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Preview Rubric_ AT3 Strategic Analysis ...trategic Management - Semester 2, 2021 Microsoft Word - Case Study 2020 by Gemma Hill Street Grocer Wri en by Dr Gemma Lewis, University of Tasmania, June 2020. Not for public release Page 1 of 5 Business Strategy Case Study – Hill Street Grocer Wri en by Dr Gemma Lewis, University of Tasmania for BAA311 Business Strategy Introduc on and history (read more on www.hillstreetgrocer.com) Hill Street Grocer is a name now synonymous with high‐end grocery and retail in Tasmania. They are a family owned and run business, and food and family are central to everything they do. As per their website, the company aim is: “to delight each and every customer and go ‘above and beyond’ at all mes to provide a fun and enjoyable shopping experience in a beau ful environment. We embrace excellence and difference and encourage team members to ‘have a go’, in order to grow and succeed in a business they are proud to be a part of, and where they feel happy and have fun. At Hill Street, we work hard to be the first choice in Tasmanians’ minds when shopping for food. We aim to give our customers the best food shopping experience in the world.”1 The Hill Street story commenced around 40 years ago, when John and Irene Varsimidis opened their mixed corner store and takeaway in West Hobart.2 In 1994, their daughter Dianna married a bricklayer, Marco, and together they took over running the store, which was then known as ‘Rite‐Way West Hobart’.3 In 2001, this successful but small corner store was renovated and rebranded as Hill Street Grocer, and addi onal family members (such as co‐owner Nick) were brought into the business.4 Fast track to 2020, and the company operates 10 stores around Tasmania: Blackmans Bay, Devonport, Dodges Ferry, Latrobe, Lauderdale, Longford, New Town, South Hobart, West Hobart and the most recent store opening in Sandy Bay. This rapid expansion has enabled the European‐style grocery chain to capitalise on opportuni es in the external market and bring a wide range of Tasmanian made and grown products to greater numbers of consumers. Many of the now Hill Street stores were previously small, independent grocery outlets. In this sense, the company used acquisi on to expand their store network. In 2017, for example, the company expanded into Northern Tasmania when they acquired the well‐established Brown’s IGA Store in Longford. The store was renovated and converted into a Hill Street Grocer, re‐opening on Sunday 12th of November.5 A similar strategy was used to convert the IGA Store in Latrobe into a Hill Street Grocer. In other cases, the company have constructed stores on previously non‐grocer sites, such as the 2019 renova on of the former UniPrint in Sandy Bay.6 Being part of the Tasmanian IGA network (of independently owned and operated stores) gives independent retailers like Hill Street access to volume buying and nego a ng power.7 It also assists Hill Street to offer consumers a wide range of household consumables, many of which are adver sed 1 Hill Street Grocer 2020, Careers with Hill Street Grocer, viewed 15 June 2020, h ps://hillstreetgrocer.com/about‐hill‐street‐grocer/careers 2 Hill Street Grocer 2020, The Hill Street Story, viewed 15 June 2020, h ps://hillstreetgrocer.com/about‐hill‐street‐grocer/about 3 Ibid 4 Ibid 5 Brunton, T 2017, ‘Hill Street Grocer expands into Northern Tasmania’ The Examiner, November 11 2017, viewed 15 June 2020, h ps://www.examiner.com.au/story/5049782/hill‐street‐grocer‐expands‐into‐the‐north/ 6 Mather, A 2019, ‘Hill Street grocer expansion con nues with 10th store expected to be finished by October’ The Mercury, Business, February 27 2019, viewed 7 June 2020, h ps://www.themercury.com.au/business/hill‐street‐grocer‐expansion‐con nues‐with‐10th‐store‐ expected‐to‐be‐finished‐by‐october/news‐story/120ebfec18dd34903f718ec9f81ea376 7 IGA Tas 2020 ‘Joining IGA’, viewed 28 June 2020, h ps://www.igatas.com.au/joining Wri en by Dr Gemma Lewis, University of Tasmania, June 2020. Not for public release Page 2 of 5 as catalogue specials. This complements their focus on “gourmet and locally sourced products, delicatessen and fresh produce sales and in‐store experiences”,8 and serving their local communi es. To further complement their wide range of food and grocery products, in 2015 Hill Street added to their core business when they launched Hill Street Home; a division which incorporates homewares, a cheese room, kitchenware and an in‐house florist. This new range of products and experiences are available in the business’s larger stores (e.g. Devonport and West Hobart). All Hill Street stores share a contemporary and aesthe cally pleasing format. This physical layout and atmosphere contribute to the family‐friendly, and somewhat ‘up‐market’ shopping experience customers are increasingly seeking. Some stores (e.g. Devonport) also house a café, which serves breakfast and lunch, and provides takeaway op ons. Customers can now also pre‐order their café drinks and meals via the Hill Street website. Customers can also do their Hill Street grocery shop online and ‘click and collect’ their purchases either in‐store or arrange home delivery within the company’s expanding delivery zones within Tasmania. Customers can check if the business delivers to their suburb by entering their postcode on the Hill Street website. In addi on to selling pre‐prepared meals in store, Hill Street’s Catering service offer a range of entertaining/func on pla ers, which customers can pre‐order online and pick up from any store the next day. The external environment and consumer trends The introduc on of ‘click and collect’ has transformed the retail industry and greatly benefited small independent grocers and supermarkets, par cularly during the