Dubious diversification?

I just stumbled across an intriguing (and concerning) example of diversification by one of Australia’s bigger retailers.

Our second largest book chain- Dymocks – has acquired an 80% stake in the Healthy Habits sandwich bars.

stack of bookssandwich1The typical rationale for acquisitions are some sort of shared competencies, value chain activities and the like. You wouldn’t typically view ‘being a store’ as adequate similarity, especially when one business prepares and sells a small range of perishable goods and the other manages a extensive range of hardgoods.

The Dymocks CEO (see this week’s BRW for an interview) claims they will leverage their skill sets in franchising, but you really would hope for a whole lot more. The only clever thing they seem to have done is keep the Healthy Habits founder involved (with the remaining 20% stake).

Watch for the carnage….

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3 Responses to “Dubious diversification?”

  1. russm Says:

    well Dymocks already do that café thing in many of their locations… I don’t know if it’s independently profitable of just a carrot to get people in the shops and reading/buying books, but an expansion around that part of their business wouldn’t seem out of the question with this news… a Heathy Habits branded store-within-a-store?

    • Andre Sammartino Says:

      Russ, that would be a little more justifiable if Healthy Habits was a cafe style retailer. But they’re more a foodcourt/fastfood purveyor of sandwiches and wraps (incidentally, not something I want smeared all over my prospective book purchases). But valid point…

  2. Steve Sammartino Says:

    I’d have to say this is certainly a classic ‘Diworsification’ – it never ceases to amaze me how CEO’s manage to convince the board of such senseless acquisitions. My favorite such folly at the moment is Quiksilver moving into bedding – must be the worst brand move of the past 10 years – they are steadily disenfranchising their core consumers ‘surfers’ who continue to shun the brand, and without the surfers, there will be no Quiksilver in the long run.

    See it here: http://poprl.com/1iiy or on my blog for some added commentary.

    Steve.

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