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Metcash makes inroads with turnaround plan

233Struggling grocery supplier, Metcash, is beginning to see signs of improvements thanks to its renewed focus on fresh food and private label brands.

Metcash has been under pressure as the 2000-plus supermarkets it supplies – IGA, Foodland, and Foodworks – face intense competition from Woolworths, Coles, and Aldi.

At an investor day on Tuesday, group CEO, Ian Morrice, and his senior executives gave updates on their plans to revamp Metcash, which suffered a $384 million loss in 2014/15.

The key part of the plan is known as Project Diamond, which was launched in 2014 with a focus on store refurbishments, fresh food, lower prices for shoppers, and a restructure of private label brands including Black & Gold.

Marketing head, Madeleine Fitzpatrick, said IGA prices had been slashed across about 900 stores and fresh produce ranges expanded since September 2014.

A major advertising campaign launched by Metcash in June featuring Shane Jacobson from the hit Australian comedy movie Kenny, also appears to have helped convince more shoppers to choose IGA supermarkets.

She said a survey had found that shoppers were now significantly less likely to think IGA was the most expensive supermarket. Wholesale sales had improved, along with those for products “price matched” with rival supermarkets.

Black & Gold sales were up seven per cent and transaction numbers had risen, she said in slides accompanying the investor day presentation. Prices on Black & Gold products had been cut and the packaging revamped.

National operations manager for the Diamond store accelerator program, Roy Leisk, said the expansion of fresh food offerings was also paying off. Average basket sizes and numbers had risen, with higher fresh food and total retail sales having been sustained into fiscal 2016.

Sales of avocados, chicken and berries were particularly strong, enjoying double-digit growth. Plans are also underway to rollout specialty cheese lines in more stores. A further 100 stores would sign up to the accelerator program in the year ahead, Mr Leisk said.

Metcash executives also outlined plans to expand the liquor and hardware divisions, which distribute to the Cellarbrations chain and Mitre 10.


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