Posts Tagged ‘Metcash’

Another one bites the dust

July 2, 2010

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.

More mutual forbearance

November 27, 2009

Hot on the heels of Woolworth’s announced entrance into the Australian hardware retailing space, it would seem that fellow grocery player Metcash wants to follow suit.

Metcash, who run all the back-office (and sales and marketing) for the independent supermarkets group IGA has launched a bid for Mitre 10, a cooperative group of over 400 hardware stores.

This would mean the three largest supermarket brands, Coles, Woolworths and IGA would now be the dominant players in the Australian hardware market.

In a strategic sense, this opens a significant likelihood of an outcome referred to as mutual forbearance. This has been defined as

“tacit collusion as a consequence of firms competing in many markets and the resulting increase in their interdependence” (Jayachandran, Gimeno & Varadarajan, 1999: 51 as cited here)

Put simply, operating in to parallel competitive spaces means these firms may well realise the futility of excessive competition and seek some stable d├ętente (a.k.a. a Mexican standoff).

It will be interesting to what the Australian Competition and Consumer Commission have to say about this one (although it is hard once the horse has bolted).