Metcash reports growth of 9 per cent in liquor

Metcash has reported that liquor sales growth is up by almost 9 per cent for the year and to $4.8 billion in a result that financial analysts say is well ahead of expectations.

Howerver, while EBIT in liquor grew to $97.4 million, this result was impacted by the increased costs to the business of creating a COVID safe workplace, DC absenteeism and increased transportation costs.

Metcash Group's new CEO Doug Jones presented the group's annual results for the first time on Monday as the business prepares to farewell Jeff Adams.

Mr Jones said revenue for the group grew by 6.4 per cent for the year to $17.4b and construction has now begun on a new distribution centre in Truganina which will be around 115k sqm in size and will replace the Laverton DC once completed in the middle of 2024.

Mr Jones said, “Supporting our decision to proceed was the success of our new DC at Gepps Cross in South Australia which has been operational since December 2020, as well as strong growth both in our Food and Liquor pillars in Victoria and the recent renewal of a long term agreement to supply Foodworks stores.”

Metcash says that demand for liquor through its retail network remained strong with growth across the IBA banner group and its contract customers. It attributed this to the continuing trend to local neighbourhood shopping and continued absence of overseas travel and travel retail.

Western Australia recorded the strongest growth in liquor, protected by the market’s isolation through COVID. The liquor business enjoyed 30 per cent growth (compared to FY21) as sales to on-premise customers continued to recover with the easing of restrictions.

Wholesale sales to IBA grew were up 4.4 per cent on last year and Metcash says The Bottle-O, Cellarbrations and IGA were its standout performers, particularly the highlight of Cellarbrations being named Liquor Store of the Year in the Roy Morgan Customer Service poll and the 'Best of the Best’ of all.

The strongest category growth as in liquor was seen in RTDs, spirits and wine. Sales of owned and exclusive brands increased by 23 per cent as the wine category continues to be a key driver of growth from Metcash and the acquisition of Kollaras continues to support growth.

Online sales growth for the group as a whole– food, hardware and liquor – were up by 140 per cent for the year, albeit off a low base and branded e-commerce platforms for Cellarbrations, The Bottle-O and Porters are now live with a pilot loyalty program to be launched in the next six months.

The average online liquor basket size for the group is $110 while the Q-comm basket sits at around the $45 mark.

Q-comm (quick commerce) continues to grow in partnership with DoorDash and UberEats offering same day delivery.

Looking ahead, Metcash says rising inflation and continued supply chain disruption makes for uncertain waters and it expects to see the cost of doing business continue to increase.

Mr Jones said: "While remaining focused on managing the supply change challenges, we are also helping shoppers manage the impact of inflation by providing better value options through a wider range of products at competitive prices.

"Going forward, our robust business model is supporting our pillars to manage well through the ongoing challenges, and we remain well positioned with a strong balance sheet and financial flexibility to continue progressing our MFuture plans."

Metcash's new distribution centre will be constructed in adherence with the new 5-Star Green Star sustainability rating and is expected to be completed by mid-2024. Racking and fitout is expected to be approximately $70m.