COVID19 pandemic, when many businesses were unable to fill the enormous demand for online orders. Consumers who were ini ally reluctant to shop online, have slowly moved into this market. Although online grocery retailing is not at the same scale as the overall online retail sector, a recent report from IBISWorld suggests industry revenue will rise at an annualised 29.7% over the five years through 2019‐20, to total $5.8 billion.9 Not surprisingly, the two biggest online grocery retailers in Australia are the two major supermarkets: Coles and Woolworths.10 Consumer shopping habits are changing in other ways too, par cularly in urban areas where household disposable income is on the increase, alongside changes in ea ng preferences and lifestyle choices. A growing number of businesses in Australia are tapping into this trend and catering to specific niches in the market. Specialised food stores are thriving, and according to a recent Bankwest report, were up by 2.1% between 2017 and 2018.11 Farmers markets are also rising in popularity and becoming a rou ne ou ng for many locals and ‘inner city foodies’. In Tasmania alone, several farmers markets are now well‐established, including the Farm Gate Market in Hobart, the Harvest Market in Launceston, and the Devonport Farmers Market.12 8 Treasury Tasmania 2019, ‘Applica on by Nick Nikitaras for a special licence for the premises Hill Street Sandy Bay at 2 Churchill Avenue, Sandy Bay.’ Commissioner Documents, viewed 28 June 2020, h ps://www.treasury.tas.gov.au/Documents/Commissioner%20decision%20Hill%20Street%20Sandy%20Bay.PDF 9 IBISWorld 2020, Online grocery sales in Australia industry trends (2015‐2020), viewed 17 June 2020, h ps://www.ibisworld.com/au/industry/online‐grocery‐sales/5527/ 10 Ibid 11 Bankwest 2019, Future of Business: Focus on Supermarkets, 2019 release, viewed 17 June 2020, h ps://www.bankwest.com.au/content/dam/bankwest/documents/business/insights/focus‐on‐supermarkets‐report‐2019.pdf 12 Discover Tasmania 2019, Farmers Markets of Tasmania, viewed 17 June 2020, h ps://www.discovertasmania.com.au/about/ar cles/farmers‐markets‐of‐tasmania Wri en by Dr Gemma Lewis, University of Tasmania, June 2020. Not for public release Page 3 of 5 Despite the advancements in community‐driven retailing, major retailers such as Coles, Woolworths, Aldi and IGA s ll dominate the na onal supermarket industry, and (except for Aldi) have a strong presence in ci es, towns, and suburbs around Tasmania. According to their 2019 annual report, the Woolworths Group operate over 1000 food stores in Australia,13 of which there are 30 in Tasmania.14 On the other hand, Coles, which belongs to the Wesfarmers Group, operate more than 800 supermarkets across Australia,15 but have around half the number of stores in Tasmania (i.e. 14 Coles stores in Tasmania).16 Consumers increasingly want premium, speciality and authen c food, including access to high‐quality products grown and sourced from their local area. This supports an overarching movement towards sustainability, and pressure on business to support local providers and minimise food wastage. The shi towards understanding ‘food mileage’ and consuming food produced and grown within a close geographic region has recently gained trac on. “Health, wellness and the environment con nue to be key purchasing factors for Australian consumers” according to a 2019 report on the retail food sector.17 The supermarket and grocery sector has also seen an increase in demand for convenience products, such as ready‐to‐eat meals, pre‐cooked packaged meals, pre‐prepared deli op ons, and food boxes delivered to the consumer’s home. According to market research company Market Research Future, higher demand for on‐the‐go bakery products and changing consumer preferences are driving the market for ar san baked goods, such as sourdough, pastries and gluten‐free bread. 18 Hill Street have partnered with leading bakeries such as Lipscombe Larder, Pigeon Hole Bakery and Jean Pascal Pa sserie, to deliver breads and baked treats fresh daily to their stores. In recognising the special place cheese holds in many consumers’ hearts, the company launched a dedicated Wine and Cheese Club, which is marketed as an ‘opportunity for like‐minded folk to experience and learn about all the different cheese’ available in Hill Street stores.19 To join, customers pay a one‐off membership fee, which is easily recouped via price discounts they receive on cheese and wine purchase in‐store, or from 9/11 Bo leshops if the customers are located in Northern Tasmania.20 Marke ng, branding and supplier rela onships Since their rebranding and major renova on in 2001, Hill Street have demonstrated a strong focus on marke ng and branding. The business uses social media such as Facebook and Instagram to connect with their strong following of customers, promote their weekly and daily specials in‐store, share recipes and ps, and other interes ng content they develop and make available on their website. The company have also expressed their strong commitment to sustainability and the environment. As per their website,21 some of the ways the business is reducing their environmental footprint and 13 Woolworths Group 2019, Annual Report 2019, viewed 15 June 2020, h ps://wow2019.qreports.com.au/xresources/pdf/WOW_AR19.pdf 14 Woolworths Group 2020, Store Locator, viewed 15 June 2020, h ps://www.woolworths.com.au/shop/storelocator 15 Coles 2020, About Us, viewed 15 June 2020, h ps://www.colesgroup.com.au/about‐us/?page=about‐us 16 Coles 2020, Stores, viewed 15 June 2020, h ps://www.coles.com.au/stores#/ 17 United States Department of Agriculture (USDA) 2019 ‘Australia: Retail Food Sector Report 2019’, viewed 15 June 2020, h ps://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Retail%20Foods_Canberra_Australia_6‐27‐2019.pdf