IBA Presentation re Outback Stores Darwin June 8th 2006

Indigenous Business Australia
Post Budget Briefings Presentation
Darwin June 8th 2006

COMMUNITY STORES
BACKGROUND
“Fix community stores and improve the quality of food…”
- Minister Vanstone was advised by the Rural Nurses Association that this was the single biggest contribution the Government could make to improving the health of Indigenous communities

The problem:
- Commercial viability
- Governance
- Fraud
- Food Stocking Policies
- Margins

IBA definition of Community Stores:
“one that is community owned and located on Aboriginal land, or one that is owned by a Government agency and operated specifically for an Aboriginal community”

The solution:
IBA has been asked by the Government to take a leading role in surveying current stores and from that data to formulate possible business models

IBA has also been asked to develop and implement Outback Stores

Two Phase Survey Process
1. Conduct a survey of existing community stores
2. Develop a management model for the future

Phase One –Objective
- To undertake a comprehensive community stores mapping exercise across Australia for the purpose of informing the development of a national community stores framework
- Project scope –research, assessment, identification
- Project Management –funding, management, field survey
- Survey Schedule
- Survey Delivery

Phase Two
- Development of a Business Model –undertaken in conjunction with Phase 1

COMMUNITY STORES POLICY MEASURE
- $48.1 million to provide a commercial management model for better governance, financial and stock management, supply chain, hygiene, nutrition and staff employment conditions
- $8.1 million to establish a company to be called Outback Stores

COMMUNITY STORES IMPLEMENTATION STRATEGY
- Development of a banner model
- Developing a range of industry contacts to assist in refining the proposal and continuing discussions with organisations that can assist IBA should the programme proceed
- Development of administrative solution

Banner Model –where a store joins a larger group to:
- take advantage of reduced purchase price through bulk discounting
- have access to generic products
- Management model, including financial management

OUTBACK STORES
- IBA would establish Outback Stores
- A line of credit would be established between IBA and Outback Stores for on-lending to upgrade store facilities where necessary
- Shares would initially be owned by IBA and progressively be sold to groups participating in Outback Stores

Outback Stores would develop a business model based on survey data including key elements of:
- Maximising efficiency through group purchasing and distribution
- Standardise POS technology
- Establish employment standards
- Limit or ban the use of CDEP

Outback Stores would assist communities by developing:
- Minimum infrastructure standards for safe food handling and storage
- Additional business modules (Australia Post, fuel outlets)
- Loans structure to pay for infrastructure and service improvement

The community benefits include:
- A more efficient and reliable store
- A better range of products including healthy, fresh food
- Better pricing of products
- Receiving rent based on turn over
- The option to purchase shares in Outback Stores

What does the community need to do?
- Place store in a separate legal entity
- Issue an appropriate lease over the land/store to that entity
- Empower that entity to negotiate membership to Outback Stores

What will the entity need to do?
- Agree to abide by the rules of Outback Stores
- Agree that Outback Stores has the right to fire underperforming store managers
- Agree that Outback Stores has the right to directly manage the store, in a worst case scenario

Where will the money go?
The store will receive the initial gross profit and make distributions as follows:
- Pay the community rent for leasing the store
- Pay Outback Stores a membership fee based on turn over (usually in the order of 5%)
- Set aside funds in a sinking fund for future replacements and upgrades
- Meet any infrastructure loan repayments
- After retaining adequate working capital, distribute balance to shareholders (community)

WHAT NEXT?
- Continued collaboration with ICC’s, other agencies, relevant state and territory governments and Indigenous organisations