IGA owner Metcash ready for Woolies, Coles
Metcash boss Doug Jones has declared his independent supermarket operators under banners like IGA and Foodland are 'up for' the competitive fight with majors Woolworths and Coles as supermarket chains slash away at prices to lure in shoppers amid cost-of-living pain.
Mr Jones said he was seeing increased competitive intensity in the market but that Metcash had 'held its own' among the nation's leading supermarket chains with IGA, Foodland and other food chains under the Metcash banner offering competitive prices.
'We absolutely are able to compete with them,' Mr Jones told The Australian on Monday after Metcash released its full-year results which showed an 8.9 per cent lift in sales to $17.32bn for the year ended April 30 as net profit rose 10 per cent to $283.3m.
'We are very clear that our processes of monitoring their (Woolworths and Coles) pricing and adjusting our own will continue to be effective. And I base that confidence in those on the relationships that we have with our suppliers who support the strategy. And suppliers are always looking for multiple retail market partners, and they don't like being only beholden to one or two players in the market, and so they're very supportive of our strategies.
'And we're able to react quickly, and we do, and so we feel confident that we can and do continue to be highly competitive in what we offer our shoppers.'
Metcash supermarket chains like IGA are facing increased price competition from Woolworths and Coles.
The competitive pressure on Metcash has come from the usual heavyweights Woolworths and Coles as well as German discounter Aldi, with Woolworths and Coles in the last few months ratcheting up that competitive heat as they dazzle shoppers with a slew of new discounts on popular grocery basket offering.
But Mr Jones said Metcash and its food retailers were ready for the fight and would maintain a strong focus, keeping as thin a gap as possible in relative pricing between IGA, Foodland and the majors Woolworths and Coles.
'We feel really good with the relationships we have with our suppliers … and the proof of the pudding is in the eating, our shoppers continue to visit our stores. And we are for it. We believe in healthy competition, and we believe choice is the primary ingredient of healthy competition.'
Mr said his wholesaler's liquor arm, which now oversaw the second-highest retail liquor volumes in the country, was also winning over consumers who didn't feel the need to drive to a big-box discounter to secure value but were happy to shop at a local Metcash bottleshop such as Celebrations or Bottle-O where prices and range was improving.
In hardware, Metcash faced off against market behemoth Bunnings, but was seeing improving performance led by recent acquisitions and its Total Tools retailer. It said its hardware division was able to hold market share in an environment of subdued trading activity.
IGA is closely monitoring price changes at Woolworths and Coles. Picture: Brendan Radke
On Monday, Metcash, a wholesaler of food, liquor and hardware, reported growth in full-year sales and profit, but underlying profit after tax fell 2.4 per cent to $275.5m. Metcash declared a final dividend of 9.5c a share, up from 8.5c and payable on August 27, but the full-year dividend fell to 18c from 19.5c last year.
'The business again performed well-supported by the successful execution of our strategy and disciplined operational performance,' Mr Jones said. 'The increased diversification and resilience of the group was a key driver of sales and earnings growth in the face of challenging conditions in all pillars, particularly in the hardware pillar where trade activity remained subdued.
'The quality and competitiveness of the independents' differentiated offer continues to resonate with shoppers, and this again helped underpin sales growth in all pillars.'
At its flagship food pillar, sales (excluding tobacco) rose 20.8 per cent to $8.8bn, which also reflected the inclusion of its acquisition of Superior Foods. Earnings for its supermarkets and food arm increased 18.2 per cent to $248.4m.
At liquor, continued shopper preference for convenience and quality of differentiated independent offer, delivered accelerated growth in the second as well as volume growth and market share gains. Liquor sales rose 3.4 per cent to around $5.31bn as earnings fell 4.7 per cent to $104.1m. This included restructuring costs of $300,000 and the impact of some cost inflation. Metcash also said on Monday it had inked a deal to buy independent liquor chain Steve's Liquor which will give it five stores in Victoria and three in Tasmania.
In hardware, sales were up 8.3 per cent to around $2.68bn as earnings fell 10 per cent to $189.3m. In Total Tools, sales increased 0.6 per cent to $683.2m, largely reflecting the impact of new stores, mostly offset by flat trade activity and the impact of cost-of-living pressures on trades people.
The 10 per cent slide in hardware earnings reflected the impact of weaker trading activity, retail margin pressure and a significant increase in depreciation and amortisation related primarily to acquisitions, Metcash said.
In terms of current trading conditions, Metcash said for the first seven weeks of fiscal 2026 sales were up 4.7 per cent, food sales up 2.9 per cent, liquor sales up 1.5 per cent and hardware sales better by 1.1 per cent.
Read related topics: ColesWoolworths
Eli Greenblat
Senior Business Reporter
Eli Greenblat is a senior business reporter at The Australian and leads coverage for the paper on the retail and beverages industries as well as covering issues related to supermarket regulation and competition, consumer behaviour, shopping, online retail and food and grocery suppliers. He has previously written for The Age, Sydney Morning Herald and the Australian Financial Review.
@EliGreenblat
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