FoodWorks to expand private label, take greater control of supply chain
Australian independent supermarket operator Foodworks has outlined a new strategy to enhance and manage distribution of their private label offering – with the help of a logistical partnership with CEVA Logistics.
The logistics group will be in charge of the supply chain and warehousing of the FoodWorks’ own house brand products, as FoodWorks embarks on a plan to improve their private label range.
Foodworks, which operates over 700 supermarkets, is currently involved in a long-term supply agreement with Metcash; with the Metcash-owned IGA Distribution responsible for delivering 79 FoodWorks ‘Best Buy’ exclusive private label products and selling branded grocery and Metcash ‘Black & Gold’ products to FoodWorks retailers. The new agreement with CEVA means that IGA Distribution will no longer distribute the ‘Best Buy’ products and dictates that FoodWorks will take greater control over their private label products. Their supply agreement with Metcash for branded grocery products and ‘Black&Gold’ goods will remain unchanged.
At the supermarket group’s national conference, CEO Peter Noble announced the changes were to ensure they could create strong competition to other retailers as the Australian supermarket landscape continued to change. “As the industry becomes ever more competitive, with new formats like Aldi and Costco developing networks in Australia, our focus has narrowed in on developing and enhancing our private label offer and on new business and property in order to grow our business,” he said at the conference.
Mr Noble noted that consumers were becoming more price sensitive and introducing new category-specific private label products enabled FoodWorks to “retain control of the quality and the price point to our customers.”
The new range will not be branded ‘FoodWorks’ and “will feature exciting new brand names and eye catching packaging designs”, according to their website. They also stress that national brands remain the cornerstone of their operations, with such products still expected to be represent 90% of store sales.
The Chief Executive Officer of Metcash Limited, Mr Andrew Reitzer, today stated that FoodWorks’ decision would not have any effect on Metcash profits and was a ‘win-win’ situation for both Metcash and FoodWorks.
“Of the 79 ‘Best Buy’ products, 62 are uneconomical for us to handle as their turnover is 20 or less cartons per warehouse per week,” Mr Reitzer reported. “By FoodWorks moving the ‘Best Buy’ products to CEVA, IGA Distribution will be able to make more efficient use of valuable warehouse space.”
“We will continue to distribute branded grocery products to FoodWorks retailers under a long-term supply contract together with our ‘Black & Gold’ generic products,” Mr Reitzer concluded.
The new supply chain agreement will commence later this month but CEVA will not be servicing all FoodWorks stores until next year.