Metcash Asked to Come Clean

Australia’s Franklins Supermarkets franchisees have called on Metcash to ‘come clean’ over supplier discounts associated with $2B of purchases.

Metcash has now acknowledged that it owes Franklins money. Why has it taken them so long to come clean? Aubrey Zelinsky, Franklins Managing Director

Metcash must have known that it negotiated discounts with suppliers that it unlawfully withheld from Franklins. Unfortunately, it has taken a unanimous Court decision to spur Metcash into action.

Metcash Trading Ltd, Australia's top wholesale distributor of food, liquor, and other grocery items has enjoyed business complimentary acquisitions and investments in IGA supermarkets, Mitre 10 hardware chain, Fresh Market Meats, RKH Services [crops], Foodland to name but a few.

Metcash supplies well in excess of 4,500 independent grocery outlets, 13,000 licensed premises and more than 80,000 customers in the convenience and confectionary sectors.

In 2008, amidst Australia’s federal inquiry into franchising, many questioned a Metcash alliance designed to increase the Lenards Chicken network by establishing franchises within IGA supermarket outlets and surprisingly in the middle of the infamous Lenards Murder Trial. 

Lenards Chicken had been the subject of many years of franchisee complaints in the media and to the Australia’s franchising regulator, the ACCC. Of note and in the context of supply issues are the submissions to the Federal Franchising Inquiry from often financially destroyed ex-franchisees,  It was alleged their financial woes were associated with a constant of mandatory purchasing from the franchisor in conjunction with the advertising of ‘top mover’ product lines apparently often at below cost.

The Metcash alliances and investments are obviously a good complimentary fit with extremely profitable supply chain strategies through so many brands; however, the Franklins' worries perhaps reinforce the ACCC findings earlier this year when Metcash was forced to amend supplier agreements in relation to IGA Supermarkets.

The ACCC is… continuing to make inquiries in relation to Metcash's arrangements with its retailers, including arrangements where retailers are required to purchase all of their products or certain percentages of their products from Metcash

Many would now wonder where confidence sits within all Metcash associated brands.