Metcash Industry Analysis

Introduction to Metcash

Metcash Limited is an Australian wholesaler and conglomerate company that operates in the food, liquor, and hardware industries. Headquartered in Macquarie Park, NSW, Metcash has established itself as a key player in the market. The company operates through three main divisions: Food & Grocery, Liquor (Australian Liquor Marketers), and Hardware (Independent Hardware Group) (Wikipedia).

Overview of Metcash Limited

Metcash Limited is a locally owned public company that specializes in the wholesale distribution and marketing of groceries, liquor, and hardware products in Australia and New Zealand. With a workforce of approximately 8,000 full-time equivalent employees, Metcash’s operations span across various retail channels, including IGA Supermarkets, Foodland, Friendly Grocer, Lucky 7, and Eziway convenience stores. The company supplies general merchandise and grocery goods to independent grocery stores throughout Australia and New Zealand, serving as a reliable partner for retailers in the industry.

Business Divisions of Metcash

Metcash operates through three key business divisions: Food & Grocery, Liquor (Australian Liquor Marketers – ALM), and Hardware. These divisions cater to different sectors of the market and contribute to Metcash’s overall growth and success.

1. Food & Grocery Division: The Food & Grocery division is the largest and most profitable segment of Metcash. It supplies independent supermarkets across Australia, offering a comprehensive range of grocery products and general merchandise. The division encompasses well-known retail banners such as IGA Supermarkets, Foodland, Friendly Grocer, and Lucky 7, among others. Metcash provides marketing and operations support to these banners and also supplies banners that are not owned by Metcash, including FoodWorks and Friendly Grocer (Wikipedia).

2. Liquor Division: The Liquor division, operated under the Australian Liquor Marketers (ALM) brand, focuses on the distribution of liquor products to a wide range of retail outlets, hotels, restaurants, and licensed premises throughout Australia. The division serves over 12,000 retail outlets and operates through distribution centers strategically located across Australia. ALM offers an extensive selection of alcoholic beverages, working closely with retailers to meet the demands of the liquor market.

3. Hardware Division: Metcash’s Hardware division, known as the Independent Hardware Group (IHG), supplies independent hardware stores across Australia. It includes renowned brands such as Mitre 10, Home Timber & Hardware, Hardings, Thrifty-Link Hardware, True Value Hardware, and Total Tools. The division caters to a diverse range of hardware needs, serving large warehouses, small convenience operations, trade centers, and frame and truss sites. With a national footprint of approximately 1,500 stores, the Hardware division plays a significant role in Metcash’s overall business strategy (IBISWorld).

Metcash’s diverse business divisions position the company as a leading wholesale distribution and marketing company in Australia, serving the grocery, liquor, and hardware sectors. By providing a wide range of products, support, and expertise to independent retailers, Metcash plays a vital role in the success of these retailers and the overall industry.

SWOT Analysis of Metcash

To gain a comprehensive understanding of Metcash’s position in the industry, it is essential to conduct a SWOT analysis. This analysis explores the strengths, weaknesses, opportunities, and threats that impact the company’s operations and strategic decisions.

Strengths of Metcash

Metcash, as the largest Australian grocery wholesaler, holds several strengths that contribute to its success in the market. These strengths include:

• Dominant Market Presence: Metcash supports the independent grocery sector, which accounts for approximately 18% of the retail market in Australia. Its strong market presence gives it a competitive edge.

• Diverse Business Divisions: Metcash operates across three key business divisions: Food & Grocery, Liquor (Australian Liquor Marketers — ALM), and Hardware. This diversification allows the company to tap into multiple markets and cater to various customer needs.

• Supply Chain Efficiency: With its extensive distribution network and logistics capabilities, Metcash demonstrates efficiency in delivering products to its customers, ensuring reliable and timely supply.

Weaknesses of Metcash

While Metcash possesses numerous strengths, it also faces certain weaknesses that may impact its performance:

• Dependence on Independent Grocers: Metcash heavily relies on the independent grocery sector. This dependence exposes the company to the potential challenges faced by this sector, such as changes in consumer behavior and increased competition.

• Limited Control over Retail Pricing: As a wholesaler, Metcash has limited control over the pricing of products at the retail level. This lack of control may affect profit margins and competitiveness in the market.

