IGA and Foodland supermarkets have been told to focus on volume sales and competitive prices rather than hiking up prices like other supermarkets amid rising inflation.
Metcash which owns the IGA and Foodland supermarkets network is said to be concerned that hiking up prices would see customers ditch the independent retailers for the duopoly of Coles and Woolworths.
The company advised its store operators they could make a profit by simply selling more products at more competitive prices.
“That is, if prices are not competitive, they could lose sales and gross profit,” a spokesperson said.
However, the wholesaler hasn’t completely ruled out small price increases in line with market conditions.
“As a wholesaler, we accept price increases. Our position has always been consistent: where suppliers put forward legitimate reasons for increases, we accept them. However, our focus continues to be on keeping our retailers at least as competitive in the market, even after the change takes effect,” said the spokesperson.
It comes after Woolworths and Coles have been accused of price gouging amid rising costs of living. A recent Canstar Blue consumer survey revealed over half of Australians (57%) think supermarkets are using COVID-19 and economic events to introduce unnecessary price increases. Another survey of supermarket shoppers found that Aussies who shop at IGA tend to pay less for groceries per week − on average $140 − than those who shop at Coles, Woolies, and even ALDI.
Meanwhile, Metcash recorded a $245.4 million net profit in the last financial year, according to its FY22 full-year results. Supermarket food sales over the past two years rose by 13.8%. The strongest sales growth was recorded in states less impacted by COVID-related restrictions like Western Australia and Queensland.
The strong performance of the IGA network was attributed to shoppers’ support for local neighbourhood stores during the pandemic and the expansion of its online shopping offering, including IGA Shop Online and various store upgrades. The network has also become even more price-competitive, supported by its Price Match and Low Prices Every Day guarantees.
This is despite the retailer network facing widespread challenges like multiple lockdowns during COVID, supply chain issues, and supply route disruptions due to flooding on the east coast, Russia’s invasion of Ukraine, and lockdowns in China.
Metcash is a wholesale distributor for independent retailers including IGA, Foodland, Mitre 10, Home Hardware, Total Tools, Cellarbrations, IGA Liquor, and the Bottle-O. The company has also said it will continue supplying Foodworks stores and Drakes supermarkets in Queensland.
Extracted from Canstar Blue