Aussie supermarket Woolworths has revealed its plans to expand its gambling business as the profit margins are much higher than on groceries.
A report by The Daily Telegraph reveals that in the past year, the company has made 12% profit for every dollar spent on gambling, alcohol and food in its hotels – that’s three times more than groceries, with its supermarket business earning around 4% profit. It’s no wonder then that Woolworths plans to grow further in this realm next year, especially considering its $184 million earnings from its hotel business in the financial year of 2011.
So why is this so? Apparently, it’s all to do with profit margins. Hotels are far more profitable in terms of each dollar spent by customers because the overheads on running poker machines are very low, and alcohol is just generally a high profit margin product.
Woolies has also announced that it will go about strengthening its grip on gambling and alcohol by purchasing seven Sydney hotels from prominent publican families in a deal worth more than $60 million. Five of the hotels will be from the Waugh family and two from the de Angelis family. That’s as long as approval from the competition regulator, the Australian Competition and Consumer Commission (ACCC) is passed.
It seems the Woolworths are on a property–snatching deal-striking roll. It was merely weeks ago that the company made a $500 million deal with NSW pub king Arthur Laundy to buy between 25 and 32 of his hotels. What’s next for the Aussie supermarket giant?