Harvard Business Leadership C

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Dan Murphy’s in Darwin: ‘a disastrous proposal’   Dr Andrea Howell and Mike Bengough    Dan Murphy’s is a highly successful liquor store with 248 outlets throughout Australia and is a fully owned subsidiary of Woolworths Group Australia (WGA).In 2019, WGA merged its drinks and hospitality businesses (Endeavour Drinks and the ALH Group (ALH)), to establish the Endeavour Group Ltd (EG). The merger was a strategic initiative to enable the de-mutualisation of EG from WGA at a future time. According to Rickard (8 June, 2021) while WGA stated the sell off was to “enhance shareholder value through a greater focus on each business’ core customers offering and growth opportunities”, the “real” reason was that WGA wanted to exit the poker machine business. As the owner of 12,400 electronic gaming (poker machine) licences, Rickard suggested WGA was increasingly off the radar for many fund managers because of its ownership of poker machines. EG was listed on the Australian Stock Exchange (ASX) in 2021.  In its promotional material, Dan Murphy’s tells the story of its namesake (Gibson, 2021): “One man built his reputation on a handshake. He made a promise that no matter who you were, or what you’d like to drink, he’d have that drink at the lowest price.” However, that promise appears to have cost WGA a lot of money and a heavy hit to its reputation. A five-year battle to acquire a liquor ‘megastore’ approved in Darwin and sited near three ‘dry’ or alcohol-free areas, was abandoned in April, 2021 following a strong and sustained backlash from Aboriginal and health groups.   Northern Territorians’ average per capita consumption of alcohol is among the highest in the world. Rates of alcohol harm are shocking, including presentations to hospital emergency departments, traumatic head injury, hospitalisations for acute alcohol disease, alcohol-related domestic violence and child abuse (Thorn, 2021). Therefore, the advocacy for this ‘disastrous proposal’ by one of Australia’s biggest corporations had the potential to put Aboriginal health and wellbeing at grave risk (McInerney, 2021).  Initially, WGA did not bow to pressure from local groups and mounted a robust defence of the Darwin site. It even went so far as to seek a change of legislation before accepting the decision of an independent review panel early in 2021 (refer to the Timeline at the end of this paper). In the aftermath, WGA CEO Brad Banducci issued an apology and conceded the organisation did not listen to the concerns of indigenous groups, the voices of First Nation people inside of WGA, and their advisory panel, and did not follow their Reconciliation Action plan. “It’s deeply ironic that we can sit here and talk about our support for the Uluru Statement of the Heart[1] but that needs to be reflected in how we run our business and the things we need to change”, said Mr Banducci (Mitchell 2021b). “We need to get our own house in order”.   What was at stake?  For Woolworths, the $40m investment was welcomed by local business groups as an answer to economic stagnation and greater consumer choice (Gibson, 2021). What began in 2016 with the original application to build the liquor megastore at the proposed location, saw a five-year run of rejections, appeals, opposition and discussion. Cumulatively, this put pressure on EG (CEO Steve Donohue), to announce in November 2020 that it had agreed to move the site of the proposed Dan Murphy’s Darwin store to be further away from these communities. The group said this decision had been made after extensive consultation with community groups. Interestingly in December, 2020 WGA announced it had commissioned an Independent Panel Review (IPR) of the Darwin plans, which would review health concerns, stakeholder engagement and other processes behind the store. At the time, WGA Chairman Gordon Cairns said: “We acknowledge that there are some in the community that feel they have not been adequately consulted regarding the proposed store. The IPR will provide a further opportunity for them and other stakeholders with a legitimate interest in the development to express their views” (Allen, 2021).  For local indigenous, health and community groups, issues with alcohol related problems meant there was vehement opposition to the planned investment. The proposed megastore was within walking distance of three dry Aboriginal communities, including Kulaluk, Minmarama and Bagot. Olga Havnen, Chief Executive of Danila Dilba said Darwin was already “awash with takeaway liquor” and that “we don’t need another store, especially one located so close to three dry Aboriginal communities.” She also stated: “There’s no harm caused to the community by taking the time to properly consider the public interest and community impact of the proposal. But there is a lot of potential harm in a rushed process that neglects the public health impact” (Allen, 2021).  