Liquor sales up 6.7% for Metcash
Metcash has announced weaker liquor earnings in its FY19 half-year results following the adoption of a new accounting standard that excludes charge through sales.
Net profit for Metcash overall rose 3% to $95.8 million in the six months ended October 31. Liquor EBIT declined 1% to $29.1million. However, excluding impact of AASB15, EBIT increased 5.4%.
Total liquor sales (including charge-through) increased 6.7% to $1.75 billion.
"We think this is a pretty good set of results we've put together, based on the challenges out there in the market,"group chief executive Jeff Adams told the Australian Financial Review.
"Overall we've seen some good improvement half on half."
The company noted there was continued growth in ALM wholesale business with the addition of large contract customers.
Wholesale sales to IBA bannered network increased 7.2% – including the conversion of contract customers to IBA banner (Thirsty Camel in SA and NT).
Like for like sales to the IBA bannered network were up 2%, supported by the on-going success of ‘Best Store in Town’ initiatives.
Metcash said that the beer category was most impacted by the rollout of Container Deposit Schemes in NSW, ACT and Queensland. The company also revealed there was some impact to earnings from higher costs including fuel
and costs associated with the introduction of the CDS schemes. It pointed out "uncertainty related to the roll-out of non-uniform state container deposit schemes is expected to continue".
Continued evolution of private label range
Metcash noted there had been significant success with as it continued to evolve its private label range.
The company spent the period focussing on in-store execution to engage shoppers and grow category, plus increasing basket size and returns.
It increased the number of SKUs to 70 across wine, beer and spirits, with sales growth of 30% (1H19 v 1H18).
A recent triumph was Kollaras & Co's Two Truths wine range - created for IBA - winning New Wine Product Of The Year at the 2018 LSA Retail Liquor Industry Awards for Excellence Awards, beating out finalists including 19 Crimes, McGuigan Single Batch Project and Squealing Pig.
Strategic focus - the next phase
For Metcash Liquor, the company noted its priorities moving forward will be:
>> continuing to build and improve the quality of the IBA network
>> investing in systems to drive shopper insights/tailored localised offer
>> nenewed focus on ‘on-premise’ opportunities
>> continued expansion of private label range
Metcash said it expects volume growth for Liquor over the balance of FY19 to continue to be at "modest levels" due to the on-going trend of premiumisation.