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Metcash boss Doug Jones says IGA stores are taking the fight to Coles and Woolworths, offering Australian households a “real value” alternative to the two supermarket giants.

Jones said successive interest rate rises and increasing grocery prices had started to affect shopper behaviour, with IGA well-placed to capitalise on customers looking for better deals and a wider range of products.

“We think our network offers real value when it comes to products, [as well as] well-staffed and very enticing deli areas – we think that stands us in very good stead,” he said.

“The customer value proposition in an IGA is fundamentally different. The community-based store resonates with Australians. Because the managers or the owners are from and of the community, they often source products that are particularly relevant to their local communities.”

Shares in the ASX-listed grocery wholesaler shot up as much as 8 per cent on Monday after it beat market expectations with a 7.6 per cent jump in profits to $259 million in the 12 months to April 30.

Metcash’s full-year revenues increased by 6.2 per cent to $15.8 billion, with the company reporting it had managed to hold on to most of the shoppers who relied on local IGA supermarkets during the COVID lockdowns.

“As they’ve rediscovered their community stores, they have really liked what they’ve seen,” Jones said.

As the battle for consumer wallets intensifies, he said Metcash wanted to remind shoppers that there was choice in the grocery sector beyond the major supermarkets.

The company’s management says IGA has made significant progress narrowing the product price gap between itself and its competitors over the past two years, and has expanded its price match program to put hundreds of products in line with Coles and Woolworths shelf pricing each week.

Metcash is also competing against retail giants in the hardware and liquor spaces, through its operation of brands such as Total Tools, Mitre 10, Cellarbrations and The Bottle-O.

The company’s hardware sales jumped by 10.6 per cent to $3.4 billion for the year, and are now the biggest contributor to overall earnings before tax, making up 42 per cent.

Jones said that while home building trends were starting to normalise, growing demand for smaller renovation programs benefited the business given its focus on serving small and medium building customers.

Metcash’s DIY business, which accounts for about one-third of its hardware segment, was also staying competitive on product pricing.

“We want to remind shoppers that there’s a choice – and we recognise that like in food and liquor, they have a choice as to how they manage their budgets. We want to be part of their choice set.”

MST Marquee analyst Craig Woolford said the latest numbers represented a resilient performance from the company.

“Metcash has delivered a solid FY23 result and demonstrated it has retained the majority of its customer wins during COVID,” he said in a note to clients.

IGA owner Metcash says sales across all retail pillars remain “strong” and the business is actively managing increased cost pressures.

For the year to April 30, group revenue rose 6.2 per cent to $15.8 billion while underlying tax-paid profit was up 4.6 per cent to $307.5 million.

Group CEO, Doug Jones, said both sales and earnings were at “record levels” as the business continued to face additional challenges associated with rate increases and cost of living.

“Our focus on further improving the competitiveness of our independent retail networks, as well as the success of our strategic acquisitions, particularly Total Tools, have been key factors in the strong performance.”

Total food sales grew 2.8 per cent to $9.6 billion on a normalised basis while supermarket sales rose 2.1 per cent and convenience store sales were up 9.7 per cent.

Liquor sales grew 8.3 per cent to $5.1 billion driven by strong demand “buoyed” by improved competitiveness, a preference for local shopping and at-home consumption trends.

The business opened 39 new IGA stores during the year and says it is “well positioned” to deliver growth and superior returns to shareholders.

For the first seven weeks of FY24, group sales have improved by 2.3 per cent, however, ongoing interest rate hikes have impacted consumer confidence across its retail networks.

Nespresso has named Stefan Vermeulen as its new MD for Oceania, effective next month. Vermeulen will succeed Jean-Mark Dragoli, who will move forward as the global head of Nespresso Authorised Brands in Switzerland.

The company said Vermeulen brings a wealth of brand knowledge and local experience, having held leadership positions within Nespresso for more than 12 years, including leading the team in New Zealand as MD and four as head of Nespresso Australia’s professional business. 

During his tenure, Vermeulen helped drive substantial growth in New Zealand by introducing the Vertuo system to the market in 2021, expanding Nespresso’s coffee range, and spearheading local sustainability initiatives.

These efforts included reforestation projects, support for educational programs on the circular economy, and strengthening the local recycling program.

