Metcash and Drakes at odds
In our assessment, Metcash never liked large independent chains, due to the strength of their negotiating power. In a recent example, Inside Retail reported that Drakes (who operate 50 supermarkets in SA and QLD) decided against using Metcash’s new DC in South Australia. This could simply be negotiating tactics, as Drakes will struggle to find an alternative wholesale supplier. But with 50 stores, Drakes may be able to create a viable alternative supply chain. It is worth watching, as there are a few more large groups in the Metcash stable who could follow Drakes.Drakes buy about $270 million annually from Metcash, still a sizeable volume, which would have to flow directly to stores or through Drakes's warehouses.