1

Table of contents
Table of contents
1
Executive Summary
2
Introduction
3
Background
3
Swot Analysis
4
Segmentation, Targeting & Positioning Analysis
5
Marketing Mix Analysis
7
CSR / Ethics
9
Financial / Pricing Analysis
10
Recommendations
12
New Marketing Strategy
12
Conclusion
12
References

Executive Summary
This study presents a market analysis of a multinational retail corporation
Metcash Limited, Australia, Australia. Metcash runs large discount superstores
and warehouses all across Australia. In order to address this business analysis,
report presents the environmental analysis followed by 4Ps of marketing. The
report also discusses the financial situation of the company.

Introduction
In the modern corporate world, competition has become not only intense but quite
intricate as well. The challenge is not only external but internal as well as companies
need to be mindful of their activities all the time and need to monitor them. The perfect
execution of a marketing strategy becomes possible when the companies are aware of
their strengths and weaknesses. It is inevitable to meet failure in a business
environment every once in a while but is important to learn from the weaknesses and
devise such a strategy to move ahead that the failures are never repeated. This paper

discusses marketing strategy by analysing a company called Metcash Limited. It is one

of Australias leading wholesale distribution companies. The paper looks into the
activities of the companies over the last few years and reflects on the strategies it has
developed and followed to be profitable over a long term.

Background
Metcash Limited is a company operating in Australia and is currently among the top 25
companies in the ASX200. Much of its income is generated from the sales of groceries,
liquor and tobacco products. The company has continued to grow over the years and
make its mark in the retail business. As of 2015, the Company employed 6300 people
in Australia. The Company has a vast operation which is reported in a consolidated
form. The operations can be divided into the following:

Food & Grocery

Australian Liquor Marketers
Hardware & Automotive

This report is focused on the marketing and distribution of food and grocery as this
segment forms a chunk of the Companys operations.

Companys Vision & Mission

The Company has devised its values on the basis of moral principles of morality and
integrity. The Companys core values include;

Championing the customer by addressing their needs in the most efficient

manner;
The passing over of added value to the stakeholders of the Company;
To conduct the operations in a responsible manner and be personally

accountable for all actions;

To empower the people in the demographics of the Company and support
the overall community.

The Companys vision includes:

To grow the Companys market and add value which shall be passed over to

the stakeholders;
To gain excellence in distribution and merchandising;

To become a leading retailer in the country and be among the best in

consumer satisfaction;
To create a productive and congenial work environment.

The mission statement of the Company is to be the marketing and distribution

leader in food and other fast moving consumer goods.
The Company claims that the following image portrays their working model and
philosophy:

SWOT Analysis
This report discusses SWOT Analysis of Metcash foods &groceries.

Metcash deals in

food and lifestyle retail.

Strength

Weakness

Opportunity

A vast scale of operation consisting of a great number of

supermarkets and convenience division brings a lot of economies
of scale;
Support of major distribution centres provides boost to the
attractiveness for customers;
The Company itself has come to own well-demanded brands;
It operates in the domestic market and knows local consumer
preferences;
Employs skilled and experienced workers
The business has almost no global presence and the business
model is very simple hence easily replicable;
The Companys internal control has some issues and has some
management issues as well;
It is difficult to keep track of unexpected costs and expenses;
The Company can look to expand much beyond Australia and

Threats

Competitors

explore new markets;

More business can be attracted through efficient marketing and
advertising;
Venture into the online markets and increase sales;
Due to easily replicable business model, the Company is likely to
be exposed to intense competition in the future;
There are certain risks related to inflation which can hamper
growth;
The problem of immigration has created some problems related to
labour in Australia which might affect the Company in the future
as well;
Woolworths
Safeway
Big W
Wesfarmers
Cole

Segmentation, Targeting & Positioning Analysis

Segmentation
Metcash Ltd is indulged in the business of dealing with lifestyle and retail. Its slogan is
Champion of independent retailers. Most of the items included in the business are
day to day items which are always in demand. At the same time, the Company also
sells luxury items for which the demand is relatively less. The segmentation of the
Company lies in supermarkets.

