:03:53,040 --> 00:03:57,640 Speaker 2: consistently surprised positive around earning the expectations. And the supermarkets 84 00:03:57,680 --> 00:04:00,160 Speaker 2: obviously haven't done that over the last twelve months. Now, 85 00:04:00,160 --> 00:04:01,960 Speaker 2: if they can move back into that place over the 86 00:04:01,960 --> 00:04:04,560 Speaker 2: next twelve then, look, they'll be defensive, they'll be category 87 00:04:04,640 --> 00:04:07,640 Speaker 2: killers and hopefully the share prices can outperform and time 88 00:04:07,680 --> 00:04:08,000 Speaker 2: will tell. 89 00:04:08,040 --> 00:04:10,760 Speaker 1: I suppose Ben, thanks for talking to Fear and Greed 90 00:04:10,760 --> 00:04:12,120 Speaker 1: Summer investing series. 91 00:04:12,480 --> 00:04:13,320 Speaker 2: Thank you very much. 92 00:04:13,560 --> 00:04:16,320 Speaker 1: That has been Gilbert, head of Australian research at Jarden. 93 00:04:16,400 --> 00:04:19,120 Speaker 1: Remember to get your own independent advice before making any 94 00:04:19,120 --> 00:04:22,520 Speaker 1: investment decisions. This is Fear and Greed's Summer Investing series, 95 00:04:22,600 --> 00:04:26,280 Speaker 1: brought to you by Vanta. Vanta automates compliance for frameworks 96 00:04:26,360 --> 00:04:30,600 Speaker 1: like ISO twenty seven one, SoC two, CPS two three 97 00:04:30,680 --> 00:04:34,120 Speaker 1: four and espedgul eight, saving time and money while building trust. 98 00:04:34,360 --> 00:04:36,880 Speaker 1: Join over eight thousand companies like at Lassian, Dovetail and 99 00:04:36,920 --> 00:04:40,400 Speaker 1: fire Ant managing real time risk. Get one thousand dollars 100 00:04:40,400 --> 00:04:43,880 Speaker 1: off Advanta dot com slash Fear and Greed. I'm Sean Elmer. 101 00:04:44,440 --> 00:04:49,839 Speaker 1: Enjoy your day.