Opportunities for Metcash

Metcash has several opportunities to explore and capitalize on to further enhance its position in the industry:

• Private Label Growth: The private label market in Australia is experiencing significant growth. Metcash can leverage this trend by expanding its private label offerings, attracting price-conscious consumers, and increasing market share (Source).

• Expansion of E-commerce: With the increasing popularity of online shopping, Metcash can invest in and expand its e-commerce capabilities. This would allow the company to reach a broader customer base and adapt to evolving consumer preferences.

Threats to Metcash

Metcash also faces potential threats that could impact its performance:

• Intense Competition: The grocery industry in Australia is highly competitive, with both traditional retailers and online platforms vying for market share. Increased competition can put pressure on Metcash’s profitability and market position.

• Changing Consumer Preferences: Shifts in consumer preferences, such as increased demand for organic and healthier food options, can pose a threat to Metcash if it fails to adapt and meet these changing needs effectively.

By analyzing the strengths, weaknesses, opportunities, and threats, Metcash can gain valuable insights into its internal and external environment. This analysis serves as a foundation for strategic decision-making and allows the company to leverage its strengths, address weaknesses, seize opportunities, and mitigate potential threats.

Competitors in the Metcash Industry

Metcash operates in a highly competitive industry, facing competition from various companies that operate in the retail and wholesale sector. Some of the key competitors of Metcash include:

Axfood

Axfood is a prominent competitor of Metcash in the food retail and wholesale business. They are known for their extensive range of products and strong presence in the market. Axfood operates multiple store formats and has a diverse customer base, which allows them to effectively compete with Metcash in the industry. For more information about Axfood, visit their website here.

C&S Wholesale Grocers

C&S Wholesale Grocers specializes in supply chain solutions and wholesale grocery supply, making them a significant competitor of Metcash in the metcash industry. With their extensive distribution network and diverse product offerings, C&S Wholesale Grocers competes directly with Metcash in providing wholesale grocery services. To learn more about C&S Wholesale Grocers, you can visit their website here.

DIA (Distribuidora Internacional de Alimentación)

DIA, also known as Distribuidora Internacional de Alimentación, is engaged in the retail sale of food products. They operate a network of stores and provide a range of grocery products to customers, directly competing with Metcash in the metcash industry. DIA’s strong presence in the retail market makes them a formidable competitor for Metcash. To explore more about DIA, you can visit their website here.

Choice Market

Choice Market operates as a convenience store and competes with Metcash in the metcash industry. With their focus on providing convenient shopping experiences and a wide range of products, Choice Market poses competition to Metcash in serving the needs of customers looking for quick and accessible grocery options. More information about Choice Market can be found here.

As Metcash navigates the competitive landscape, it is essential for the company to continuously assess and adapt to the strategies and offerings of these key competitors. By understanding the strengths and weaknesses of each competitor, Metcash can strategically position itself and identify opportunities to stay ahead in the metcash industry.

Financial Performance of Metcash

To gain a comprehensive understanding of Metcash’s position in the industry, it’s important to analyze its financial performance. This section will delve into the revenue and earnings before interest, tax, depreciation, and amortization (EBITDA) of Metcash, as well as the performance of its various divisions.

Revenue and EBITDA of Metcash

In the 2020 financial year, Metcash reported a revenue of $13.2 billion, representing a 1.9% decrease compared to the previous year. Despite this slight decline, Metcash remains a significant player in the industry.

Metcash’s EBITDA for the same period stood at $366.2 million, reflecting a 5.2% decline from the previous year (Metcash Investor Centre). While the decrease in EBITDA indicates some challenges, Metcash continues to maintain a strong financial position.

Performance of Food Division

The grocery division of Metcash, which includes well-known brands such as IGA, Supa IGA, and Foodland, generated a revenue of $9.7 billion in 2020. This represents a decrease of 2.2% compared to the previous year (Metcash Investor Centre). Despite the decline in revenue, the food division remains a core part of Metcash’s business.

Performance of Hardware Division

Metcash’s hardware division, which encompasses brands like Mitre 10 and Home Timber & Hardware, reported a revenue of $2.1 billion in 2020. This represents a 2.2% increase compared to the previous year (Metcash Investor Centre). The positive growth in the hardware division demonstrates Metcash’s ability to adapt and thrive in this sector.

