WOW ASX: Woolworths boss Brad Banducci values most being in ...

After reading 3500 emails from customers and visiting stores over that long weekend in January, Banducci also confesses the group misread its customers’ priorities.

There are other issues that have accumulated over the last few years. The growing staff underpayment issue, first uncovered in 2019 by the company, and now one of the largest in retailing history having blown out to almost $600 million. Woolworths, which owns the Big W chain, is separately facing legal action from the Fair Work Ombudsman in a test case which is likely to determine how workers should have been paid, which could inflate that figure even more. There were also two workplace deaths last year, prompting questions about the company’s safety standards as it spends billions on new distribution centres. The group is reviewing and testing its processes, Banducci says.

The decision to push ahead with a supersized Dan Murphy’s liquor store near dry Indigenous communities in Darwin was also a mistake. Those plans were later abandoned in 2021.

But does Banducci think supermarkets are the latest political punching bag, fairly or unfairly?

“There’s been a lot of inflation, and a lot of stress for customers, and everything else is a manifestation of that. If we address that we essentially address all the questions that are asked of us … our customers are the high watermark,” Banducci says.

In particular, it is climate change to blame, he adds.

“I don’t think we can avoid that we are dealing with a more volatile climate,” he says, something which impacts the supply of fruit and vegetables, and in turn, prices.

Some of Banducci’s most prominent corporate backers, however, have no doubt the long-serving executive will overcome these hurdles as Woolworths nears its centenary, a moment that would cap more than eight years in the top job for the businessman.

Peter Tonagh, the former Foxtel chief executive, first met Banducci some 25 years ago when the two men worked together at Boston Consulting Group. Now he’s a director at Woolworths-backed Quantium, a data and analytics company which helps brands understand customer behaviour and shopping habits.

Tonagh says Banducci is not only astute commercially, but has an impressive social conscience.

“He balances these two things. He has passion for whatever he does, whether it’s being a winemaker or the charities he supports or protecting his staff from verbal abuse, but he also has the ability to remove emotion and take a very analytical approach,” he says.

Roger Corbett, who Banducci recently eclipsed as Woolworths’ longest serving chief executive, agrees.

“Of all the CEOs in Australia, Brad is the one who is most socially conscious and aware. I think that is his biggest legacy,” he says.

Born in the South African mining town of Boksburg, near Johannesburg, Banducci and his two younger brothers Clint and Guy grew up in Cinderella, a leafy suburb. As a child, he helped out in his mother’s clothing store packing boxes and making tea.

As a teenager, Banducci became involved in his father’s business importing sewing machines and was the top salesman at the Rand Easter Show in South Africa two years running.

Banducci arrived in Australia in 1989 to study at the University of New South Wales. He went on to work around the world for the Boston Consulting Group for 15 years as a retail specialist but jumped ship to work with Jost Stollman, an alumnus of BCG, at start-up payments company Tyro.

“Joining this little PowerPoint presentation was a courageous move,” says Stollman.

Eventually, Banducci wound up at Archer Capital, at the time one of the country’s largest private equity firms with investments in everything from Myer to MYOB. The firm wanted to buy alcohol retailer Cellarmasters from Foster’s.

Banducci helped run due diligence on the $215 million acquisition, and ended up running the company.

Former Archer partner James Carnegie, now one of the most senior local figures at buyout giant Blackstone, describes the married father of two as a “triple threat”.

“Brad’s good in detail and numbers, and good at strategy. He doesn’t get so bogged in weeds that he doesn’t see the big picture, nor so in the big picture that he doesn’t see the detail. He’s smart but not so smart that he can’t relate to the average punter,” Carnegie says.

But the real test for private equity is the exit. With Cellarmasters, Banducci delivered, offloading it for $340 million in 2011. The buyer was Woolworths.

In a presentation to the supermarket giant’s then M&A chief, Martin Roberts, Banducci outlined his first synergy – his own job.

Banducci left Cellarmasters, although he did land a job at Woolworths. Within a year, he was running the company’s drinks division and by 2015 was head of food. During that time, people who worked with him say, he was focused at regaining market share lost to rival Coles.

It was a difficult time for Woolworths. Its credit rating was sliding toward a downgrade, and it had lost billions of dollars on a failed bet on hardware after partnering with Lowe’s.

It was in this atmosphere that Woolworths began searching for a new chief executive. Those who worked at the group at the time say the company’s then chairman, Gordon Cairns was set on appointing an external chief executive, ideally from a global retailer from the United Kingdom or North America.

Within Woolworths, an external appointment was considered all but finalised until Banducci presented to the board.

“The relationship between Brad and Gordon never really recovered,” says someone who worked with them.

Banducci says he and Cairns “always had a very robust relationship, and it led to some very brave decisions that proved to be pivotal for the group’s transformation”.

Cairns, who was succeeded by Scott Perkins in October 2022, declined to comment.

Investors didn’t expect much from the new chief executive. Many considered him a short-term appointment focused on cleaning up.

