Woolworths is reportedly seeking to acquire a major stake in unlisted pet food and accessory business PETstock as the former seeks exposure to record high levels of pet ownership encouraged by covid lockdowns. PETstock profit jumped $20m to $54m pretax profit in FY22, recently hitting $700m of sales.

https://www.marketindex.com.au/news/rising-pet-ownership-encouraged-by-covid-lockdowns-sees-woolies-eyeing-more

Woolworths must be generating a lot of data pointing to 'one-off'' consumer items and are looking for a platform to make this happen. But a bit pricey?

Woolworths has now withdrawn it's bid for API (pharmaceutical businesses including Priceline).

Thank goodness, the bidding war was getting a bit silly.

Woolworths Group (ASX: WOW) has today thrown its hat in the ring to acquire Australian Pharmaceutical Industries (ASX: API) for $872 million, representing a 13 per cent premium to the offer on the table from retail rival Wesfarmers (ASX: WES).

Perth-based Wesfarmers' proposal already represented a 35.4 per cent premium to API's closing share price before a bidding war began that also included Sigma Healthcare (ASX: SIG).

The API board had previously unanimously recommended shareholders vote in favour of that arrangement in the absence of a superior proposal.

Cashed up ... recently sold off their head office/data centre site at Bellavista Singaporean property group $463m.

Woolworths are on the drive to gain customers. They have recently started an unlimited home delivery subscription service for $15/mth (similar to Amazon prime) which helps to lock customers in to the one merchant - "I will check first whether it is available at Woolworths". Also reduced their minimum spend to $50 from $100.

Not only that, they have REALLY tightened their delivery timeframes with availabilities of "same day service within the hour" for $15.

In comparison, Coles doesn't have a subscription service (yet) and you need to spend $250 to get free delivery.

Disc: I don't own WOW at the current moment but am looking.

The opportunity to get cashback on something as mundane as grocery purchases is very conducive to people scanning their loyalty cards/apps.  This in turn gives Woolworths the data they need to upsell.  And they are using it!

Examples:

* They know which items I buy in bulk and market discounts to me accordingly.

* They know who buys petfood and what type of pet they have - possible to sell pet insurance or petfood subscriptions (much like toiletpaper subscriptions).  They already onsell health and car and home insurance.  Simiarly, they know who have kids (all those snack foods and packet drinks) and could potentially upsell an ipad/laptop computer/study guide at the start of each year.

* They know who buys baking tins.  Those are the people most likely buy kitchen gadgets.  At upwards of $400 a food processor, or $300 for a vacuum cleaner, Woolworths have the ability to earn a clip off each appliance sold.  That's A LOT of commission for doing nothing more than opening their platform to list items.

* They are already in the meal prep space , partnering with Dinnerly - with more reach and less premium pricing than Marley Spoon/Hello Fresh etc

* They already sell mobile plans & mobile phones.  Not to mention selling gift cards to JB HIfi, Fashion brands, Restaurants etc.  A small clip off each of these would add up.

I got excited when Wesfarmers opened up their website to third party sellers many months ago.  But I feel Woolworths is in a much much better position than Wesfarmers.  Woolworths has the data to 'know' their customers.  I do not believe Wesfarmers has my profile even though I shop at Bunnings and Officeworks regularly. 

Announced $2bn off-market buyback (10-14% off market price)

Ethnic food retail soaring (eg MiddleEast, Indian subcontinent, Asian anything) - they are currently run off their feet, delivering 10hrs a day, 7 days a week, own staff plus hiring sub contractors, and there is a 1 to 2week lead time?!?!

Large traditional retailers have a lot to gain from entering this space, especially in the more ethnic suburbs and with the use of dark warehouse distribution models (as there are so many product lines).

Who will lead - Woolworths or Coles?

Woolworths Moat is getting wider....

Their Everyday Rewards program is very powerful at customer retention.  Every purchase is tracked, down to the date and qty.  To their absolute credit, they are mining this data to no end on the Woolies side.  Would love to see them take this data to promote the Big W business - granted much harder to get sticky customers.

Like Wesfarmers, WOW is company seeing the opportunity in data.

Company with strong physical presence with even more powerful distribution channels.   During the pandemic they are leaping forward with fine-tuning their delivery channels.  They even opened some "dark stores" during lockdown, simply to pick and pack because they couldn't cope with demand.

They are already entering the fastfood space with their pizza, deli and sushi counters.  I can't see anything stopping them from selling delivered office/childcare catering, wholesale distribution to retail/fast food, even prescription medicines with some tweaks.

There's no shortage of business for Woolworths during lockdown.  Don't know why the price has fallen.

Opportunity to buy methinks.