Metcash is celebrating total liquor sales growth of 5.6% to $3.67 billion for the year ending April 30, 2019, reflecting continued growth for the IBA bannered group and ALM wholesale customers.
Overall, the company has also swung back into profit territory, reporting a $192.8 million profit for the year, up from the prior year’s $148.2 million loss.
Liquor EBIT increased 1.3% to $71.2 million, which the company credited to continuation of the “premiumisation” trend; “modest improvement in sales volumes”; cycling addition of new contract customers in FY18; wholesale sales to the IBA bannered network increasing 5.3%; and cycling conversion of contract customers to IBA banner (Thirsty Camel in SA and NT)
The IBA bannered network has delivered six consecutive years of like-for-like liquor sales growth, which Metcash noted showed “the strength of our IBA retailer network”.
Group CEO Jeff Adams was optimistic about the progress on key initiatives in the second half which helped deliver “a pleasing financial and strategic outcome for the year”.
“Solid earnings and cashflows were again delivered by our Pillars despite challenging market conditions, and we continue to be well positioned with a strong balance sheet,” Adams said in a statement to the ASX on Monday.
Premiumisation reaps rewards
Adams said continuation of the premiumisation consumption trend was expected to be the key driver of liquor sales growth for Metcash in FY20.
The company focused on higher value premium products in wine and spirits in FY19 that aligned with consumption trends.
There was also increased coverage of its ‘Cellar Selections’ premium range, with a marketing program to 250 stores
Metcash also strengthened its regional ranging strategy, with retailers having the flexibility to deliver local product offerings.
Private & exclusive labels continue to evolve
Metcash’s private label range increased SKUs to 80 across wine, beer and spirit categories.
In the wine category sales were up 20% on FY18 and it now represents 85% of private label sales. Private label also resulted in increased retailer margins and basket size.
The wine range also garnered extensive critical acclaim, receiving more 50 awards in FY19.
Outlook for the next 5 years
A national roll-out of Porters Liquor was among the key highlights for Liquor moving forward over the next five years.
Metcash also plans to work on growing its share of the on-premise market. This will include strengthening alignment between key partners, including suppliers and customers, better leverage of existing network, and stronger investment in its on-premise team.
The company also flagged an acceleration of its digital capability.
“The business is continuing to focus on key MFuture initiatives including building and improving the quality of its IBA network, growing its share of the ‘onpremise’ market, the trial of corporate stores, expanding private label and the rollout of Porters Liquor,” Adams added.