Coles considering $1 bet limits

Is community action group GetUp! having an effect on some companies?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 27, 2012 11:26 am AEDT

Wesfarmers Limited (ASX: WES), owner of Coles supermarkets and hundreds of pubs and clubs is considering $1 bet limits, as it seeks to distance itself from problem gambling.

Community action group GetUp! confirmed it had dropped its campaign against Wesfarmers to limit bets on the poker machines it owns – believed to be around 1300. GetUp! recently organised Woolworths Limited (ASX: WOW) shareholders to call an extraordinary general meeting to attempt to force the company to impose $1 limits on its poker machines, but the move was overwhelmingly voted down. Woolworths is Australia's largest operator of poker machines, with around 12,000.

At the time, Woolworths chairman, James Strong said the resolution was focused on one company only and not for everybody else in any other form of gambling and therefore was unfair.

Wesfarmers is also looking at alternatives to owning and operating its 92 pubs and hotels, and their associated poker machines, believing it's not a natural fit for its business. The issue is complicated as many of the hotels are associated with liquor stores, which have become an essential part of both Coles and Woolworths. For Woolies, the liquor business is worth over $6 billion in revenues. It may only be a matter of time before Woolies' and Coles' other major competitor, Metcash Limited (ASX: MTS) enters the liquor retail business in force.

Wesfarmers may seek to setup a similar holding company like Woolworths has done, with ALE Property Group (ASX: LEP) owning around 90 pubs, which are then leased to Australian Leisure and Hospitality Group (ALH), 75% owned by Woolworths.

Senator Nick Xenophon, an active campaigner for more stringent limits on poker machines, has suggested that he will be moving a bill in the Senate next year for a referendum on imposing $1 betting limits.

Meanwhile, GetUp! is continuing with its campaign against Woolworths over poker machines, in the run up to Christmas, and will consider targeting Coles, if the group is not happy with Wesfarmers' progress.

The Foolish bottom line

It's unlikely that Wesfarmers will go ahead with imposing $1 limits on the poker machines it owns, as it risks gamblers deserting its pubs and going elsewhere. GetUp! may be better off Ulobbying politicians to support Senator Xenophon's proposal for an industry wide $1 betting limit.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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