A pyrrhic victory for NSW newsagents?

The campaign by NSW newsagents to retain lotteries in small business took an unexpected turn yesterday, with the NSW Government and the Tatts Group coming to a Memorandum of Understanding (MOU) that will see Tatts lottery outlets limited to newsagents, petrol stations and convenience stores until 2018.

This follows the campaign, orchestrated by The Newsagents Association of NSW & ACT (NANA), against the end to the five year moratorium which limited lottery outlets to newsagents in NSW.

Whilst this may initially be seen as a short term win for the NSW newsagents, it still allows powerful supermarket chains Woolworths and Coles, as operators of the petrol outlets and small format stores, to retail lotteries through these outlets. It does not address the issues of the franchise agreement or the guarantee of a level playing field for all lottery operators.

CEO of NANA, Andrew Packham says that NANA was not consulted about the arrangement and they have a number of concerns in relation to the MOU.

The NSW Government could have been liable to pay significant claims for damages if it reneged on any part of the agreement made when the Tatts Group purchased the license to operate NSW Lotteries for $1 billion in 2010.

The new agreement states:

  1. NSW Lotteries will not undertake to expand its network of lottery outlets into large supermarkets (chains) for three years from April 2015 to 31 March 2018.
  2. Tatts Group acknowledges that it has undertaken trials of distribution of lottery products through fuel outlets, and is undertaking further investigation of this distribution channel as a viable outlet for its products and market. Clause 1 states that the agreement will no way restrict NSW Lotteries from expanding into the convenience fuel channel if it deems fit.
  3. The NSW Government will provide support to the existing network of lottery agents to assist them to update their lottery retail image to the standard required by NSW Lotteries under their particular sales category by providing direct financial support up to a maximum of $10,000 per individual outlet.

Managing director and CEO of the Tatts Groups told the Sydney Morning Herald on 29 January that “We actually have got no intention at this point in time of going to the supermarkets.”

In the past 18 months Tatts has trialled the sale of lottery tickets through fuel convenience stores, such as Coles Express at Shell outlets in Victoria.

Mr Cooke said the trial showed no cannibalisation of sales. He declined to share figures, but said Tatts was working in a commercial manner. “It is not in our interest to thin our sales across a greater number of outlets.”

Whilst the contribution towards the cost of the lottery refits will be welcome for newsagents the Tatts Group has done well to have the government contribute millions of dollars to this.

However, without any consultation with the industry the agreement could well be a pyrrhic victory for newsagents as they will still face stiff competition from the convenience channel and service stations. As Tatts do not wish to “thin sales across a greater number of outlets”  it will be the best performing outlets that will prosper  and that could be newsagents or convenience stores of any format.

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