Friday, 27 November 2009

James Strong Misleads Shareholders

At yesterday's Woolworths Annual General Meeting, I put it to the shareholders that their Chairman has made misleading statements. As a consequence, I urged other shareholders to vote against his re-election. I summarised the mis-statements and referred to the fact that I had provided the Woolworths Company Secretary written details upon which I based my opinion. These written details are now disclosed in full. The quotes are Mr Strong's own written statements:
"Our participation in the hotel sector began in 2000 and originated from the different State and Territory liquor licensing laws which preclude us from opening retail liquor stores in Queensland without a hotel licence."
Firstly, it is incorrect to state that laws in other states or territories have an affect upon retail liquor licensing in Queensland. It would only be Queensland laws that regulate Queensland liquor licensing.

Secondly, there is nothing that precludes Woolworths from opening stores. Queensland laws do not prevent Woolworths from branding stores and earning a profit from the sale of liquor in Queensland. This practice is actively conducted by such groups marketing themselves as Thirsty Camel, Cellarbrations and Duncans by arrangement with individual proprietors. The applicability of this practice was confirmed by a report in the 20 November 2009 issue of the Australian Financial Review with respect to a proposed joint venture between Coles and Tabcorp.
"...we work hard to ensure that our venues operate to the highest standards, including the strict prohibition of minors from gambling areas. Compliance with these obligations is a matter of ongoing vigilance for our management team."
What I have seen, supports a contrary finding. There appears to be no "strict prohibition" nor an implemented policy of vigilance. On three occasions on two successive days (17 and 18 November 2009) I saw children in the gambling areas of Woolworths' associated venues. Not only were children present, but, in two instances, they were interacting with gambling products on offer.
  • Unaccompanied children in The Rex's TAB in Port Melbourne. The Rex is a pokie club associated with Woolworths. I questioned one of the boys outside. He said that the staff permits him to watch the races.
  • Child looking for 'father' thru the glass wall of the pokie room at the Highpoint Maribyrnong. She was standing in the area set up for Texas Hold'Em Poker.
  • Child collecting KENO gambling cards in front of the pokie area at the Pascoe Vale Taverner.

There was no venue staff interventions with any of these incidents. Pictures of all these incidents were attached. They the subject of this blog and also this blog.

It would be prudent to require, given Woolworths management's inability to implement the statements made in the 249P Response, that children be simply banned from Woolworths' pokie pubs and clubs. This lack of either careful management or constant monitoring not only contradicts statements made but also has implications for consumer trust in all Woolworths' operations including supermarkets.

I have urged Woolworths to adopt the National Principles yet the company has refused. This refusal diminishes the validity of the assertion of "highest standards". The Productivity Commission referred to the National Principles as "the lowest common denominator of measures" (8.12). In the light of this refusal, to properly inform Woolworths shareholders, it would be correct to state that "...we have refused to ensure that our venues operate even to the lowest common denominator of measures".
"I can assure shareholders that our gambling and liquor operations, as with all our operations, are carefully managed and constantly monitored."

At the last AGM I raised the matter of Woolworths associated venue, the QBH in Melbourne, in the context of the safety of their venues and the quality of Woolworths' pub management. This venue had been the scene of two unlawful killings within the space of 15 months. I quoted the Victorian Assistant Commissioner of Police stating "QBH clearly have to have a look at their own behaviour." Mr Luscombe assured shareholders that this and other matter were to be taken under advisement. Despite Mr Luscombe's words the reality is that little if anything was done. My warnings went unheeded.

The reported facts is that according to the Victorian Director of Liquor Licensing, patrons were able to buy the "equivalent of a bottle of Johnnie Walker, a bottle of spirits". "It hardly meets the responsible serving of alcohol principles to supply a bottle of spirits at the strength of volume of alcohol in an unregulated way".


On the other hand, if we are to accept the Chairman's words at face value, these operations are "carefully managed and constantly monitored". If this practice is condoned by the Woolworths Board then it is a practice that is both imprudent and reckless. The existence of security cameras does not excuse irresponsible service of alcohol in this self described "beacon of violence" using Mr Mathieson's own words. Pursuit of sales should not take priority over patron safety. The result was a brawl in which 23 people, including 10 security staff, were injured. Undeterred, only a few weeks, Woolworths associated management promoted a kick boxing event at the same venue called "Mother's Day Mayhem". The reported implication was that management were marketing this event utilising the venue's reputation for violence to those who would be attracted to such reputation.


It should be noted that in failing to adopt the National Principles, in Victoria, Woolworths' has failed to adopt the Principle that "alcohol should not be served to patrons while they are at a gaming machine" even though this is the practice in other states. This failure is irresponsible, imprudent and reckless.
"We understand that for a small minority of people, liquor and gambling can have the potential to cause harm. However for the vast majority, these are enjoyed as recreational activities."

Such statements have been characterised by the Productivity Commission as "misleading". A similar statement made by the Australian Hotel Association was of specific concern to the Productivity Commission. The following are quoted factual findings from the Productivity Commission's 2009 report that urge consideration of the relevant population (their italics page 7.15):

“Two thirds of Australian adults do not play gaming machines at all in any given year, and most of those that do, do not play regularly. … the average estimated prevalence rate of problem gambling among regular gaming machine players is close to 20 per cent.”

“About 5 per cent of adults play weekly or more often on gaming machines:
  • Around 15 per cent of this group are ‘problem gamblers’ and their share of total spending is estimated to range around 40 per cent.
  • A further 15 per cent of pokie players face ‘moderate risks’.”
“adult population prevalence rates can be misleading about the extent of problem gambling — the key concern is the proportion of regular gamblers who have problems.”

The Productivity Commission's own manner of consideration of pokie gambling prevalence can be applied to Woolworths' own pokie gambling business. There is significant research in Victoria where over half of Woolworths' associated pokie operations are located. In September 2009 the Victorian government released an Epidemiological Study where 15,000 people were surveyed:


The finding was that 0.7% of Victorians are problem gamblers and 2.36% of Victorians are moderate risk gamblers. These numbers relate to the whole Victorian population.

The Productivity Commission made the following statement with respect to the whole Australian population:
"These current prevalence estimates translate to around 0.75 per cent and 1.7 per cent of the adult population for problem and moderate risk gambling respectively. That looks small. However, to put these figures in context, around 0.15 per cent of the population are admitted to hospital each year for traffic accidents. Small prevalence rates do not mean small problems. The evidence suggests continuing large costs to society associated with problem gambling"

Based upon statistics available for the Victorian Gambling Commission's web site, the Woolworths/Mathieson Victorian pokie operations accounted for about 25% of the total number of Victorian pokies but about 33% of money lost on Victorian pokies.

Based on money lost (arguably the only measure) somewhere around 30,000 Victorians are either problem or moderate risk gamblers as a result of pokie gambling in Woolworths/Mathieson associated pokie pubs or clubs.

I attached a pdf which is reproduced below. Click on the image to read. It sets out the Victorian government 2009 findings that 27.06% of problem gamblers have considered suicide in the last year. 91.04% of Victorian problem gamblers participate in pokies. 77.24 of the moderate risk gamblers participate in pokies.Chairman Strong used the words 'warped or not a fair presentation' to describe the effort to minimise the harm of Woolworths' pokie business. Click here to read about the Lateline Business Report and watch the video of Ali Moore interviewing Mr Strong.

What is truly warped is to engage in a business that sends people to crime or causes so many to contemplate suicide.

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