Geographic segmentation: Since the customer base of the Company hails from
almost parts of the Company, it is quite difficult to segment the market on the

basis of geography.
Demographic segmentation: The Company also targets all the customers
regardless of their age, gender, religion, occupation or ethnicity. Hence,

demographic segmentation would also not be possible.

Behavioural segmentation: The Company has a very vast operation and it is
not easy, but possible, to keep track of the customers who are loyal. Satisfaction
of such customers has to be the top priority.

Occasional segmentation: Occasional segmentation is also possible since the

shopping of groceries is mostly done on certain occasions. One such occasion is

the beginning of the month where salaried customers shop for the whole month.
Cultural & Social segmentation: Such segmentation would be inconsistent in
the context of this company since it targets all sorts of customers.

Targeting
The market for groceries is always going to commercially viable because these items
are necessities of life. These products cannot be avoided and their utility is so deeply
etched into the minds of the customers that they can never go without them. This is
why the Companys focus is likely to continue with this segment and make sure that the
customers get the best products and satisfaction. The occasional segment stands out
as a segment to be targeted because it focusses on that time of the month when the
salaried customers like to shop. They want to shop for low price and high quality
products and they want to be able to trust the products blindly. The Company has to
build this trust through effective marketing and advertising about the quality of its
products so that the people know of its efforts.
Positioning
As a supplier of high quality groceries, the Company can look to expand its operations
further and supply goods to various independent grocery stores. Since the grocery
stores also look to be contain more variety than mere groceries, Metcash must exploit
this opportunity and keep on supplying other products as well. Further, it has to take
account of its own retail and wholesale operation as well. Hence, the products are
positioned on all levels i.e. retail; wholesale and distribution brands.

Marketing mix analysis

One of the key aspects of marketing is to offer the right product at the right place at
the right time. This has become a maxim for the field of marketing and also a basic
model for devising a marketing strategy. The analysis through this model is also known
as 4Ps analysis because of the following four components each of which is discussed
separately:
Product
The first step is to introduce such a product that is going to be demanded by the
customers. In the case of Metcash Ltd, the products range from necessities to luxuries.
Since the focus of this paper is dominantly on the groceries, it becomes safe to assume
that the customers will continue to demand them in the long term. One important
aspect of groceries is that a single retailer can also sell their substitutes and
complementary products. This enables the Company to hold a great amount of variety
and attend to the preferences of customers with different tastes. This shows that the
Company has a clear idea regarding their product.
Place
As mentioned above, the Company has a threefold operation whereby it acts as a
retailer, wholesaler and distributor. In addition, sales are made both through traditional
stores and through the modern e-commerce strategy. The use of e-commerce helps the
company in establishing a worldwide presence which adds to the goodwill. It also helps
in informing the consumers about latest offers and the deals the Company offers from
time to time. Other services like order tracking also make the online platform a
desirable marketplace. The physical dimensions of the Company are also quite

remarkable as there are easily accessible retail outlets all over the country. These
stores are open 24/7, 7 days a week hence achieving great consumer satisfaction.
Price
Since Metcash is not the only entity of its sort in the country, it has to take certain
measures to keep the customers attracted to their outlets. One such measure is
competitive prices. The Company has to make sure that the customers are able to get
the products at reasonable prices. Since the prices of most groceries usually hover
around a similar range, the market tends to bend towards perfect competition. In such
a market, the Company would look towards maintaining a price level that is identical to
the competitors. It also becomes difficult to lower prices in such an environment. But in
cases where it can lower its prices i.e. products where the brand is owned by the
Company, the prices have to be lowered to attract as much customers as possible.
Such tactics also build an image into the minds of the customers that the prices of the
Company are low for all products. This would help in grabbing more market share.
Promotion
The lower prices strategy can also be used as a great promotional too as it is bound to
attract customers from all social circles. The Company is operating in an industry where
there are certain competitors who have a great foothold and market share. But the
Company has also historically been frugal in investing in advertisement. While the
competitors usually spend about 2.1% of their budget on advertising, Metcash only
spends 1%. It is recommended that the retailer advertise in about 13 circulars per year.
Currently, the Company has invested a lot of resources on social media campaigns. The
advertising includes circulars, newspaper ads, website publicity, commercials, yellow
pages, mass mailers and electronics newsletters.

