ALM sales up, profits down, as IBA network steals market share from major chains

Published this morning, Metcash Limited’s half yearly results reveal another successful trading period for its Australian Liquor Marketers liquor division in spite of challenging market conditions, with sales growing 2.1% to a worth of $2.5 billion.

However, despite the overall sales growth, ALM’s total profits decreased 3.3% to $49.1 million over the reporting period, with the business citing the impact of reduced strategic buying with lower wholesale price inflation and increased.

“Market shares were held in the Food and Hardware pillars, and grew materially in Liquor,” said Doug Jones, Group CEO.

“The Liquor pillar delivered another strong result with independents outperforming the chains, led by the IBA network. Their tailored, localised and competitive offer has again driven strong performance.”

Metcash partly attributes its strong performance to the localised and competitive offer of its independent retail stores, with value-oriented RTDs, spirits, beer, and wines experiencing the greatest growth.

Jones said, "our diversified portfolio strategy continues to deliver in the face of a challenging external environment. Conditions were difficult for all our pillars… The independent value propositions continue to resonate with shoppers in a highly value-conscious environment, underpinned by the improved quality of those offers, including competitive pricing positions.”

The half yearly results follow shortly behind Endeavour Group announcing a profit warning for the upcoming quarter after a slow-down in sales in September.

Both Coles Liquor and Endeavour Group announced a renewed focus on value-oriented offerings to consumers in the lead up to the festive holiday period.

“During the quarter, promotional intensity lifted across the sector as customers became increasingly value conscious,” said Steve Donohue, CEO at Endeavour Group.

Similarly, Coles Group CEO Leah Weckert said, “cost of living remains a challenge for many of our customers, and we are focused on helping them find value in our stores through weekly specials, value campaigns, Flybuys and exclusive brands.”

Despite this, Metcash expects ALM to continue to win back market share, primarily as a result of performance from its off-premise IBA network. In the first four weeks to the period end November, ALM’s total liquor sales grew by 4.4%, driven by a 5% increase in wholesale sales to the IBA retail network and contract customers.

“Looking forward, as the leading wholesaler and service provider to independent businesses across Australia, our more diversified Group provides an ideal base for future growth,” said Jones.

“Our Food and Liquor pillars are well positioned for structural growth, while in Hardware we remain confident that the long-term market fundamentals remain positive for both IHG and Total Tools. These businesses are ideally positioned to capitalise on an improvement in activity levels.”

Metcash also recently unveiled its new purpose-built distribution centre in Truganina, Victoria, which it says will be crucial in addressing the growing volume of business.

"The new site is a game changer for both our staff and customers,” said Jeremy Goodale, General Manager of ALM’s Southern Region.

"We are working with suppliers to constantly refresh our range and increase the stock holdings on site of the most popular brands to minimise any out-of-stock disruptions… We are training and onboarding new warehouse staff, with new processes and new equipment and are preparing for the busy summer trading period.”