Sharing his vision for the business, Vermeulen said he believes that coffee can be a force of good for people, communities, and the planet. 

“The more we drive sustainable growth, the more we can have a positive impact as a brand and organisation through the entire value chain,” he explained.

“Sustainability will also remain at the core of our strategy as we explore new ways to engage more consumers with our recycling program and introduce initiatives to help us on our journey towards net zero and improve as a B Corp.”  

Meanwhile, under Dragoli’s leadership, the company said it had benefited from product innovations and services that resonated with local consumers – from Aussie-inspired coffee blends to personalisation and expanded delivery services. 

His prioritisation of local sustainability initiatives has also helped the business deliver on its B Corp commitments and the broader purpose of using coffee as a force for good.

Key projects include:

• An innovative kerbside recycling trial.
• A Recycling Rewards pilot.
• The launch of the company’s first Australian StartCup Challenge supporting circular start-ups and SMEs.
• A partnership with Greening Australia to build resilience in local habitats in the face of climate change.  

Welcoming the new MD, Dragoli said Vermeulen deeply understands the local coffee culture, customer preferences and the nuances in each market. 

“Having led and built relationships with our teams on both sides of the Tasman over the last seven years, Stefan has already established a strong foundation for success in the Oceania market,” he concluded.

“I have no doubt he will do great things in this role, leading with our employees, customers and business partners front of mind.” 

Collins Foods, the ASX-listed operator of KFC and Taco Bell chains in Australia, and KFC in Europe – broke the US$1 billion sales threshold in its home market last year.

For the year to April 30, revenue from continuing operations rose by 14.2 per cent to $1.35 billion with growth across all business units.

KFC Australia’s revenue grew 10 per cent to $1.05 billion when compared to the prior corresponding period while same-store sale growth was up 5.8 per cent, driven by significant e-commerce growth.

Delivery, web and app sales contributed nearly a quarter of all sales in the second half in addition to increased accessibility through partnerships with major aggregators, including Uber Eats.

KFC’s Europe division delivered double-digit sales growth of $249.5 million, up 31 per cent while same-store sales were up 13.9 per cent.

Taco Bell’s revenue increased 36.1 per cent to $48.7 million, with the addition of eight new restaurants during the year.

Underlying tax-paid profit from continuing operations fell to $51.9 million while underlying EBITDA fell to $205.1 million.

In a results filing, the company said it expects inflationary pressures to remain for much of the next year, however, plans to maintain its long-term growth strategies.

That strategy includes a trial of click-and-collect at its Queensland and Victorian restaurants and the steady rollout through UberEats which is contributing to increased brand awareness.

Drew O’Malley, MD and CEO of Collins Foods, commended KFC’s strong store sales performance in Australia and Europe in the face of challenging economic conditions.

“Whilst inflationary pressures have played into our profitability in the short-term, our long-term growth plans remain on track, and we will continue to prioritise providing exceptional value across each of our brands as a primary driver of customer retention and engagement.”

It’s time to take the makeup off at Sydney private equity firm Crescent Capital Partners.

Street Talk can reveal Crescent has mandated Ankura Consulting Australia to find a buyer for its beauty and makeup business, Nude by Nature, after nearly a decade of ownership.

Nude by Nature lays claim to being Australia’s No.1 mineral makeup brand that rings up a sale every 27 seconds from the range. Its product offering covers the whole gamut – foundations, BB cream, mascaras, brushes – and is marketed as 100 per cent clean and natural.

Despite its clean-ingredients push, it’s not a niche player but rubs shoulders with juggernauts like L’Oréal in the makeup aisles of Chemist Warehouse, Priceline, Myer, Target, Big W and 1200 independent pharmacies in Australia and New Zealand.

The homegrown business is the fifth-largest seller at pharmacies – behind multi-nationals Maybelline, Revlon, L’Oréal and Rimmel – where nearly 45 per cent of the population does its cosmetics and beauty shopping.

Its mineral foundation sells for $42.95 a pop, while brushes start at $16.95 on a full-price basis. It claims to be “cleaner” than higher-priced competitors and is ready to be scaled up locally and overseas, according to the sell-side pitch.

Ankura is preparing Nude by Nature for a 100 per cent sale, and would take expressions of interest before commencing the sale process.

