By Andrew Starke
Metcash has announced that its liquor division will cease to supply Woolworth’s hotel business in Queensland when its existing supply contract ends on June 30, 2010.
The move was anticipated by the industry as Woolworths has for some time looked at commissioning a distribution centre in Queensland to service its own supply requirements.
The termination of the contract represents a projected sales loss in the 2011 financial year of approximately $420 million for Metcash subsidiary, Australian Liquor Marketers (ALM).
Australian Leisure and Hospitality (ALH), which is 75 percent owned by Woolworths, operates more than 270 licensed venues and over 450 retail liquor outlets across Australia.
The giant retailer opened liquor distribution centres in Sydney and Melbourne earlier this year.
Metcash CEO, Andrew Reitzer, said “We have made no secret of the fact that Woolworths would eventually look to service its Queensland liquor business via its own distribution solution.”
“While the loss of the Woolworths volume will have a financial impact on the ALM business and Metcash Group in our 2011 financial year, we have already commenced strategic initiatives to replace some of the lost volume and reduce costs accordingly,” he said.
The announcement takes some gloss off ALM’s positive contribution to Metcash’s recent annual results through marketing arm, Independent Brands Australia (IBA).
Sales across the liquor business were up 5.6 percent with IBA branded store sales up 16 percent. Total IBA store numbers were up from 1,578, up from 1,527 last year.
IBA banner groups include Cellarbrations, The Bottle-O and IGA plus Liquor stores.
Metcash shares were trading at $4.49 at 11am today, up from $4.37 seven days ago.