PBL (in the guise of Australian Consolidated Press) has gone direct to petrol
and convenience stores, cutting out newsagents and negotiating a barrier for
other publishers’ product in P&C outlets…
Graeme Samuel and his team at the ACCC can expect to be busy with the
complaints coming their way from magazine publishers, magazine
distributors and newsagents as they fight the latest sweet and secret
deal between the Packer ACP magazine empire and the Coles, Woolies, BP
and Mobil dominated petrol and convenience outlets.
For decades petrol and convenience stores have been supplied with
magazines by newsagents with the P&C stores classed as sub agents. For
that the P&C outlets received anything between 12.5% and 19% of cover
price. They wanted more.
Two months ago ACP advised newsagents that they would no longer allow
supply of their product to around 800 P&C outlets under the long
standing sub agent arrangement – thereby removing a reported $12 million
in net revenue from the newsagent distribution network. ACP said at the
time that their decision was based on pressure from the P&C guys for
greater margin – Coles, Woolies and the others had reportedly
threatened to pull the magazine category out of their outlets.
Newsagents, while unhappy at having $12 million ripped out of their
businesses, maintained their commitment to the P&C channel and vowed to
continue to supply the considerable range of non-ACP product they had
supplied for decades.
Three weeks ago, more of the ACP/P&C deal was revealed. It seems that
Mr Packer’s management team have negotiated new product displays
(planograms) allocating specific space in each outlet by magazine
title. Imagine the shock when other magazine publishers and newsagents
found out that the new planograms allocated a reported 10% or less of
available space for non-ACP titles.
The new planograms are expected to reach beyond the initial 800 P&C
outlets taken over by ACP two months ago.
The impact of the planograms, if successfully implemented, will be a
cut by around 80% of real estate space in retail outlets allocated for
non-ACP product in the P&C channel; cutting newsagent net revenue
by an estimated $30 million; reducing consumer choice in terms of
magazine titles; introducing a considerable barrier to small publishers
of existing titles and publishers of potential new titles.
Some directly affected claim the planograms and the deal between ACP and
Coles, Woolies, BP etc. breaches the barrier to entry and
unconscionable conduct provisions of the Trade Practices Act and want
urgent ACCC action. At least one newsagent body is expected to have a
complaint to the ACCC in the next few days.
While one cannot deny that ACP publishes more Top 10 magazines in
Australia than any other publisher, this move will make it impossible
for competitors to gain market share given the dramatic surge in the
importance of P&C outlets in the sale of impulse lines such as magazines.
The ACP move to direct supply and to control what product can be sold
through the P&C outlets will impact the economic viability of around 500
of Australia’s 4,600 newsagents. Some in that channel expect business
closures and rationalisation in a matter of months as a result – unless
Graeme Samuel and his team act to stop the march of ACP dominance.
Every newsagent will be affected through a drop in goodwill. In one
case recently a newsagent has seen $175,000 slashed from his $800,000
goodwill and expects a much tougher time trying to sell what was until
recently a growth business. Once the banks are aware of the ACP move,
availability of finance from banks is expected to be impacted as well.
Newspaper publishers are privately concerned about the ACP move and the
impact it will have on the viability of newsagents and their servicing
of sub agents who are vital to newspaper sales. Publishers rely on
newsagents to supply their product to P&C stores and expect to lose some
sub agent coverage as newsagents pull out of servicing some locations
due to the ACP move.
While ACP denies that they are involved in trying to reduce access for
non-ACP product, newsagents are being told by P&C location managers to
stop supplying because they no longer have space for non-ACP product.
Several newsagents have also reported that ACP merchandising staff, when
visiting P&C outlets, have removed some non-ACP product from display.
This move by ACP further challenges the future of the newsagent network
as other retailers eat away at what was once their exclusive domain.
Some in the industry expect the number of newsagent outlets to fall by
50% over the next 5 years and that this fall will happen to the
financial detriment of the families owning the newsagencies. This is a
story you won’t read in the newspapers or see on the television as the
controllers of those media outlets are playing a key role in the
collapse of Australia’s iconic newsagencies.
Footnote: ACP is compensating newsagents with six months of the net
revenue they would have made from the business taken from them. The
problem is that this requires the newsagent to bill the head office of
the P&C stores 30 days in arrears with a usually payment time of 6 to 8
weeks leaving the newsagent cash flow negative for up to 60 days.