Slap on the lipstick, COVID is over

Crescent Capital Partners has pressed play on the sale as discretionary retail straddles a tricky divide – on one side, sales in categories like makeup and movie cinemas are recovering from lockdowns but on the other, rate hikes are being tipped to force shut shoppers’ wallets again. The PE firm has also redrawn it territory to become a leader in healthcare assets. 

The preliminary sales pitch has urged prospective buyers to think of Nude by Nature’s double-digit EBITDA margins (detailed financials were not offered at this stage), track record of growing profitably, large footprint and future growth opportunities.

The latter, it said, would come from pushing further into digital channels and new geographies.

Nude by Nature’s chief executive officer Mark Thompson, who has been in the role since 2014, sees merit in launching again into China and is preparing a US foray in the 2025 financial year. The management has experience in taking its products global, and is already driving revenues from launches in Canada’s Shoppers Mart and Europe’s Nocibé, Douglas and Karstadt.

Lastly, it has a pipeline of products ready to launch, including colour cosmetics, clean baby care and teen-focused products, prospective new owners were told.

As a comparable deal, Melbourne-based high-end skincare brand Aesop fetched a $US2.53 billion ($3.7 billion) enterprise valuation in a sale to L’Oréal in April. Aesop made $US537 million in fiscal 2022 and had its highest-ever profit margin at 25 per cent at the time of the sale.

Infant formula maker A2 Milk has scored a win in on one of its most lucrative markets after the company’s contract supplier, Synlait Milk, was approved by China’s market regulator to continue selling its China label infant milk formula product.

On Tuesday, A2 Milk announced that China’s State Administration for Market Regulation had renewed approval for Synlait to manufacture stages one, two and three infant formula products after its previous registration only got a bridging extension in February pending the regulator’s decision.

It comes after infant formula sold in China underwent a regulatory process to meet the country’s more stringent food safety rules, known as GB standards, with the renewal to be valid until September 2027.

A2 Milk said production was expected to begin later this month at New Zealand-based Synlait’s Dunsandel facility, and that its products would transition to the market in the first half of 2024.

The company’s chief executive David Bortolussi said the approval by China’s market regulator would provide A2 Milk with continued access to China’s substantial domestic infant milk formula market, which remained a key focus of the firm’s growth strategy.

“We look forward to making our upgraded new China label IMF product available to parents and their infants and young children in China, building on the strong brand loyalty we have developed with Chinese families over the past decade as the pioneer and leader of the A2 protein category,” Bortolussi said.

Chinese parents represent a lucrative key market for the dual-listed company, with revenue from its Asia market increasing 24.5 per cent in the 2022 financial year.

Bortolussi previously told this masthead the company was also seeking to build back its Chinese daigou community after the pandemic’s closed borders inflicted damage on the reseller channel into its key Asian market.

Synlait chief executive Grant Watson said the registration in China was a significant milestone and the company would benefit from the certainty received through the renewed approval.

“The re-registration is a very important milestone, and we have worked hard together to ensure its success,” Watson said.

Following the announcement, shares in A2 Milk traded 4.1 per cent higher at $5.56 shortly after 1pm AEST, ending the day 1.9 per cent higher at $5.44.

Tribeca Investment Partners portfolio manager Jun Bei Liu said the approval extended for a longer timeframe than most investors were expecting.

“The market was getting quite worried about what was happening with A2’s licence and was only expecting a short renewal or one or two years,” Liu said. “The approval removes an overhang for the company and is quite meaningful.”

Liu said China was a core growth market for A2 and that the company’s outlook was positive.

“A2 is one of the few companies that have managed to capture the imagination of Chinese consumers and the outlook now looks great.“

Sigma Pharmaceuticals has won over the Chemist Warehouse wholesale pharmaceuticals contract held by its much-bigger rival EBOS, in a major win for the business.

It has signed a binding term sheet with the pharmacy giant for supply of Pharmaceuticals Benefits Scheme (PBS) medicines and fast moving consumer goods (FMCG) items for five years starting in July 2024.

The contract is worth $2 billion annually and would triple Sigma’s existing Chemist Warehouse contract from $1 billion.

Sigma would pay Chemist Warehouse across new shares and a right to acquire some non-core assets. It would issue about 10.7 per cent of its share base at 64.2¢ a pop to the pharmacy owner at the start of the supply contract. (Sigma shares closed at 63.5¢ on Monday).