Performance of Liquor Division

The liquor segment of Metcash experienced a 9.2% increase in revenue. This growth can be attributed to strong consumer demand and increased store numbers in the Independent Brands Australia (IBA) network (Source). The success of the liquor division showcases Metcash’s ability to capture opportunities in this market.

By analyzing the financial performance of Metcash, we can gain insights into its position within the industry. Despite some challenges and fluctuations in revenue and EBITDA, Metcash continues to demonstrate resilience and adaptability. The food, hardware, and liquor divisions each contribute to Metcash’s overall performance, with varying degrees of growth and stability.

Future Outlook for Metcash

As Metcash looks to the future, the company is focused on strategic initiatives to drive growth and stay competitive in the market. Two key areas of focus for Metcash’s future outlook are investment in digital capabilities and the expansion of e-commerce offerings.

Investment in Digital Capabilities

To adapt to the evolving retail landscape, Metcash plans to further invest in its digital capabilities. This includes upgrading and modernizing its technology infrastructure to enhance operational efficiency and customer experience. By leveraging digital solutions, Metcash aims to streamline processes, optimize supply chain operations, and improve communication with its network of independent retailers.

Investing in digital capabilities allows Metcash to better anticipate and respond to changing consumer preferences and market trends. By harnessing data analytics and insights, the company can make data-driven decisions to drive growth and enhance customer satisfaction. This investment in digital technology positions Metcash to remain agile and competitive in the rapidly evolving retail industry.

Expansion of E-commerce Offerings

Metcash also recognizes the growing importance of e-commerce in the retail sector. The company plans to expand its e-commerce offerings to cater to the increasing demand for online shopping. By providing a convenient and seamless online shopping experience, Metcash aims to capture a larger share of the digital market.

The expansion of e-commerce offerings will allow Metcash to reach a wider customer base and provide additional channels for independent retailers to connect with their customers. By embracing online platforms, Metcash can offer a range of products and services to meet the diverse needs of consumers in the digital age.

By investing in digital capabilities and expanding e-commerce offerings, Metcash is positioning itself for future growth and success. These strategic initiatives enable the company to adapt to changing consumer behaviors and market dynamics, ensuring its continued relevance and competitiveness in the industry.

To learn more about the SWOT analysis, company analysis, competitive analysis, and market analysis of Metcash, refer to our articles on Metcash SWOT analysis, Metcash company analysis, Metcash competitive analysis, and Metcash market analysis.

Leadership and Competitors

When examining the leadership and competitive landscape of Metcash, it’s important to consider the CEO of Metcash and the competitors in the market.

CEO of Metcash

Jeff Adams currently serves as the CEO of Metcash. As the leader of the company, Jeff Adams plays a crucial role in guiding Metcash’s strategic direction and overseeing its operations. With his experience and expertise, Jeff Adams contributes to the continued growth and success of Metcash in the industry.

According to Owler, Jeff Adams has an approval rating of 63/100, reflecting the confidence and support he has garnered within the organization.

Competitors in the Market

Metcash operates in a competitive market, facing competition from various players. Understanding the landscape and identifying key competitors is essential for Metcash to stay ahead in the industry.

Some of the notable competitors of Metcash include:

• Axfood: Axfood is a major player in the food retail industry, operating in Sweden. They offer a wide range of food products and have a significant market presence.

• C&S Wholesale Grocers: C&S Wholesale Grocers is a leading wholesale distributor of food and grocery products in the United States. They serve retail businesses across the country.

• DIA (Distribuidora Internacional de Alimentación): DIA is a multinational retail company based in Spain. They specialize in the distribution of food, household, and personal care products through their extensive network of stores.

• Choice Market: Choice Market is a growing food retailer that focuses on providing fresh and locally-sourced products to its customers. They prioritize convenience and sustainability in their operations.

These competitors, along with others in the market, contribute to the competitive landscape that Metcash operates within. By closely monitoring and assessing the strategies and offerings of these competitors, Metcash can adapt and innovate to maintain its competitive edge.

To gain a comprehensive understanding of the industry, it is essential for Metcash to conduct thorough SWOT analysis, company analysis, and market analysis. This enables Metcash to identify its strengths, weaknesses, opportunities, and threats in relation to its competitors and make informed strategic decisions.