Battle joined in hardware war

In a blistering assault on Woolworths and its plans to initially set up its first 11 hardware outlets in Victoria, Bunnings claims the retailer and its United States joint venture partner Lowes were getting a "free kick" and a "valuable gift" from the rezoning of industrial land to be used by the duo.

The dispute goes directly to the heart of Woolworths' key strategy of not only offering the standard array of hammers, nails, nuts and bolts from industrial sites but widening its big-box model to take in the sale of whitegoods such as big-screen TVs, washing machines and fridges.

Woolworths and US partner Lowes are expected to spend upward of $4 billion over the next three years to build their chain of hardware stores, currently code-named "Oxygen".

A submission to a government advisory committee obtained by BusinessDay reveals some of Bunnings' key strategies in the bitter hardware war that will be fought between the Wesfarmers-owned market leader and newcomer Woolworths.

BusinessDay has learnt that Bunnings has retained a Queen's Counsel to vent its complaints about Woolworths' alleged attempt to circumvent long-standing planning regulations. It also has engaged well-connected government lobbyist Hawker Britton to advise on the vital project.

The issue has been discussed informally at recent meetings of the Bulky Goods Retailers Association, where Woolworths is not a member but Bunnings is one of the group's leading voices.

Also, in a small setback for Woolworths it has lost one of its planned hardware sites in Bendigo.

Victoria could prove a national test case for the intended rollout following a recent decision by Planning Minister Justin Madden to wrest control of the Woolworths planning applications from local councils to declare the new stores a "major project".

Bunnings believes this will help Woolworths bypass onerous planning regulations that Bunnings faced when setting up its portfolio of warehouse-turned-retail stores decades ago.

Woolworths needs seven of its 11 Victorian sites rezoned from "trade supplies" to "restricted retail supplies" to sell legally whitegoods and other similar products.

This could be waved through by the minister despite objections from local councils and nearby retail competitors, including Bunnings.

"Bunnings does not seek to use the planning process to stymie the proposed Oxygen stores," the Bunnings' submission says. "However, Bunnings submits that it is important that, when it comes to planning provisions affecting competitors, there be a level playing field.

"Simply it would not be a fair planning outcome if one operator had the benefit of a less rigorous planning regime than other operators, and if there are strong reasons to give a particular operator an inside run, then a competing operator should be put in a position to compete as part of that same general process."

Bunnings, through its QC, Stuart Morris, says Woolworths is avoiding the full gamut of third-party participation and external scrutiny to which other retailers are normally exposed when seeking to establish or expand their business.

"In terms of timing, information provision, appeal process and finality, the minister's process affords Woolworths a significant advantage over other retailers."

If the land was rezoned to "restricted retail supplies" it would also represent a huge gift of value to the supermarket giant and its powerful US partner.

Bunnings managing director John Gillam told BusinessDay its submission requested a fair and transparent process that delivered a level playing field for all market participants.

At present only some Bunnings stores are zoned "restricted retail supplies", but this might need to be expanded to better compete with future Woolworths hardware stores.

A spokeswoman for Woolworths said the Victorian government's decision to undertake a fast-tracking process was based on the significance of the jobs and investment potential for the state.

"Fast-tracking of planning approvals is a valid and transparent process and there are other current examples where this is taking place in Victoria, for example Aldi.

"Any retailer has the right to apply for changes to their own zoning restrictions but trying to do this via another retailer's valid application process is somewhat questionable."