Metcash looks to cash in on home brand spat

Eli Greenblat
November 30, 2011 – 1:30PM
The Age

Metcash has declared itself the “champion” of brands, declaring it will distance itself from the nation’s most powerful supermarket chains and the proliferation of private label on their shelves.

“We believe Aussie consumers trust brands,” Metcash chief executive Andrew Reitzer said today.
Metcash, which supplies food and groceries to IGA supermarkets and Franklins, will not follow the lead of the most powerful supermarket chains Coles and Woolworths by filling its shelves with the so-called home-branded goods, saying it will serve customers’ demand for popular brands.

Mr Reitzer said that in an ideal world the wholesaler would not set a target for private label penetration, or aim to sell more private label, but would meet consumer choice for specific items.

“What we prefer to do and specifically as a result of our two competitors new strategy is that we want to remain the champion of trusted brands,” Mr Reitzer said.

“And you will be seeing in IGA catalogues going forward, and in media and television really big emphasis on trusting the brands that you know.”
But he said this would go hand in hand with a three-tier private label strategy that would meet the price and value expectations of different customer demographics.
This month Woolworths said it would aim to double the sales penetration of private label goods at its supermarkets, taking it closer to chains in the UK where private label accounts for more than 40 per cent of sales. Coles has also upped its reliance on the home-branded labels.
The growing dominance of private labels has stirred anger among some consumer groups and manufacturers concerned about the lack of choice and the impact on local brand suppliers and their employees.

Mr Reitzer said Metcash would not set a target for private label sales at its supermarkets.
“It could happen (that private label sales get to 20 per cent) but it will be taken there not by us, but by the consumer.
“Whereas I think what our two competitors are doing is saying they will take it there.”
Mr Reizter said he would not delist or disempower any brands in favour of private label unless consumers demanded the change in the mix on offer.
Metcash has had a 14 per cent drop in first-half profit but has increased its financial forecasts for the full year. Metcash reported a $94.4 million net profit for the six months to October 31, down from $110 million in the previous corresponding period.

It now expects low- to mid-single digit growth for earnings per share for the year, up from just a low-digit growth pace, without elaborating.

Read the full article here