Metcash urges its suppliers to keep their prices competitive

The nation’s largest supermarket wholesaler has implored its grocery suppliers to maintain their normal level of discounting.

The Kingaroy IGA was nearly out of toilet paper by lunchtime.

The nation’s largest supermarket wholesaler, Metcash, has implored its grocery suppliers to maintain their normal level of discounting and promotions in the wake of unprecedented sales volumes at stores triggered by the COVID-19, as Metcash-backed chains such as IGA strive to remain competitive.

Metcash supplies about 1400 independent supermarkets as well as thousands of food shops, convenience stores and other outlets.

It has warned suppliers that there might need to be rationing in particular categories hit by panic-buying to enable a fair distribution of produce to every store in its network.

However, Metcash said its supply chain was showing resilience in the midst of the crisis as employees worked around the clock to keep groceries heading to the supermarket shelves.

In an email sent to some of country’s biggest grocery, produce and general merchandise suppliers, and obtained by The Australian, Metcash merchandise director Grant Ramage argues that discounts and promotions are crucial in the current environment and need to be continued, even though Metcash might be issuing fewer or no weekly catalogues to shoppers in the near term.

Mr Ramage reminds the suppliers about the importance of discounting and promotions for the continued competitiveness of the independent supermarket sector.

“Maintain your investment in the independent channel — our stores need your ongoing support to deliver competitive prices and shopper value through promotions and deals,” he writes.

“This continued support through this period is about the longer-term ­viability of the independent network.

“Together, we have made real progress on improving IGA’s value perception over the past year, and we all want to ensure that we don’t jeopardise that even in these highly unusual times.”

Mr Ramage also assures suppliers that in the face of the social and economic disruptions caused by the coronavirus pandemic the Metcash supply chain is coping with the unprecedented demand, although some of its supermarket stores might be allocated smaller volumes as supplies are shared equally in its nationwide network.

“While our logistics function is under significant pressure, our ­operations teams are doing a phenomenal job to cope with record and unprecedented demand,’’ Mr Ramage continues. “We are operating significantly expanded hours at all sites. Extra freight providers are being used to manage the increased volumes.’’

He says the spike in demand as some shoppers resorted to panic-buying would cause rationing.

“In selected categories where demand has spiked we are restricting product to retailers to ensure fair distribution of available stock for all stores. We are recommending to our retailers that they apply limits per shopper in line with the industry. We believe that this is the approach that is most likely to eventually lead to cessation of panic-buying.”

Mr Ramage’s letter says Metcash understands that suppliers’ businesses are also under enormous pressure at this time.

“What we appreciate: all our partners working together to produce and distribute stock and support the Australian community; your patience and understanding. None of us really knows the extent to which this will escalate or the length of time we will be operating in this manner.”

Metcash’s chief executive of supermarkets, Scott Marshall, told The Australian there was no need for shoppers to panic-buy, mirroring comments from the bosses of Woolworths, Coles and Aldi, saying the shortages on the shelf were purely a demand issue.

“My key message is the same — don’t panic. We do have plenty of supply and products to get out there,” he said. “The supply chain is working very well. We are dealing with Christmas volumes every day without planning for Christmas,’’ he said.