Banducci restructured – increasing the number of his direct reports – and slashed the price of groceries. He says waiting for the payoff was one of the most stressful periods in his career.

“One thing I’ve learned is that the strategic decisions are clear. The timing of when you make them is less clear,” he says. “We could see the turn in the customer metrics but not in the sales metrics. And so it was a pretty stressful, stressful year.”

The stress took a toll in other ways. Banducci was swimming at Bondi when he felt a sting. He assumed it was a jellyfish. It was shingles.

“It was a manifestation of stress I hadn’t experienced and actually, I found it quite, quite shocking,” he says.

But the decision to cut shelf prices paid off, even if that success took some time to become clear.

Under Banducci’s leadership, Woolworths has also invested in its logistics and supply chain, making big investments in automated distribution centres.

The retailer has splashed out on Quantium and PFD Foods, the country’s largest foodservice distributor, and now owns Cartology, a retail media business.

In 2022, it narrowly lost a bidding war for Australian Pharmaceutical Industries to Wesfarmers, but picked up a controlling stake in pet retailer Petstock for $586 million.

Under Banducci, Woolworths has stemmed the market share losses and controls about 37 per cent of a growing $132 billion grocery sector. Coles and Woolworths together count for some 65 per cent of sales. Despite this, Banducci argues the market is highly competitive with Aldi, Costco, Amazon and Metcash and IGA’s independent stores all competing to serve consumers.

Over the past five years, the retailer has invested around $10 billion back into the business – nearly double the amount paid to investors in dividends over the same period ($5.7 billion).

Still, whether through social conscience or political blowtorch, things will have to change. Already Coles and Woolworths have lowered the prices on some items, although both blame cost increases from suppliers as one of the main reasons shelf prices are going up – along with the weather and supply problems.

Barrenjoey analyst Tom Kierath says Banducci has proved to be one of the country’s best chief executives over his time at Woolworths, carefully managing the tricky balance between customers, staff and shareholders.

“His open and honest approach with analysts, investors and the wider investment community has built both confidence in the Woolworths strategy and management team. When he started as CEO, Woolworths was in a mess, but today the business is thriving and Brad has been a driving force for this change,” Kierath says.

What is clear is Banducci has certainly done things his way.

In his early days as CEO when Woolworths share price was under $18 and the group was on its knees, Banducci brought in Thom Knoles, master of Vedic Meditation, to speak to his senior leadership team.

“I knew then that things would be different under Brad, and they have been,” says Steve Donohue, the chief executive of Endeavour, the operator of pubs and liquor stores once owned by Woolworths and spun out by Banducci in 2021.

Apart from how he will perform in front of the politicians come next month’s parliamentary inquiry, the big question is how long Banducci will stay at Woolworths.

With a $7.7 million salary last year, some expect him to become more focused on his own investments.

Already, Banducci has some in his name. These include a corporate entity known as Alba-Petrus, named after the family’s cats, and Cinderella Management.

He also has some direct investments. One is in Fleet Space Technologies, an AFR Fast 100 company, which maps sub-surface composition from space with the aim of making drilling for mining more accurate.

“After doing Tyro, I’m just passionate about entrepreneurs and their visions. To be a PhD, a rocket engineer moving from Italy to Adelaide, you want those people to succeed and to build an aerospace industry in Adelaide,” Banducci says of Fleet Space, which is backed by Harbour Capital, a private equity firm run by his brother Guy. Banducci also owns shares in SpaceX, the spacecraft business run by Tesla billionaire Elon Musk.

Another investment is high-end ice provider Bare Bones, a brand stocked by Endeavour’s BWS and Dan Murphy’s chains as well as bars and restaurants. “Brad is extremely supportive, the very best investor we could ever find,” says founder Damien Liot.

The Banduccis also have a portfolio of Sydney property, including three North Bondi apartments. Banducci and his wife Anna Dudek also have properties in Sydney’s inner east, including a $6.8 million Redfern warehouse and a Surry Hills apartment bought for $3.8 million in 2013.

Despite the long tenure, most investors do not seem to be tired of Banducci yet. For one, the group is yet to hit payday on some of his key projects like Cartology. Others speculate Banducci won’t want to go before the 100-year anniversary in December.

Others, however, question whether he can maintain the pace. Banducci spends Saturday mornings at the company’s Surry Hills offices in central Sydney, meeting with key staff members to discuss strategy issues or visiting stores. Even visits to his mother in South Africa – three or four times a year – are usually limited to weekends, where the pair play cards and dominoes.

For his part, Banducci says he works hard to manage his stress. He practices yoga and meditation daily (his wife Dudek is a meditation teacher and sculptor), and swims regularly at Bondi despite an enduring fear of sharks.

Music is another passion, and he singles out Jeremy Loops, a South African folk singer and songwriter, as one favourite.

“If you get too stressed, you make bad decisions,” he says.

What will Banducci’s legacy be once he does leave?

“I want to be seen as a good, hardworking member of the team that leaves the place better than I found it,” he says. “If we don’t do the right thing, we’re not going to be in business.”