For the NT Government, it see-sawed between attempts to curb alcohol-related harm and promote development. When elected in 2016, the government made it clear it was serious about the territory’s alcohol problems. It reinstated the Banned Drinkers Register; appointed former Chief Justice Trevor Riley to conduct a ‘root and branch’ review of the territory’s alcohol policies and legislation; and accepted all but one of the 220 recommendations of Riley’s review, including establishing an independent liquor commission. However, this began to change once the reforms came into effect. The 400 square metre ban was repealed, the government’s opposition to WGA’s proposal evaporated and it seemed to become less enamoured of the commission’s ‘independence’ (Thorn, 2021).   Sydney-based lawyer Danny Gilbert was scathing in his review, which found WGA and the government worked together to find a way around the barriers to the development’s approval. They ultimately decided to legislate their way out of the difficulties, bypassing the independent Liquor Commission and giving the Director of Liquor Licensing the power to fast-track an approval. “Instead of doing its own dirty work, the government had engineered a process that made the Director of Liquor Licensing responsible for determining the application” said Thorn (2021). Community groups expressed disappointment over the decision and accused WGA of “corporate wilful blindness”, comparing the decision to the destruction of Juukan Gorge[2] by mining company Rio Tinto (Powell, 2020, 2021a; Knight, 2021). “I believe the decision by WGA chairman Gordon Cairns and CEO Brad Banducci to aggressively pursue their desired outcome is a good example of corporate wilful blindness,” said Olga Havnen.  For business investors, Dan Murphy’s withdrawal may have ongoing ramifications according to Opposition leader Lia Finocchiar: “The Gunner government’s reaction and continual shifting of the goalposts made it very clear, even to the most casual observer, that the Northern Territory is not a good place to do business (Gibson, 2021)”. The NT Chamber of Commerce chief executive Greg Ireland concurred saying the “scrapped” proposal would mean the loss of new jobs and affect the perception that the NT was a place to do business (Read & O’Mallon, 2021).However, for other business leaders such as Australia’s richest man, Andrew Forrest, the decision to withdraw made sense. Mr Forrest had previously criticised the company’s choice to open a “dirty big grog shop” near the Indigenous community (Powell, 2021).  The aftermath  Woolworths/Endeavour Group  In the upper echelons of corporate Australia, brand reputation trumps local profits (Gibson, 2021). When opponents of the project took their fight directly to the WGA board, warning its national reputation was at risk if it allowed its subsidiary to proceed with the controversial Darwin project, the Board took note and commissioned an independent review. That report was highly critical of WGA officials, Michael Gunner’s Labor government, and the actions of the territory’s Director of Liquor Licensing Phil Timney, in approving the development in the face of the opposition from health experts and the wishes of Darwin’s Indigenous community. WGA management agreed, apologising:  “We did not do enough in this community to live up to the best practice stakeholder engagement to which we hold ourselves accountable,” Mr Cairns, WGA Chairman said. “In particular we did not do enough stakeholder engagement with a range of Aboriginal and Torres Strait Islander communities and organisations.”  BUT WGA CEO Brad Banducci denied the company had done anything wrong in April (Allam & Butler, 2021). “There’s nothing wrong with what we’ve done, but we can improve it, and we have high aspirations for the way we should operate,” he said. He then sought to put some distance between WGA and the EG; at a shareholder briefing on April 29, 2021 he did not rule out the prospect of a Dan Murphy’s outlet opening elsewhere in Darwin but stated future plans were a matter for the WGA subsidiary which is demerging from the supermarket chain (Breen, 2021):  “What we have announced today is that we will not be proceeding on the current location,” he said. “As to whether there’s a future Dan Murphy’s in Darwin that would be up to the Endeavour Group but certainly in any engagement process going forward we will take on board the Gilbert Review findings and adjust how we consult on those matters.”  WGA then formally surrendered its liquor licence back to the NT Government on April 29, 2021. In a letter to the IRP Chair, Danny Gilbert, on June 9 WGA Group Chairman, Gordon Cairns, Group CEO, Brad Banducci and Group Sustainability Chair, Holly Kramer stated:  “We clearly failed to meet our expectations and we deeply regret our insensitivity to critical stakeholders in Darwin and beyond, and our own external Indigenous Advisory Panel, whose advice we did not seek. For that, we unreservedly apologise. At the heart of our reflections today is strengthening our foundations for deeper, and more thoughtful and meaningful relationships with First Nations’ peoples. Relationships built on listening, learning and education. Relationships underpinned by equity and respect. Without those foundations it will not be possible for us to achieve our ambitions for full reconciliation”.  