This morning, Metcash Limited – Australia’s largest drinks supplier to independently owned liquor retailers in Australia and the largest broad range liquor wholesaler in Australia – issued a trading update offering insight into its current market positioning. In it, the Group revealed its liquor division to be in a strong position at present, having gained 5% of liquor retail market share from competitors over the past year.
According to Chairman Peter Birtles, “the current economic conditions remain challenging and continue to impact consumer confidence. As a result, we expect the shift in consumer behaviour to more value-conscious choices to remain in FY25.
“We continue to work closely with our suppliers and shoppers to maintain a value offering with a wide range of products at competitive prices, and we are encouraged by our retailers’ adaptability and ongoing ability to meet shoppers’ needs.”
In its trading update presentation, Metcash said that its “strategy is working,” with its Food & Liquor businesses “structurally positioned for growth.”
“The Company’s platform of three diversified businesses is fundamentally strong, and we have the right plans, teams and capabilities in place to deliver future growth as we work through the current economic cycle,” added Birtles.
“Our financial position is strong, our strategy continues to deliver and the addition of new channels through our recent acquisitions will help us to continue progressing our growth plans.”
Since 2020, profits from Metcash’s Liquor business have grown at a compound annual growth rate of 11% to its latest FY24 total of $109.2 million. Despite being slightly below the Group’s overall 12% growth rate over the past four years, liquor experienced the greatest profits growth over the past year, growing 4.9% compared to the group’s overall 0.9%, Liquor was the only Metcash pillar that grew across both profits and revenue, with food experiencing an 0.5% decrease in revenue and Hardware a 3.8% decrease in profits. The only measure in which liquor was outperformed was in revenue, with Hardware growing by 2.7% compared to Liquor’s 1.7%.
“Operationally, all pillars demonstrated resilience in softer market conditions successfully leveraging their competitive strategies,” said Birtles.
“In Liquor, the business continued to outperform the market, win share and deliver strong earnings growth.”
In its trading update presentation, Metcash says liquor business growth “accelerated with independents again winning market share underpinned by the relevance of their localised offer.” Throughout the year, ALM wholesale sales to Independent Brands Australia retail customers increased by 5.8%: “The IBA independent network has outperformed in a more challenging environment buoyed by further improvements to network quality and competitiveness,” said Metcash in its trading update presentation.
Metcash’s liquor business currently represents 28% of overall revenue and 20% of total earnings before income and tax. Despite having around half of the retail footprint – with 1,619 Supermarket retail stores compared to 3,057 Liquor retail outlets – food continues to be Metcash’s most valuable pillar, responsible for 53% of sales revenue and 40% of profits.
“Group revenue increased 0.7% to $18.2bn, while Group EBIT declined 0.9% to $196.3m, with growth in Food and Liquor earnings being offset by lower earnings in Hardware and increased corporate costs,” said Birtles.
More information about ALM’s current positioning can be found in this Drinks Trade article.
