Foodworks and Metcash reach new supply agreement

Posted by Daniel Palmer on 3rd September 2009

Australia’s largest independent grocery wholesaler and distributor, Metcash, has reached agreement for the supply of grocery and liquor products to the 45 supermarkets (and 8 aligned liquor stores) that Foodworks will acquire from Coles.

It is anticipated that the first store will transition to supply from Metcash in the next month with the last transferring by the end of April 2010. The supply agreement will be for an initial period of 10 years and will incorporate supply of the fresh categories.

The contracted supply arrangements between Metcash and Foodworks, which have been extended until 2019, will remain in place.

Metcash said it would add $250 million in sales for the firm in the first full year of operation.

“We are delighted to have reached agreement with Foodworks and look forward to a mutually prosperous expansion of our relationship,” Chief Executive of Metcash, Andrew Reitzer, said. “While the volume is obviously crucial to supporting Metcash’s negotiating power on behalf of all its independent retail customers, having such an important customer as Foodworks aligned to achieve similar goals in servicing consumers’ needs is critical.”

Mr Reitzer concluded that the acquisition of the Coles outlets by Foodworks would assist the independent grocery sector in building “a viable third force in grocery retailing in Australia”.