SENATE

Friday, 21 October 2016 Senate Page 5
Senator McCARTHY: Would you be able to give us an indication of just where these 10 profitable and the
10 non-profitable are? Could you give us an indication of location?
Mr Bradley: The key difference is that it is all based around community size. We typically find that in a
community of less than 200 we cannot run a profitable store. When it gets over that, up to about 500, it falls into
that barely viable category, and when the community population is over 500 we are able to run a profitable store.
The smallest community that we aim to run a store in is of the order of about 80 people, but there are one or two
that have dropped a little below that in recent times, so we have to consider whether it is appropriate for us to still
run stores there.
Senator DODSON: With those that are not as profitable—maybe in your third category—what is the level of
operating subsidy that they require?
Mr Bradley: We spent $1.5 million last year subsidising those unviable stores.
Senator DODSON: Has the government had to tip into that or does it just come out of your revenue?
Mr Bradley: The government, when they set us up in first place, provided three tranches of funding. We are
still using that to subsidise those unviable stores. We could reduce the amount that it costs to subsidise those
stores by increasing the prices of merchandise. We think that is the wrong thing to do, so we are maintaining the
selling prices at reasonable levels and using the government money to subsidise those stores.
Senator DODSON: In terms of your profitability, where that occurs, is there a dividend paid back to those
local communities or those local stores?
Mr Bradley: The stores are owned by the community. If it is profitable a proportion of the profit will be
retained for future improvement to the store and a proportion—it is roughly fifty-fifty—will go to the community
to be spent out of the community benefit account. So we take nothing of the profits from the store.
Senator DODSON: In terms of the items that are promoted in the stores, have you got a health strategy
associated with that?
Mr Bradley: We do.
Senator DODSON: Maybe we could get a copy of that somewhere down the track.
Mr Bradley: I can certainly give you a copy of our health and nutrition strategy. What I would say is that it is
geared towards not promoting or supporting unhealthy products where we can, and pushing as far as we can the
availability and the affordability of the healthy products. There is a lot more detail behind that.
Senator DODSON: I would appreciate it if you could take that on notice. Do you receive any rebates from the
wholesalers?
Mr Bradley: Yes we do.
Senator DODSON: What is the value of that?
Mr Bradley: It is about $2 million a year.
Senator DODSON: Has that been consistent from about 2014?
Mr Bradley: Broadly, yes.
Senator DODSON: Has it dropped off, or—
Mr Bradley: I can tell you that in financial year 2015 it was $2.2 million, and in 2016 it was $2.1 million.
Senator DODSON: How does that translate into the cost of items on the store shelves?
Mr Bradley: It does not directly. We take the rebates into subsidising the cost of running Outback Stores as a
company. That in essence allows us to charge a lower fee to run the service in the stores than we would otherwise
have to charge. Outback Stores as a company just about breaks even. We make a small profit or small loss—that
is what we try to do. The rebates are part of our income and we use that to lower the amount that we have to
charge in management fees to the stores.
Senator DODSON: Not necessarily on the products.
Mr Bradley: No. Can I say incidentally that this is a common issue in the food industry. I used to work for
Woolworths. You cannot negotiate from the suppliers the lowest price in the base price of the merchandise. The
standard in the industry is that rebates are paid and, in our case, we take those back into Outback Stores to reduce
the amount that we need to charge and management fees.
Senator DODSON: I just wanted to know whether there is a flow on to the items on the shelf in pretty
reasonably poverty-stricken communities.
FINANCE AND PUBLIC ADMINISTRATION LEGISLATION COMMITTEE