Metcash has revealed it will invest $270 million across its grocery, hardware and liquor businesses over the next five years to improve stores, logistics and digital offerings.
CEO Jeff Adams said it was time to help independent retailers increase sales, respond to changing shopping habits and reverse a long-term decline in market share caused by increased competition from new players such as ALDI.
“The guys have done a great job of stabilising the [food] business over the last few years,” he told The Australian Financial Review. “It’s a business that had been challenged and lacked investment over a number of years – as a result of that, it’s really fallen behind global trends,
“Our plan is to invest back into that business, improve the competitiveness of our retailers and align ourselves better to those global trends.”
The capital expenditure comprises about $100 million for rebranding and refurbishments, with Metcash providing loans to retailers to fund refurbishments, $10 million on small-format store pilots, $25 million on logistics and $30 million on systems including a new loyalty program and promotional platforms.
Metcash supplies about 90% of independent retailers through brands such as Cellarbrations, Bottle-O and Thirsty Camel. It plans to invest about $15 million on building or acquiring new stores, wants to double its share of the on-premise market to 20% and is preparing to roll out the premium Porters Liquor chain nationally.
It will also expand its private-label offerings and tailor ranges to better suit locations and a consumer shift towards premium wine, beer and spirits.
Metcash currently has 70 SKUs across beer, wine and spirits and said it had a “strong focus” on growing the wine category.
Digital capability has also been flagged as an area for growth.
Meanwhile, the company is trialling a portfolio of company-owned stores called Bottle-O Warehouse. There are currently three stores in operation – in Tasmania and Victoria – with 10 planned by December 2019. The trial is slated to be completed by the end of FY20, with potential roll-out commencing FY21.
The stores are being touted as a platform to learn new retail concepts and support the roll-out of new programs across the IBA network.
In a trading update, Adams said total food sales for the year to date were marginally higher than the same period last year, but wholesale supermarket sales continued to fall after slipping 1.9 per cent (excluding tobacco) in the first half. Sales remained strong in liquor but hardware sales had softened, reflecting the slow-down in construction activity in the trade sector.
Shares in Metcash rose nearly 5% after it unveiled the plan to turnaround each of its three operating businesses.
New CEO for Metcash Liquor in FY20
Metcash also revealed that the new CEO of its liquor pillar will not commence in the role until early FY20.
Chris Baddock was announced in October 2018 as the replacement for Scott Marshall, who took up the role of CEO of the Metcash Supermarkets and Convenience division in March 2018.
Formerly the Director of Pinnacle and Direct, which is part of Woolworths’ Endeavour Drinks Group, Baddock said at the time: “I am deeply passionate about the liquor business, and the critical role independent retailers have in it. I am very much looking forward to working with the Metcash team, retailers and suppliers as I transition into this new role next year.”