Metcash puts accent on convenience
The grab for a greater slice of the market is part of a new Metcash strategy to harness the milk-bar, petrol and small-cafe market segment to compete with the supermarkets to increase the number of customers for its wholesale operation.
Metcash, which wholesales to 7-Eleven and is chasing a similar large supply contract with BP, believes convenience stores need to change the way they do business if they want to survive in the face of the petrol discounts offered by Coles and Woolworths.
Last year Metcash chief executive Andrew Reitzer warned that the aggressive price war between Coles and Woolworths would force old-fashioned independent corner stores to the wall and that unbannered convenience stores would cease to exist.
Peter Dubbelman, Metcash chief executive of convenience, said the wholesaler had 15 per cent to 20 per cent of the convenience store sector and recently upgraded its 15 distribution centres to allow them to deliver small parcels, right down to individual bottles of drink, to corner stores.
"What we want to do is take a slice of Coles and Woolworths' market share away," Mr Dubbelman said.
"For every convenience store the staple product was milk, now consumers are going to the chains because they are value conscious. So, there has been a shift of consumers which the big chains have planned, but they still have one big dilemma - they are not convenient.
"The value proposition we hold is our convenience store operators need to differentiate. Forget about milk, come up with fresh categories like ready-to-eat or ready-to-heat meals, gourmet sandwiches, so the time-poor consumer has a real choice of going into a convenience store and finding the offer.
"You change the game. Get away from the tobacco, newspaper, milk, - keep doing that, but focus on fresh, on having an offer that the consumer wants."
Part of this new model was showcased by Metcash at a convenience store convention in Melbourne this week, with a small-format store model featuring new fresh categories, such as fruit and vegetables, as well as new categories such as hardware.
Metcash is also keen to leverage its new acquisition, car-parts business Automotive Brands, to offer convenience stores a range of car accessories.
Frequently Asked Questions about this Article…
Metcash is shifting from trying to beat supermarkets on price to winning on convenience and product range. The wholesaler plans to target milk-bars, petrol stops and small cafés with better fresh-food offers, ready-to-eat/ready-to-heat meals, gourmet sandwiches and new product lines to attract time-poor customers and take a slice of the $10 billion convenience sector.
Metcash aims to differentiate convenience-store operators by focusing on convenience and fresh categories rather than price. The company says consumers go to the big chains for value, but convenience stores can win back shoppers with fresh, ready-to-eat options and a more convenient location and offer—an approach designed to blunt the impact of Coles and Woolworths' petrol discounts and price promotions.
Metcash estimates it has about 15–20% of the convenience store sector. The wholesaler already supplies chains such as 7-Eleven and is actively pursuing a large supply deal with BP to expand its customer base.
Metcash recently upgraded 15 distribution centres so they can deliver small parcels down to the level of individual bottles. This allows the wholesaler to service corner stores and small-format operators with more flexible, smaller deliveries tailored to convenience retail needs.
At the convention Metcash demonstrated a small-format store model featuring fresh categories such as fruit and vegetables, ready-to-eat and ready-to-heat meals, and even new non-food categories like hardware—showcasing how convenience stores can broaden their offer to attract customers.
Metcash chief executive Andrew Reitzer warned that the aggressive price war between Coles and Woolworths could push old-fashioned independent corner stores to the wall. He noted that unbannered convenience stores may cease to exist if they don't adapt to changing consumer and competitive pressures.
Metcash plans to leverage its recent acquisition, car-parts business Automotive Brands, to offer convenience stores a range of car accessories—an example of using group-wide capabilities to broaden the product mix available to convenience operators.
Investors may find Metcash's strategy noteworthy because it targets a large $10 billion convenience market with a differentiated approach—focusing on fresh food, small-format stores and distribution improvements rather than price wars. That strategy could help Metcash expand market share away from major supermarkets and create new wholesale opportunities (for example with 7-Eleven and potentially BP).
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