Metcash has reached agreement for the supply of grocery and liquor products to the 45 supermarkets (and eight aligned liquor stores) that Foodworks will acquire from Coles.
The supply agreement will be for an initial period of 10 years and will incorporate supply of the fresh categories.
At the wholesale level it is expected that the new Foodworks stores will add an additional $250 million of sales to Metcash in the first full year of operation.
Metcash will also continue to supply the more than 700 Foodworks-aligned customers under its existing contract, which has been extended until 2019.
“We are delighted to have reached agreement with Foodworks and look forward to a mutually prosperous expansion of our relationship,” said Metcash CEO Andrew Reitzer.
“The Foodworks’ brand is well recognised in the marketplace and espouses common themes to those championed by Metcash, namely tailoring independent stores to suit their local customer base and the communities in which they operate.
“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,” he added.
Metcash’s grocery distribution business IGA has helped the Foodworks stores increase their sales to $1.75 billion from $450 million over the past seven years.
“Metcash continues to be focused on supporting independent retailers compete effectively against the national chains and these additional Foodworks stores will assist in further building the independent sector as a viable third force in grocery retailing in Australia.”
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.