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Metcash suffers major blow as 7-Eleven deal falls through

Metcash has suffered a major blow to its wholesale business, after 7-Eleven announced it will not be renewing its contract with the food and beverage supplier.

Metcash said in a statement to the ASX on Friday afternoon that it was “unable to reach an agreement with the convenience chain 7-Eleven on its supply requirements for the east coast, including delivery routes and scheduling”.

Metcash felt that the requirements laid out by the chain would lead to supply being “uneconomic” for its convenience business.

Metcash’s convenience sales to 7-Eleven are worth approximately $800 million annually, mostly in lower-margin tobacco products.

Metcash said it will be looking for ways to offset the impact today’s announcement will have on future earnings.

The grocery wholesaler is still in discussions with 7-Eleven about supply to Western Australia and a number of smaller categories on the east coast.

Today’s announcement is just the latest in a string of blows to the business. In September, its largest wholesale supermarket, Drakes, announced that it was going out on its own, with its departure from the group set to cost Metcash around $270 million in sales.

Drakes ended its SA contract in 2018 after Metcash announced plans to open a new purpose-built distribution centre.

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