In addition to it, Chemist Warehouse would have the right to acquire certain non-core assets from Sigma that have a $24.5 million value. Should Chemist Warehouse decide not to buy the assets, Sigma would have to pay it $24.5 million net cash.

Sigma’s largest shareholder is David Di Pilla’s HMC Capital, which owns 19.07 per cent. HMC Capital, in turn, is backed by Chemist Warehouse’s owners and has been on fundies’ M&A radars for a while.

It is a major blow for the New Zealand and ASX listed EBOS, which has a $7.25 billion market capitalisation and was halted from trading on both exchanges on Tuesday morning.

Eric Morris will step down as chief executive of Larry Kestelman’s Brand Collective – the name behind Superdry, Clarks and Volley – after 18 years in the top job, with former David Jones boss David Thomas taking the helm.

Mr Morris was appointed to lead the Brand Collective business when womenswear retailer The PAS Group merged with Brand Collective in March 2022. Rich List property developer Mr Kestelman snapped up Brand Collective from Anchorage Capital Partners, which owns Shoes & Sox, Shoe Warehouse and Volleys, in 2021. He bought PAS Group after it fell into administration the year prior.

“It has truly been an amazing journey, from the formation of The PAS Group in 2005 following the acquisition of the Yarra Trail business by private equity, to my involvement in each subsequent acquisition of the PAS brands and to the delivery of the business as it stands today,” said Mr Morris, who will take a non-executive director seat and advisory role within the Brand Collective business.

Under his management, the enlarged Brand Collective business expanded its portfolio, adding Reebok, Replay and Canada Goose.

Mr Thomas headed up Country Road Group, as well as a short stint as CEO of David Jones, and stepped down from running Peter Lew’s Brandbank Group, which owns Seed Heritage and All Kinds, after four years.

“I am delighted to join Brand Collective and to work with the team to enhance business performance and deliver on future growth opportunities. The team have created a strong framework for future growth, and I look forward to this new challenge,” said Mr Thomas.

Executive chairman Mr Kestelman said the company is positioned for a prosperous future as the business evaluates growth opportunities.

“I would like to thank Eric for what he has done in building the business as well as his dedication and tenure, and I look forward to David’s future leadership and contribution,” he said.

Brand Collective’s parent company, Queens Lane Capital, was founded and is controlled by internet entrepreneur-turned-property investor Mr Kestelman, Boris Rozenvasser and Nick Tsoumanis.

Brand Collective is one of Australia’s biggest multi-brand apparel, footwear, and sports businesses, with a stable of 24 brands, over 300 retail stores and 14 e-commerce sites.

It also operates Designworks, the wholesale arm responsible for the development and distribution of private label and licensed sports and character brands such as Bluey.

Woolworths chief executive Brad Banducci is pushing to have all the retailer’s petrol home delivery trucks swapped for electric models by 2030, in a move the nation’s largest supermarket chain claims will reduce total group transport emissions by about around 60 per cent.

Its fleet update will proceed despite the technology and infrastructure to support commercial loads and long-haul freight being still in its infancy.

Woolworths will begin delivering groceries to Sydney customers with 27 new EVs hitting the road within months. Its fleet investment follows a pilot period trialling two EV trucks over the past two years, and five EVs in New Zealand.

“You might say 27 is not a large number, which I happen to agree with. But it’s the biggest EV grocery delivery fleet in Australia, so it just shows you what a long way we’ve got to go,” Woolworths chief executive Brad Banducci told The Australian Financial Review.

Mr Banducci said there are a further 20 EV trucks on order that will start to replace Woolworths’ 1200 petrol home delivery trucks. It is anticipated that the last combustion engine vehicle will join the fleet by 2027, and be gradually decommissioned.

Public EV infrastructure to support commercial fleets remains limited. The EV trucks will operate out of the retailer’s customer fulfilment centres in Mascot and Caringbah, which are dedicated to picking and packing the supermarket’s online orders, and have been fitted out with charging stations.

Woolworths selected two models manufactured by Foton Motor and SAIC Motor, which both offer sufficient working range to complete daily metro home deliveries before returning to base to charge overnight.

