Metcash to acquire liquor group in attempt to lift its liquor sales
Australian wholesaler and distributor of groceries Metcash is attempting to stem recent losses in its Liquor division, entering into an agreement in late February 2015 to purchase Southern Independent Liquor Group (SILG), which trades under the Duncan’s and OzLiquor banners.
The acquisition is subject the shareholder approval, which will be sought at a meeting to be held in March 2015.
SILG operates in Victoria and Tasmania with over 100 Duncan’s and OzLiquor branded retail outlets also has over 400 wholesale customers.
“The purchase of SILG would strengthen Metcash’s presence in these states,” said Ian Morrice, Group CEO of Metcash. “The Duncan’s stores are well placed and we believe that as part of Metcash’s Australian Liquor Marketers portfolio, sales can be increased as they become part of the Group’s established marketing programs,” he said.
Metcash liquor business growing profit
Metcash saw earnings growth for its Australian Liquor Marketers business for the financial half year ending 31 October 2014, despite a decrease in sales. Australian Food News reported in December 2014 that ALM had seen “robust retail sales performance” in Metcash’s retail bannered independent groups. This influenced operating leverage by increasing EBIT by 6.9 per cent to $24.9 million.
Sales to wholesale contract independent groups decreased as these stores lost market share to organised groups and the self-supply chains during the financial half year ending 31 October 2014. Metcash said continued decline in liquor consumption contributed to lower overall volumes, resulting in a 3.6 per cent decline in ALM’s total sales during the period.
Focus on ‘growing independent strength’
Mr Morrice said Metcash would be able to leverage SILG customers and retail outlets, which will be serviced from the ALM distribution centres in Victoria and Tasmania.
This acquisition follows the recent successful transition of Steve’s Liquor Group to Metcash’s BottleO network.
“Both SILG and ALM are focused on growing independent strength and we view the asset sale as a positive step toward building a stronger and more robust independent liquor retail sector,” said Frank Kraps, Chairman of SILG. “An Extraordinary General Meeting of SILG shareholders is to be held in March to obtain approval of the Asset Sale Agreement.”