14th October 2021 By Bridget O'Connell | email@example.com | @foodtickernz
The partners behind new Auckland food retailer Four Candles Food Market have ambitions to grow but are not expecting to be the ‘third player’ disrupting New Zealand’s supermarket duopoly.
“The barriers are great – we have just opened up one store,” managing director Chris Fisher told the Ticker.
“Foodstuffs and Countdown must have around 600 stores between them – I could grow at 20% for the next 20 years and not even make a dent in them. So we are not going to ever be that third player.
“To make an entrance in a big way into a market takes time and the likelihood would be that that would come from abroad, from an international retailer who has funds to see out that journey.”
Fisher does not put much stock on that investment coming locally, even amid moves from maverick mobile phone-duopoly buster Tex Edwards.
A Commerce Commission submission from Edwards’ Northelia vehicle said it could mobilise a capital base in excess of $1bn to create a new supermarket chain if the watchdog pushed ahead with market reforms and forced Foodstuffs to sell 200 stores.
“I understand the logic and the intent but I question how it would actually happen,” Fisher said.
For now, Fisher and his two business partners Murray Snowden and Ross Barraclough were focused on optimising operations at its debut Constellation Road location on Auckland’s North Shore.
Between them, the trio had close to a century of retail and FMCG experience garnered both at home and overseas.
Fisher has retail chains Asda, Lidl and Walmart on his CV but was best known in New Zealand grocery for his three years at Countdown as head of data and analytics and then merchandising general manager, which gave him full merchandise responsibility for the group’s $6.1bn in annual sales.
He met Snowden at Asda in the UK and the duo were reunited at Mitre 10 here in New Zealand, which brought in the third partner, the owner of Mitre 10 Mega Takanini and property investor Barraclough.
“The first plan is to make sure we can run one store well,” Fisher said.
“You have got to establish a culture, and you have got to establish your processes, and you have got to see what the customers think of what you’re doing and that takes a good year at least, probably two.”
The trio has financed the business themselves including securing a medium-term lease for the first store, which is pitched at the premium end of the grocery market “but more competitively, and with great service”.
This would likely see it carve off some customers from Farro, some from New World and some from convenience due to its first location, Fisher said.
Was being competitive on price realistic for a new entrant with little buying power when it came to suppliers?
“Suppliers have been happy to work with us, to have another option. But do I feel that they are going to from day one give us the best prices in the marketplace when they have other people purchasing hundreds times more volume than I’ll ever purchase? Well no, I think that would be naive.
“However, over time I think they will recognise we are a direct, fact-based business to deal with, that can talk to their brand more than most – they are not going to be swamped by a thousand other brands. [That means] there will be opportunities for driving more volume potentially in one location than they might do in three or four of the standard locations. We’ll see how that evolves.”
Being able to compete on price was about more than just the cost of goods purchased, Fisher added.
“The other side is how much it costs you to sell those products, so if we can be ok in the cost of purchase and much better in the cost to sell them, that gives us an opportunity to be more competitive.”
That means a laser-like focus on the sales line.
“Good retailers – they understand their cost line as well as they understand their sales line, and it is about managing all aspects of that,” Fisher said.
“All those different dynamics are sometimes over-simplified. The gross margin is not your net margin – far from it – it’s a constant battle every day, every week, to figure out what is your baseline and how you adjust it.”
The leadership team also planned to be transparent with staff around the financial performance of the business as part of the management guru Adam Grant-influenced company culture that Fisher favoured.
“We will share 10% of profits back with the team – that is a starting position. We believe if we are really going to have something that is differentiated the team need to be involved in its success – the why, not just the what.
“The long-term ambition is to grow and to maintain the culture as we grow. But we will only do that when we are ready. Plenty of businesses grow exponentially through external finance to find out they might not have something that is sustainable – that’s really not what we are trying to achieve.”
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