Metcash ready for the price war with Woolworths and Coles as promotions fly

Independent chains like IGA and Foodland are closely watching Woolworths and Coles as they slash prices, with the boss of wholesaler Metcash declaring his chains are ‘up for’ war at the checkout.

Metcash CEO Doug Jones. Picture: Supplied

Metcash boss Doug Jones has declared his independent supermarket operators IGA and Foodland are “up for” a competitive fight with majors Woolworths and Coles as supermarket chains slash prices to lure shoppers and counter cost-of-living pain.

Mr Jones detected increased competitive intensity in the market but said Metcash had “held its own” among the nation’s leading supermarket chains with IGA, Foodland and other grocery chains under the Metcash banner offering deals.

“We absolutely are able to compete with them,” Mr Jones told The Australian on Monday after Metcash reported an 8.9 per cent lift in annual sales to $17.32bn for the year ended April 30 and net profit 10 per cent higher to $283.3m.

“We are very clear that our processes of monitoring their (Woolworths and Coles) pricing and adjusting our own will continue to be effective. And I base that confidence in those on the relationships that we have with our suppliers who support the strategy. And suppliers are always looking for multiple retail market partners, and they don’t like being only beholden to one or two players in the market, and so they’re very supportive of our strategies.

Piccones IGA Edmonton’s fruit and vegetables on display. Picture: Brendan Radke

“And we’re able to react quickly, and we do, and so we feel confident that we can and do continue to be highly competitive in what we offer our shoppers.”

The pressure on Metcash has come from the usual heavyweights as well as German discounter Aldi, with Woolworths and Coles in the last few months ratcheting up that heat with a slew of discounts on popular grocery basket offerings.

Mr Jones said there was more than just ‘price’ when it comes to deciding value, and as Woolworths tips as much as $100m into shelf prices, the independents could compete on offering and range.

Metcash was also increasingly proactive with suppliers who realise having a strong network of independent supermarkets - there are more than 1,600 stores in the Metcash wholesale channel - was good for business.

“Our suppliers are really well disposed to us, as strategically they need alternative routes to market to the majors, and we offer that. Aldi doesn’t do that because they don’t really carry their ranges, so what we do for suppliers is allow them to get to places where the majors aren’t ... we invest alongside our suppliers and demonstrate to them that investing and keeping our network competitive is good for them.”

Metcash supermarket chains like IGA are facing increased price competition from Woolworths and Coles.

Mr Jones said Metcash aimed to keep as thin a gap as possible in relative pricing between IGA, Foodland and Woolworths and Coles.

“We believe in healthy competition, and we believe choice is the primary ingredient of healthy competition.”

His wholesaler’s liquor arm, which now commands the second-highest retail liquor volumes in the country, was also winning over consumers who didn’t feel the need to drive to a big-box discounter but were happy to shop at a local Cellarbrations or Bottle-O where prices and range were improving.

In hardware, Metcash is up against Bunnings, but was seeing improved performance led by acquisitions and its Total Tools retailer. Its hardware division was able to hold market share in an environment of subdued trading.

Underlying net profit fell 2.4 per cent to $275.5m. Metcash declared a final dividend of 9.5c a share, up from 8.5c and payable on August 27, but total annual dividends fell to 18c from 19.5c in 2023-24.

At its flagship food pillar, sales (excluding tobacco) rose 20.8 per cent to $8.8bn. However, the slide in tobacco sales and the rise of the illegal tobacco market has pinched earnings for Metcash supermarkets - which historically had over-indexed in terms of tobacco sales. Including tobacco, Metcash’s food pillar had sales growth of 11.1 per cent and earnings increased 18.2 per cent to $248.4m.

Since 2021, tobacco sales for Metcash have fallen 40 per cent.

At liquor, sales rose 3.4 per cent to $5.31bn but earnings fell 4.7 per cent to $104.1m. This included restructuring costs of $300,000 and the impact of some cost inflation. Metcash also said on Monday it had inked a deal to buy independent liquor chain Steve’s Liquor which will give it five stores in Victoria and three in Tasmania.

In hardware, sales were up 8.3 per cent to around $2.68bn as earnings fell 10 per cent to $189.3m. In Total Tools, sales increased 0.6 per cent to $683.2m.

Mr Jones said the earlier decision to merge its hardware operations should help bolster margins.

“We think that the environment is starting to look better than it has for a while, certainly not telling you it’s over, but we are seeing some encouraging signs.”

For the first seven weeks of fiscal 2026 group sales were up 4.7 per cent, food 2.9 per cent, liquor up 1.5 per cent and hardware sales 1.1 per cent.

Originally published as Metcash ready for the price war with Woolworths and Coles as promotions fly