Executive summary

The purpose of this paper is to critically analyse the Metcash limited company. Over the years the company has developed to be among the giant companies in Australia dealing with grocery and product wholesaling. Their marketing approaches have developed over the duration to match the market demands. The company has emphasized lower prices and attractive after sale services in their marketing policies. Unfortunately due to poor decision making and managerial incompetence’s in the company they have been dropping in the market value. This paper evaluate the situation of Metcash limited supermarket analysing their strengths and weaknesses and how they can be improvised.

Supermarkets and Grocery Industry

The grocery industry is among the most significant industries within the Australian economy. Foods and other staples are key in people’s lives as they use them almost in a daily basis. As such, the prices of that products directly impacts the lives of consumers. As an industry, the grocery employs many workers and is connected to other industries such as agriculture and logistics. In Australia, supermarkets are among the top stakeholders in the grocery industry, whereby they cater for around 70% of the total value of retail market groceries. The industry is experiencing rapid changes, with more firms joining the industry. Metcash Supermarkets is among the key players in the Australian food and grocery industry, having several stores all over the country (“IBISWorld Reveals State of the Supermarkets and Grocery Industry”). However, with the current changes in the industry, the firm is facing competition from other players such as Coles, ALDI, and Costco. Notably, the big four firms occupies around 80% of the industry’s market share as shown below.

Figure 1: Australian grocery industry firms’ share

Due to increased competition, each firm is committed to put in place particular strategies, aimed at increasing its productivity. In that regard, an examination of Metcash Supermarkets offers great insights about the industry.

Metcash Limited Supermarkets

Metcash Limited is a firm that is among the top 50 companies in Australia. The company operates in both retail and wholesale sectors. In 2018, the company recorded a gross revenue of $14,562,900,000 (“Our Businesses,” n.d.). As depicted by the company’s 2018 first quarter sales, foods are its major source of revenue as shown in the chart below (Pash, 2018).

Figure 2: Metcash 2018 revenues

As per 2018, the company had more than 6000 employees in Australia include those working in the subsidiaries the company manages. Food and grocery are among the major sector that can be attributed to the company’s recent success (financial review, 2019). The firm is committed to attain a larger market share by increasing the IGA branded retail stores and other subsidiaries such as Foodland, Lucky 7, and Friendly Grocer. Even though the company faces a lot of competition, it still maintains its position in the market.

One Aspect The Company Excels At: Pricing

The supermarket is known for it reduced prices across the town. The prices are relatively low on products as compared to other retailers. This makes it a conducive place for small-scale retailers to come and buy goods in bulk and supply them to other places where they can sell and make some profits too. The pricing has also attracted more buyers to the supermarket as customers can get the value for their money. The supermarket also has several promotional discount, whichare usually done on peak seasons like December. The products are subsidized or you get additional product of the same if you purchase a certain amount of the promoted products (Rebecca, 2012). Product promotion and pricing are critical in attracting new customers. The lower and subsidized pricing can be attributed to the company purchasing the products directly from the manufacturers. A reduced distribution channel curbs out intermediaries who hype the prices of the commodities to get their profits. The supermarkets buys goods in bulk and repackage them to smaller sizes which are convenient to small scale traders and buyers. All these are done at a lower price. This aspect has made it dominate in the area and outshine other supermarkets and grocery.

Another Aspect The Company Excels At: After Sale Services

The supermarkets has remarkable after sale services which are complemented by their accommodative staff members. The supermarkets offer delivery of products for all the big products like fridge and couches across the country once you purchase for them. That is incredible as the customer does not have to pay again for the transportation cost f the product. The packaging of small products is done excellently using the supermarkets shopping bags. The after sale services helps the customer feel appreciated and gives him or her a feeling of entitlement. The customers are likely to come back to a place where they are given better after sale services. This is different to other supermarkets, which charges customers to deliver bulky products at different parts of the country. The staff’s members are always accommodative and ready to help customers whenever called upon. The staff members help customers who are stranded in identifying where certain products are located. The staff also helps in packaging of the products. The supermarkets emphasizes on a very cordial relationship between the employees and the customers. An employee review is frequently done to ensure that the employee are up to the company standards. All these are positive factors that have helped the supermarkets outshine their competitors.

One Aspect That The Company Is Criticised For: Decision Making

Metcash limited supermarkets has however made decisions which have negatively affected it growth. The company has opted for a grocery code which has made it to be lagging behind other supermarkets like Woolworths and Coles. Due to this Metcash has been on the government ladder for how they are treating their employees and suppliers. The government has singled out Metcash limited supermarket for the behavior it portraying to the farmers and the food manufacturers. From a forensic analysis that was carried out it was determined that Metcash limited supermarkets had not complied with the promotional code and has been critized for expecting payments which are above reasonable expenses to conduct study tours. According to the review various issues were identified which were absurd from the grocery code. These issues have affected the Metcash limited market share which have been dropping. According to the report as at 2018 Metcash had a market share of 7 per cent and it was dropping steadily. The supermarkets has over the years adapted a traditional wholesale model which has been seen as not adaptive to the changes in the consumer habits. These factors have affected the general operations of the supermarkets and has made it lag behind.

Recommendations and Conclusion

It is evident that Metcash has an uphill task to do to remain competitive in the supermarket and grocery field. The company should develop better and contemporary wholesale models. This will help in creating an environment that is easily adaptive to the changes going on the field. The company should also treat it suppliers fairly. Suppliers have been running away from the company due to how they are generally treated and paid this has created a gap between the supplying department and the whole selling department causing depreciation in overall available products. Partnering effectively with suppliers also is crucial in bringing the prices down as there would be adequate products to retail. In a nutshell, to remain competitive in a business you should be able to read all the current business trends and acts on them effectively and swiftly. Metcash limited supermarket has the ability to expand more since it has already created a brand for itself. It needs to adopt to various government recommendations to have a better working environment. The company should act on its weaknesses and strengthen its strengths to remain relevant and competitive enough.

References

IBISWorld reveals state of the supermarkets and grocery industry Industry Insider. (n.d.). Retrieved from https://www.ibisworld.com/industry-insider/press-releases/checkout-update-q1-2018-ibisworld-reveals-the-state-of-play-in-the-supermarkets-and-grocery-stores-industry/

Our Businesses.(n.d.).Metcash. Retrieved from https://www.metcash.com/our-businesses/

Pash, C. (2018, June 25). Metcash shares jump despite a full year loss from IGA supermarkets. Retrieved from https://www.businessinsider.com.au/metcash-full-year-loss-iga-supermarkets-2018-6