Banducci also admitted, in June 2021, that ‘The buck stops with me . . . I’ve learnt a lot’’(Mitchell, 2021a; Butler, 2021). Powell (2021) reported that WGA’s executives would not lose their bonuses but chief executive Brad Banducci has pledged to base a portion of WGAs’ long-term executive remuneration in the future on the company’s reputation to ensure issues such as those with the since-axed Darwin store would not be repeated.  External stakeholders  Olga Havnen, Danila Dilba Chief Executive said it was a win for ensuring big corporations take into consideration the social and economic impacts of their businesses:   “Those things have got to be taken into consideration. This is why we have environmental laws. This is where we have restrictions on the sale of certain products. For example, we don’t sell alcohol to kids – there’s a reason for that. I think these sorts of social responsibilities need to be taken into account and considered seriously, and that it’s not enough just to focus on the profits. Profits don’t come before people or before the environment,” she said (McInerney, 2021).  Several external stakeholders have also called for greater corporate responsibility (McInerney, 2021). The Public Health Association of Australia (PHAA) welcomed the news that WGA had cancelled its plans for the store saying it was good that the retail corporate had listened to the concerns of Indigenous groups. But it also sounded a warning, saying it was “disappointing to hear from the CEO Brad Banducci that WGA may search for a new location for the store”. “These stores will cause serious alcohol harms wherever they are, and it’s time major retailers listened to the expert public health advice on these issues,” the PHAA tweeted.  The Royal Australasian College of Physicians (RACP) also welcomed WGA’s decision, saying the news “comes as a relief to specialist physicians who have been seriously concerned about the impacts of building a liquor megastore and the harms that it would bring to the community. When we increase the access to alcohol in the community, we see a direct increase in alcohol related harms,” said President John Wilson. “After all the progress that’s been made in reducing alcohol related harm in the Northern Territory, building a liquor megastore would have been a disappointing and an unnecessary step backward. We hope that this will herald the start of a process where more socially responsible decision making is made by commercial entities about the impacts of alcohol-related harm in the communities they serve.”  AMSANT, Danila Dilba, Foundation for Alcohol research and Education (FARE) and NTCOSS are asking the retail giant to release the Gilbert Review immediately, “in the interests of transparency”. “This is an important opportunity for Woolworths and other big alcohol retailers to re-assess their community consultation processes and acknowledge the harms their stores do to so many communities across Australia,” they said. “Communities should not need to fight so hard for so long ever again – this a unique opportunity for a re-set of liquor store approval processes in the NT and indeed across the country.”           Timeline  The key dates and strategic moves by Woolworths and other stakeholders (FARE, 2021):   2016  The NT Government amended the Liquor Regulations to make it a condition of a store licence that the retail floor space was limited to a maximum of 400 square metres[3].Woolworths applied to substitute an existing licence for a Dan Murphy’s store and threatened to take the NT Government to court.    2017  Woolworths applied to the Federal Court of Australia to have the amendments made under The Liquor Amendment Regulations 2016 declared invalid on the basis that they were not within the regulation making powers of the Government.It later withdraws the case from Federal Court action against the NT GovernmentAn independent review into alcohol in the NT — the Alcohol Policies and Legislation Review (Riley Review) established to tackle the high level of alcohol harm in the NT. The Alcohol Policies and Legislation Review Final Report made a range of recommendations to reduce alcohol harm in the NT.One of the recommendations from the Riley Review comes into effect: a five-year moratorium on new take-away liquor licences began 27 October, 2017.However, the 400 square metre rule would be repealed.          2018  The NT Government announces legislation to re-establish an NT Liquor Commission.Woolworths lodged an application to build a Dan Murphy’s liquor outlet on the corner of Osgood Drive and Bagot Road, Eaton.Woolworths applies to NT Liquor Commission for licence; it commences its next legal action, applying to the NT Liquor Commission to open the first Dan Murphy’s store in Darwin despite the application being opposed by Aboriginal communities, members of the public, and organisations including FARE, NTCOSS, Danila Dilba health service, Aboriginal Medical Services Alliance NT, Public Health Association NT, and Amity Community Services.      