Wesfarmers Limited

Wesfarmers' $67 billion market cap conglomerate structure demonstrates portfolio effect: diversification across Bunnings (hardware), Kmart (discount retail), Officeworks (office supplies), and industrial divisions (chemicals, energy) buffers sector-specific shocks through uncorrelated earnings streams. When residential construction slows dampening Bunnings growth, cost-conscious consumers increase Kmart spending. This mirrors mixed-species herds where predator pressure on one species creates alertness benefits for others.

Bunnings' dominance—67% market share in Australian hardware retail, $18.5B revenue FY24—represents keystone position in home improvement ecosystem. The warehouse format with 280+ stores, extensive product range (50,000+ SKUs), and "lowest prices are just the beginning" positioning created switching costs through one-stop convenience. DIY enthusiasts and trade professionals accept Bunnings as default supplier, generating network effects: supplier investment in Bunnings-specific packaging and merchandising reinforces incumbency. Like oak trees that acidify soil to disadvantage competitors, Bunnings' scale creates conditions favoring its continued dominance.

The conglomerate's 1914 founding as Western Australian Farmers Cooperative created path-dependent advantages. Early agricultural focus—fertilizers, grain handling, machinery—established regional infrastructure penetration in Western Australia. The 1984 acquisition of Bunnings, 2007 purchase of Coles supermarkets (sold 2018 to focus on retail), and 2016 catastrophic Homebase acquisition in UK ($1.7B writedown) show bet-hedging through serial diversification. Successful bets (Bunnings, Kmart turnaround) offset failures (Homebase, Target struggles).

Kmart's resurrection demonstrates phenotypic plasticity: the struggling discount chain refocused on $5-$10 price points, simplified ranges, and fast fashion mimicry. FY24 revenue grew 7.4% to $10.4B through positioning as Australia's Primark equivalent—acceptable quality at aggressive prices. This contrasts with Target's stagnation attempting mid-market positioning where you compete against everyone. In ecology, generalists struggle when specialists dominate both ends; Kmart succeeded by embracing extreme discount specialization.

Wesfarmers' chemical and industrial divisions (WesCEF, Industrial and Safety) provide countercyclical ballast. When consumer discretionary spending contracts, industrial ammonia demand for fertilizers and mining explosives remains stable. The portfolio's functional diversity—different divisions peaking at different economic cycle phases—demonstrates stability through response diversity. Total FY24 revenue of $43.5B and $2.7B net profit show mature conglomerate extracting steady returns from diversified niches.