Consumer Shift to Value and Frozen Foods: Metcash CEO

Metcash CEO Doug Jones has observed a shift in consumer behaviour as shoppers prioritise value, opting for private label groceries and transitioning from fresh to frozen foods. The food, liquor, and hardware wholesaler is grappling with high inflation and a series of interest rate hikes. 

Independent supermarkets aligned with Metcash, such as IGA, Foodland, and Ritchies, have gained the loyalty of cost-conscious households through price match offers and “everyday low prices” campaigns. Although there has been a change in shopping patterns, with a notable shift towards value items and a peripheral move from fresh to frozen foods, this trend is not pervasive across the entire market. 

Woolworths and Coles, the nation’s two largest supermarket chains, have also experienced an increase in private label groceries and a preference for frozen and canned foods as consumers seek to stretch their budgets. Metcash’s annual financial results indicate the pressures faced by shoppers in the current economic climate. 

Despite these challenges, the company’s supermarkets arm, bolstered by customer loyalty established during the early stages of the pandemic and store refurbishments, contributed to a 5.5% rise in its full-year net profit. Metcash’s group revenue for the fiscal year ending April 30 increased by 4.2% to reach $15.8 billion. 

While food inflation is stabilizing, Jones anticipates further interest rate hikes by the Reserve Bank of Australia to combat inflation, which will impact consumers. The company remains committed to delivering differentiated value to customers across its three pillars (food, liquor, hardware), focusing on managing costs to offer competitive prices to retailers and, in turn, provide value to shoppers. 

In terms of financial performance, the food pillar achieved earnings growth of 3.8%, supported by a strong trading performance and an improved retail network. The liquor pillar experienced an 8.9% increase in earnings and an 8.3% rise in sales due to strong sales to retail customers and the recovery in on-premise sales. 

The hardware segment, led by Mitre 10, Total Tools, and Home Timber & Hardware, delivered a significant earnings increase of 16.8%, driven by robust demand and the greater contribution from majority-owned and joint venture stores. 

Looking ahead, Metcash has maintained solid sales growth across all pillars in the first seven weeks of the 2024 fiscal year, with food and supermarket sales up 6.8%, liquor sales up 1.2%, and hardware sales up 5%.

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