Metcash is the largest Australian grocery wholesaler in the Australian market, supporting the independent grocery sector (~18% of the retail market). Established for almost 100 years, ASX listed and operating across 3 key business divisions Food & Grocery, Liquor (Australian Liquor Marketers – ALM) and Hardware. For UK based businesses looking for strategic growth into the Australian grocery retail environment (and food service for Liquor) Metcash with their access into the independent sector differentiating on service, premium product range and access to branded innovation can deliver an alternative market entry strategy compared to targeting the two leading retailers. It’s important to understand that the supply chain requirements differ. This added complexity can however deliver access to a different customer looking for innovation, new trends or food products with provenance and less price sensitive.
Total Food Sales increased across the first 6 months as Metcash, yesterday announced 18.8% to $4.2bn. Reflecting growth across both retail and food service. (wholesale growing by 3.1%)
Liquor grew by 2.1% to $2.5bn, with highest growth in value RTDs, spirits, beer and wine group sales,
Key callouts driving the performance include: –
Whilst the outlook continues to be positive for the sector, momentum and diversity is critical in retail.
What is the opportunity for UK Food & Drink businesses targeting growth in Australia?
The Private Label Market
This is experiencing significant growth, presenting Food and Drink manufacturers with opportunities to expand their businesses. Competing on high volume lines where you can offer efficiencies through procurement, automation or volume remains a key opportunity as retailers continue to source internationally to access better commercial performance and invest in price. Additionally, understanding the growth channels, trends and innovation requirements of the market enable UK manufacturers to offer access to turnkey innovation under the retailer’s Private Label offer with products proven in other international markets that can be easily adapted to the Australian palate or consumer.
The Branded Opportunity
This is also experiencing growth as new brands rapidly enter the market to fill the innovation gap as consumer needs change, having the flexibility of a start-up and ability to innovate with agility giving them an advantage versus the major local brands driven on cost control and operational efficiency. Recognising the innovation within the UK food and drink sector this translates to an exciting opportunity for established UK businesses that operate a portfolio of brands and are innovating to gain market share in other highly competitive markets. The high level of appreciation or trust between consumers in both countries increases the opportunity to win. Understanding the competitive landscape is critical to unlock these opportunities through the identification of product or range gaps and marketing messages that really resonate with consumers.
Key Growth categories
Outside of this trading update we know Australian consumers are continuing to shop for value, which is also creating an opportunity for premium products. This results in higher growth for lines such as meat, coffee, health and beauty, confectionary, wine and condiments as more consumers have that special occasion at home, reducing the costs associated dining out. This creates an opportunity for UK food and drink businesses that bring something different and have a clear USP away from the value play and can support brand growth in a new market. Additionally, health and wellness or sustainability continues to be high growth areas so products that have enhanced nutritional benefits or functionality are resonating well with consumers and retail buyers alike (high protein, added collagen, repurposed vegetables as examples).
In an increasingly competitive market being ready or prepared is essential before approaching one of the key retailers. Understanding the competitive landscape, regulatory compliance, supply chain requirements, marketing strategy and how to support the new business effectively are some of the key strategic questions to consider prior to any approach.
Prof Consulting Group
Prof. Consulting Group will help lead your business to success in the Australian Food Industry with our team of veteran experts and extensive range of services. For more information or to discuss how Prof. Consulting Group can support your business, Contact Us Today.
