Small supermarkets feeling the pinch

SUPERMARKET supplier Metcash says times are tough due to low consumer confidence and the price war between Coles and Woolworths.

GROCERY wholesaler Metcash says a price war between Coles and Woolworths and weak consumer confidence continue to hurt smaller supermarket chains.

Metcash supplies fresh food and groceries to independent retailers including IGA and Foodworks.

Earnings in Metcash's food and grocery business fell by five per cent in the year to April 2013, and chief executive Ian Morrice said on Wednesday the business experienced another tough three months to the end of July.

He told the company's annual general meeting low consumer confidence was also impacting the grocery business.

That confidence is unlikely to improve until the federal election is over and the Australian dollar falls further, Mr Morrice said.

Consumers and extremely cost conscious, and the massive number of discounts offered by Woolworths and Coles are putting downward pressure on prices across the industry, he added.

Chairman Peter Barnes told shareholders smaller retailers were struggling against the big supermarket chains.

"Conditions for the independent retail sector remain challenging with low consumer confidence and the self service supermarket chains locked in an ongoing marketing war," he said.

Metcash will issue guidance for its full year earnings and an update of its review of its grocery business in December.

Metcash shares were down 19 cents, or 5.5 per cent, at $3.25 at 1552 AEST.