Supermarket and wholesale distributer Metcash will spend up to $270 million across its three main divisions of food, liquor and hardware over the next five years as part of a new strategy.
Dogged by competition from homegrown giants Coles and Woolworths, as well as Aldi, Metcash is hoping the new cost-management directive announced on Monday by chief executive Jeff Adams can offset the impact of inflation over the next five years, predicted at around $25 million a year.
Following the announcement Metcash share prices were 2.31 per cent higher, at $2.66 at 1315 AEDT.
The ING supplier has identified potential savings of $50 million over 2020 and 2021 from a number of areas mostly in food-related costs including logistics, property and efficient marketing and promotions.
Chief executive Jeff Adams credited the company’s 2.2 per cent in sales revenue for the six months to October 31 to its food division and hardware business.
Both of these categories will benefit from the largest investment under its revised strategy of accelerating successful segments of the business.
The largest portion of expenditure about $165 million will go towards improving its food and grocery division which includes the trial of new small format convenience stores.
Following weaker results predictions for its hardware category in the second half of 2019 reflecting the slow-down in construction activity, $90 million will be invested into brands such as Mitre 10.
This includes the rollout of its its refurbishment “Sapphire” program to about 200 new hardware stores, and expansion into products like plumbing and flooring.
Under its liquor portfolio supported brands such as Cellarbrations and The Bottle-O have flagged digital capability as an area for growth, while a new chief executive for the category has been slated for early 2020.
Over the next five years Metcash aim to grow revenue by improving infrastructure and cutting costs on processes, and focusing on its independent retail networks with possible integration across different sections.