Metcash reveals plans to overhaul operations, refresh IGA branding

ELI GREENBLAT
MARCH 4, 2019
The Australian
Supermarket, liquor and hardware wholesaler Metcash has released a strategy update and planned overhaul of its entire operation that will touch every part of its business — from selling more private label groceries to refashioning its IGA branding — and has this morning reported a mixed trading performance for its divisions.
Metcash (MTS) said that sales at its flagship grocery and food stores had increased marginally year to date while liquor sales were also better, although hardware sales had slowed down in the second half due to a slowdown in construction activity.
In a wide ranging strategy update this morning, Metcash, led by new chief executive Jeff Adams, said the wholesaler believer “Independence is worth fighting for”; and it was about giving back to the communities where we live and work.
Calling it’s new direction “mFuture” Metcash has unveiled a five year strategy to turnaround its struggling business and return it to growth.
Metcash wants to build a five year pathway to this growth, focusing for its retail operations on the key areas of range, price, service and location.
For its liquor wholesale arm it is seeking to roll out new stores and increase its share of the on-premise market, in hardware it will have new initiatives such as expanding its plumbing and flooring offer while at wholesale grocery — which still produces the bulk of its profits — Metcash will have more small format stores and revitalise the IGA branding.
In the supermarket sector, Metcash said there were a number of challenges for its brands, such as IGA and Foodland, including intense competition, food price deflation, the roll out of discounter Aldi and tougher economic conditions in WA.
It wants to improve the performance and earnings of its retail chains through a number of initiatives including delivering channel clarity to meet shopper trends, having the right brand by format (previously it had stretched the IGA brand too far), align shopper experience with format, match location to shopper mission, be more competitive on everyday pricing and have unmatched local service.
The new approach from Metcash will see it use more of a carrot-and-stick approach to its retail partners as they need to comply with standards dictated by the wholesaler when it comes to stores and service.
Metcash said it wants to create a new market proposition for its key IGA supermarket brand that will include a clear proposition for shoppers, a differentiated range and price aligned to format, Enforced standards that protect the integrity of the brand, Better pricing for retailers who comply with promotional programs, new trading terms for each brand that drive and reward the right behaviours, a program to refurbish stores and alternate brands to house less-compliant stores.
It wants 70 per cent of its stores to be of the highest compliance to IGA standards around key issues such as stores, service, pricing and range — all supported by national IGA marketing campaigns. It sees less than 10 per cent of its store network on the low compliance standard end where these independent banner groups that buy from Metcash have little or no compliance checks and only local marketing campaigns.
Metcash said less than 5 per cent of sales in its partner supermarkets and other stores are private label and it needs to grow this with new products and in categories like ready made meals.