Woolworths' new pokies king

Woolworths' Grant O’Brien has nailed his colours to the mast with this week’s ‘win’ on pokies... so why not reveal just how big the business has become.

A silly, poorly conceived anti-pokies campaign against Woolworths from ‘social activist’ group GetUp! finished with a resounding fizzle yesterday – but not before revealing a few hard truths about Woolworths under chief executive Grant O'Brien and his arch rival Richard Goyder at Wesfarmers.

Having successfully defended Woolworths' role as one of the biggest players in the gaming machine business, O’Brien is now free to openly push for power in the pokies market. Woolworths has an estimated 12,000 machines... that’s four times more than Wesfarmers.

Coles' Richard Goyder on the other hand will now be compelled to fully compete with O’Brien or else quit the gaming business altogether – Goyder has publicly expressed discomfort with Coles' involvement with pokies.

Both Coles and Woolworths explain their original role as pokies providers in terms of the oddity of Queensland licensing rules, where a company must own a hotel to provide liquor and hotels invariably come with pokie machines.

But Goyder has attempted in the past to get the rules changed in Queensland – he tried to lobby the Bligh government and has now returned to flag the issue with the Newman government. Wesfarmers is examining ways it could sell liquor in the state without having to participate in the gaming industry.

The issues thrown up by mainstream retail groups running significant and presumably profitable gambling operations are serious: According to the Productivity Commission about 7.5 per cent of all regular gamblers are problem gamblers and that works out at around 120,000 people.

It has been reasoned that many shareholders in big retailers might have problems if they were made aware of these gambling activities – but the 95 per cent of votes rejecting an attempt to limit Woolworths' gambling revenues would seem to dispel that notion. It would have been most interesting to see if an identical vote had been taken at Wesfarmers would the results have been similar? GetUp! had attempted to run a vote at yesterday's Woolworths EGM that would have imposed a $1 bet limit on pokie machines – an idea that has also been raised in the past by the Productivity Commission.

Meanwhile, though the Get Up! campaign was ineffective primarily because it is patently unfair to attack one company while leaving its competitors unaffected, it did highlight how both Coles and Woolworths are burying the gambling figures in their accounts.

Jennifer Owen, a former Citi retailing analyst and now a principal at Aspire Wealth, suggests that because both Coles and Woolworths include their gambling figures inside food and hospitality categories "you just can’t figure out how much either of the big retailers are making from gambling."

The argument for keeping the numbers under wraps is that they are ‘immaterial‘. That might be true from a strict accountancy perspective but if O’Brien and Goyder are committed to being 'responsible operators of gaming machines’ then it’s time we were told the numbers.

James Kirby is managing editor of Eureka Report.