Mr Banducci said Woolworths will continue to increase its use of electric and low-emissions freight vehicles across its Primary Connect supply chain logistics business. It operates three electric heavy-duty trucks, and is trialling the emerging technology to help decarbonise its fleet.

EV charging infrastructure

He said Woolworths would contribute to public infrastructure planning to ensure charging station locations can support the commercial EV fleet, as well as low-emissions long-haul freighter trucks, which will require charging points across regional Australia.

Asked if Woolworths would invest in consumer charging infrastructure for shoppers visiting its supermarkets, Mr Banducci said petrol stations will provide much of the nation’s charging capabilities, and Woolworths had no plans to do so on its own.

“I know [Ampol CEO] Matt Halliday and the whole team at Ampol are working on that. Everyone’s in scale-up. But I think we will scale up in partnership, no question,” he said.

Woolworths has a partnership with Ampol via its loyalty program but will stop short of putting its capital behind the rollout of charging infrastructure. However, Mr Banducci noted plans to add charging stations at some of Woolworths’ new developments.

By 2030, Woolworths’ goal is to cut overall operational transport emissions by around 60 per cent and to have decommissioned more than 3000 internal combustion engine vehicles from its company-wide fleet.

Other climate action by the retailer includes reducing its operational emissions by 31 per cent since 2015. It aims to run its entire operations on renewable electricity, with all its sites in South Australia powered by 100 per cent green energy by 2025, and it has committed to become net carbon positive by 2050.

As Australia’s grocery operators jostle to provide value to households being squeezed by the cost-of-living crisis, discount supermarket NQR has one simple focus.

“The goal of the business is to buy things as cheap as we can, sell things as cheap as we can,” said chief executive Ewan Jones.

“Our stores won’t be the prettiest stores in history [but] they will be the cheapest by far.”

The discount supermarket, which has been in operation since 1987 and was previously also known as Not Quite Right, has collapsed twice in the past two decades, most recently in 2018. 

But NQR’s current owners, a group of investors – including retail veterans who have worked at other budget chains, such as The Reject Shop – say the time is right for the company to be back on the expansion path.

Two new stores are planned for Victoria this year, at Box Hill and Mount Waverley, as well as new sites across South Australia. There are no stores in New South Wales or Queensland yet, but the group’s online platform ships nationally. The business has grown to a network of 23 stores.

Jones says the business has worked hard to rebrand itself over the past few years, broadening its range of stock and emphasising that it sells high-quality products.

“If you ask any customer, they’d say ‘Oh they only sell out-of-date [products]’. That’s not actually the case,” he said.

Instead, NQR’s experienced team of product buyers are “wheeling and dealing all day and all night”, sourcing products that are close to their use-by dates, or that a supplier might need to sell at a good price for other reasons, despite the products being good quality.

“Our buyers are very in tune with that market,” Jones said.

The group’s promise of well-known brands sold at up to 80 per cent of their recommended retail price is gaining new traction in an environment where the price of everyday pantry staples are skyrocketing.

Price tracker data from investment bank UBS suggested overall food inflation hit its peak in April, averaging 9.6 per cent.

Jones says NQR has an important role to play in the current grocery landscape, and takes its promise to budget-focused shoppers seriously.

“There’s a specific market for our kind of product. There are some people who just won’t shop with us; they feel like in their mind it’s too low for them ... that’s OK with us. We’re there for people who really need us,” he said.

“They talk to us about it all the time, [and say] ‘we’re so glad you’re here, I couldn’t afford to eat if you weren’t here’. We have a bit of responsibility at that end to look after them.”

As the company looks to expand its range, everyday pantry essentials and snacks are a top priority, with frozen products and snacks, such as chips, flying off the shelves.

“Dry grocery is the one where people are really struggling at the moment; that’s where you’re seeing the most growth,” Jones said.

The business also wants to play a role in reducing food waste at a time when many people are experiencing food insecurity.

“We consider what we are doing for the market is really strong, [because] things aren’t just being thrown out because they are short-dated, but still can be sold.”

While NQR stores have traditionally been placed in regional and outer suburban centres, Jones says there’s a place for the brand in CBDs, too.

“I’d love to be around Spencer Street [Melbourne]. There’s a lot of people in the city – do they deserve cheaper groceries? Yes, because they’re probably paying top dollar in the city.”