2019  The NT Liquor Commission denied the application for substitution (see 2017) on 20 September 2019, noting the “potential for a significant increase in harm due to the use of liquor, over and above that already occurring within the community areas”.The Northern Territory Government overhauls the Liquor Act 1978 in response to the 2017 Alcohol Policies and Legislation Review Final Report (the Riley Review) and the NT Liquor Act 2019 comes into effect. Woolworths appealed the NT Liquor Commission decision to the NT Civil and Administrative Tribunal (NTCAT).Woolworths faces shareholder scrutiny when asked to approve re-structure plans NTCAT dismisses Woolworths’ application on the grounds that it could be made in relation to premises that existed.           2020  Woolworths applied to the Supreme Court of the Northern Territory for leave to appeal the Tribunal decision.Legislative Assembly introduced the Liquor Amendment Bill 2020 and referred it to the Legislation Scrutiny Committee for inquiry. As a result, Woolworths withdrew from the Supreme Court action since the legislation changed the Liquor Act 2019 to remove the barriers to the application identified by NTCAT.FARE took the unprecedented step of formally writing to the Board of Woolworths asking them to properly consider and reassess their Director responsibilities under the Corporations Act 2001. Woolworths lodged an application to have the case reconsidered at NTCAT. However, it sought an adjournment of public hearing to early 2021.Government introduces legislation to bypass independent Liquor Commission process; power now granted to the Director of Liquor Licensing to decide on the Woolworths’ Dan Murphy’s application without following the laws of natural justice or considering the previous decisions by the Liquor Commission or NTCAT. Woolworths can propose an alternative location without submitting a new application and without seeking the views of the community at the new location. The current NTCAT proceedings would be terminated, and the Director’s decision would not be reviewable by NTCAT. Moves by the NT Government to weaken its alcohol policy reforms were condemned by leading NT Aboriginal, health and social groups and community members.Supermarket giant Woolworths faced increasing pressure from Darwin-based health and Indigenous community groups to reconsider a controversial plan to open one of its biggest Dan Murphy’s liquor outlets in the city. The announcement that a Dan Murphy’s outlet would relocate to an alternate site fails to alleviate the concerns of Aboriginal community health advocates. 130,000 signatures ignite the “keep grog out of our communities” petition. NT Community continues to speak out, refuting Gordon Cairns (Woolworths Chairperson) claims of community consultation during Woolworths AGM. 45 organisations and community leaders signed an impassioned open letter to Woolworths Chairperson Gordon Cairns. This letter was published as a full-page advertisement in the Australian Financial Review (9 Dec AFR).The Director of Liquor Licensing officially approved Woolworths’ application despite strong community objection.      “In light of the LC Decision, FARE’s position is that it is reasonably foreseeable that to continue to pursue the proposed development will carry with it significant reputational risk to Woolworths.”          2021  Four high-profile business, health and Indigenous leaders appointed to an independent panel established to review Woolworths’ plans to build a store close to dry communities in Darwin.Indigenous community groups in Darwin hit out against the Woolworths Group for what they say is the company’s failure to have genuine community consultation over the construction of a Dan Murphy’s liquor store.Community groups criticise Woolworths for divisive tactics during push to build Darwin liquor store:Call for Reconciliation Australia to pull support for Woolworths over Darwin Dan Murphy’sDanila Dilba launches legal action against Woolworths, NT Liquor Licensing director over Darwin Dan Murphy’sCommunity leaders say new Dan Murphy’s store will add fuel to fire of town’s drinking problemOn April 30, Woolworths abandoned its plan for a Dan Murphy’s in Darwin.Following Woolworths’ decision, the company formally surrendered its liquor licence back to the NT Government, which was granted to them by the Director of Liquor Licensing in December 2020. This means that, for now, there is no back door open for Woolworths or any of its subsidiaries to build a liquor store in the area.      “It’s wedging Aboriginal groups against each other. This is the game that they’re good at, big corporates, they love it, and we’re calling on them to cease it. Take a social conscience in all of this and listen to the Aboriginal leadership here in the Northern Territory and withdraw your application now.” – John Paterson, CEO AMSANT                    [1] The Uluru Statement of the Heart was developed in 2017 to enable Indigenous Australians to have a voice in matters of law which affect them    [2] Rio Tinto developed mining projects in heritage areas by blowing up 40,000 year old caves (Knight, 2021)    [3] About 1.5 times as big as a tennis court (The measure of things, 2021) 

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