IGA and Metcash sign landmark agreement as growth plans gather pace

Posted by Daniel Palmer on 16th July 2009

The representative of over 1,270 independent IGA retailers has announced a new deal with their leading supplier, Metcash, to share the proceeds of growth and major expansion projects.

The IGA National Council announced the deal today, with Metcash – the owner of the IGA brand – to share equally in the $10‐20 million worth of expected annual improvements in profits to be generated through the expansion of the IGA chain, refurbishments of stores, brand compliance, and improvements in stores’ “teamwork” over the next three years.

The new agreement, to be back dated to May 1, 2009, was struck following negotiations between Metcash and IGA at the IGA National Conference and Expo in Surfer’s Paradise this week, attended by more than 5,000 store owners and staff, as well as suppliers to the IGA network.

“This is a historic deal for independent supermarkets in Australia, where we will share the proceeds of IGA’s continued expansion across Australia with our supplier for the first time,” National Board Chairman of IGA, Mick Daly, said. “We are delighted that Metcash has confirmed its position as the champion of the independent retailer by striking this historic agreement with IGA, whose network we continue to expand despite competition from the national chains.”

The deal is one of the outcomes of the two year, multi‐million dollar ‘Project Lion’, which involved IGA and Metcash identifying and generating greater operational efficiencies, technology upgrades, brand compliance and store standards, as well as the creating growth targets.

As a result of the Project, IGA will introduce more than 225 new stores by 2012, with 43 opened last financial year and a further 60 new openings expected in 2009‐2010.

Chief Executive of Metcash, Mr Andrew Reitzer, said the store openings would be supplemented with a cost cutting program designed to improve efficiency.

“We have also targeted $110 million in savings over the period that can be generated through greater operational efficiencies in stores and within our distribution system,” he advised. “We are working very closely with our retailers to achieve aggressive growth targets during tough times and believe our interests are perfectly aligned with IGA owners, who should share the rewards of our market‐leading supply system.”

Mr Reitzer is hopeful the new scheme will encourage other independent retailers to join the IGA banner.