The European grocer that invaded Australia

Melbourne Herald Sun, Thursday November 20, 2014

For a company that didn't believe in advertising for much of its history, the current commercial is pretty lavish. Set in a primitive, frozen, Grimm-like alpine village and inhabited by inbred coarse natives, we see them react when Johann returns from a visit to far-away Australia.

He tells them of hopping animals, cricket bats, even gets them to surf on the lake - which, being perfectly flat, just sees them sink below the ice.

Finally the villagers of Julbacken pick up burning torches and revolt. But at Johann's house they find a barbecue and table piled with Christmas fare. One prawn and they're converted to the Aussie Christmas.

The advertiser is a surprise: Aldi Supermarkets. For a price-driven, warehouse-shelved operation that doesn't even give you carry bags, they have spent big on some classy advertising for their Christmas drive.

But then you look closer and my, how they have grown without being noticed. It seems such a little time back that they were a curious German food store selling phoney Corn Flakes. You'd go there when it was close by - not very often because there weren't many - or the days before payday when you'd feel the need to be penny-pinching.

Now however there are 340 Aldi stores in Queensland, NSW, ACT and Victoria. They turn over $5 billion a year and have overtaken IGA to become number three in supermarkets with 10.3 per cent market share. All done since 2001.

Much of this was achieved with very little media advertising, compared to Coles and Woolworths. They persistently letterbox their neighbourhoods so I'll have to give that credit. But of course their main draw is their ability to dramatically prune the price of most products.

While I cuttingly describe them as "phoney" products, I do have to admit that they are quality made and packaged. I've also noticed that a lot more recognised brands are starting to penetrate their shelves. They claim that a hundred per cent of their fresh meat, eggs and bread is sourced locally.

The stores themselves are a third the size of a conventional supermarket. This means a concentration of products, so there is less range to choose from. But it also reduces the cost. In fact Choice consumer magazine had regularly done basket comparisons that show Aldi as much as 25 per cent cheaper than the big boys. They wrote in a report, "Even if a customer does not shop at ALDI, they obtain significant benefits from having an ALDI in their local area, as the Coles or Woolworths store prices more keenly".

With 9000 stores in 18 countries, the group's main gripe about Australia is that they can't grow fast enough. They like to build and own their stores but claim that this country is the most restrictive one they operate in. Such a big wide country, but they can't find the suitably sited, correctly zoned blocks.

Even the ACCC sympathised, stating in 2009: "The barriers to entry created by planning laws are particularly pronounced for independent supermarkets".

Just this June Aldi submitted to the Competition Policy Review that this lack of real estate was reducing the opportunity for Australians to enjoy the lower prices brought about by competition. Their rivals, on the other hand, already have networks of old inner-city stores that can be upgraded - as you'll no doubt have seen in some of your local supermarkets.
So don't be surprised if any large empty shops near you suddenly sprout blue and orange logos.

The Great Golden Shield of China

Melbourne Herald Sun, Thursday November 13, 2014
They say that you can see the Great Wall of China from the moon. Well from there you could certainly experience another wonder: the Great Firewall of China.

This is the huge barrier the Chinese government has built to protect itself not from the hoards of Mongolian marauders, but from the hoards of western democracy campaigners. All internet and email has to filter through this mighty dam to ensure that it is pure of thought and ideology.

Of course every government longs for this controlling power - just look at the measures frequently proposed in our own Parliament. However it is unbelievably expensive - and cumbersome. The Chinese call it The Golden Shield and it's estimated that as many as two million police are involved in the project. What that would do to the budget blow-out.

Naturally, Chinese computer enthusiasts devote enormous time and energy to finding ways around this colossus. They have a constant cat and mouse game with the authorities, making a hole and getting full use of it before it is found and blocked up.

However, all this censorship has not impeded the paths of profit. The world's greatest data companies see billions of dollars in trade, and huge Chinese companies have a world market to serve.

So, early next year Twitter is opening its Hong Kong office, devoted to China business even though it is banished from the land. Google already has a sales office, in a ten-storey headquarters in Beijing. Facebook has just rented its own offices in Beijing, with views of the Forbidden City.

Which is quite appropriate, because the social activities of these world giants are mired in the quagmire of Chinese censorship.

That Golden Shield has seen some mighty stoushes. Google especially has spent ten years in a market where they once had 36 per cent - that has dropped to 1.7 per cent. The government has repeatedly blocked the search engine, both in English and Chinese. You'll get no sensible response to "tank man" or "Tibetan protest" or "Hong Kong democracy demonstrations".

Facebook was blocked in 2009 - so why are they about to move into a huge new office? Well, China is where the business is. Huge clients like Alibaba, Lenovo, Xiaomi - the names may not be familiar, but their products are in your house or office: from toys to computers to clothes and shoes and phones. Probably they have someone else's brand stuck on the face - but the companies that make them are vast and they depend on exports.

At the same time our social media giants have found that there is a big hungry world out there. Twitter has 284 million users, 78 per cent of them outside the US, even without a presence in China. In the last reported quarter its revenue was US$242million - not bad for a recently launched company. Facebook made $800 million, Google $13.2 billion. And they are all complaining that business is slow.

These companies see the Asia-Pacific region as the future, with offices strategically spread from Seoul to Beijing or Hong Kong, to Singapore and Sydney. And even the world's biggest Golden Shield won't keep out these treasure hunters for long.