Another one bites the dust

The highly oligopolistic Australian supermarket industry just lost another multinational player.

South African grocer Pick’n’Pay (#143 on Deloitte’s list of global retailers by size) has sold off its Aussie holdings (the Franklins branded supermarkets) to our biggest grocery wholesaler Metcash.

Metcash (which was once South African-owned) supplies the very large network of 1000+ independently owned IGA stores. The 77 company-owned Franklin stores will soon be sold off to what are effectively franchisees locked into a supply arrangement with Metcash (now there’s a nice strategic play with respect to reduced bargaining power of buyers).

Franklins has proven a very tough company to run. It was sold off by Hong Kong’s Dairy Farm (#128) back in 2001 after they couldn’t turn a decent profit against the Woolworths and Coles behemoths.

Irrespective of the slow rise of Aldi and prospect of a Costco challenge, the rivalry in this market is mighty nasty for anyone without the big two’s economies of scale and reach.

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Tags: Australia, business, coles, competition, grocery, International business, International retailing, Metcash, oligopoly, Pick'n'Pay, Retailing, Strategic management, supermarkets, Woolworths