CSR / Ethics
Corporate Social Responsibility (CSR) has gained a great deal of significance over the
last few years and corporations all around the world have also increased the degree of
care in this regard. For a company to be sustainable, it has to be wary of the impact it
has on its environment and the society. Profitability is essential but it must not come at
the cost of environmental or social harm. The customers also take a lot of interest in
the way the products are produced and marketed. CSR also has an impact on the
competition in the retail market. Not only do the supermarkets require to behave
ethically but they also need their employees to be ethically and environmentally
responsible. CSR is defined as the continuing commitment by businesses to behave
ethically and contribute to economic development while improving the quality of life of
the workforce and their families as well as of the local community and society at large
(Holmes et al., 2000).
Metcash Ltd is greatly wary of its CSR and maintains high standards of ethical business
practices. With the increasing popularity of the company, owing to its low prices and
quality products, Metcash Ltd is aware of the responsibility that falls on it as a
corporation. It takes extra care in making sure that the products are sourced
responsibly, retain nutrition, and do not have harmful effects on the environment in
their production. The Company also takes into account its own workplace environment
and makes sure that there is no discrimination at any level. The Companys diversity
policy is very clear about how it recruits its employees and also outlines the Companys
continued efforts in removing all barriers to diversity within the corporation.

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Financial / Pricing Analysis

Source: ASX
The above graph shows a comparison between Metcash Ltd and two of its major
competitors. For Metcash Ltd, the gap between the earnings multiple which it trades on
and the share price growth has been widened more than the competitors. The gap is so
wide that it makes Metcash potentially undervalued currently even though it seems to
have gained a path towards recovery.

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Yearly Analysis of financial positions of Metcash

Five Year Review
Financial
Performance
Sales ($m)
Underlying EBITA
Interest, net ($m)
Underlying profit
after tax ($m)
Profit after tax
attributable to parent
($m)
Financial Position
Metcash shareholder
equity ($m)
Net tangible assets
per share (cents)
Gearing
(debt/debt+equity)
(%)
Share Statistics
Fully paid ordinary
shares
Weighted average
ordinary shares
Earnings per share
(cents)
Underlying earnings
per share (cents)
Dividends declared
per share (cents)
Other statistics
Number of
employees (full-time
equivalents)

2014

2013

2012

2011

2010

2009

13,39
2
406.7
57.2
250.1

12,977
460.4
61.6

12,501.10
451.2
67.6

12,364.00
438
66.3

11,517.40
401.2
49.3

10,974
371.3
49.8

280.7

262.5

256.2

244.9

225.9

206

90

241.4

227.6

202.5

16,254.20

1,335.10

1,442.80

1,377.60

1,279.40

(9.5)

(28.1)

19.7

12.5

13.0

33.2

42.6

36.7

35.5

33.5

880,704,78
6
859,742,60
7

771,345,86
4
770,441,43
2

7,689,853,64
4
767,676,470

765,644,03
1
765,178,86
5

764,888,36
3
764,843,88
0

24

11.7

31.5

29.7

26.5

32.6

34.1

33.4

32

29.5

28.0

28.0

27.0

26.0

24.0

5,794.00

5,166.00

5,638.00

5,773.00

5,358.00

169.2

28.3
18.5

.5 256.2 244.9 225.9

Profit after tax attributable to parent ($m) 206.0 90.0 241.4 227.6 202.5

It can be seen from the above table that the Company has increased its sales
progressively from the year 2009. The major reason has been its involvement in ecommerce and e-marketing. The advertisement on a large scale has had a positive
impact on the sales of the company. Such efforts, if continued with more intensity,
would create a path towards excellence for the Company in the long run.

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Recommendations
Metcash Ltd has started to dabble in e-commerce but it seems that it needs to immerse
itself more. Its involvement in the online shopping industry helped it in recovering its
performance and be profitable in the past. But currently its involvement is still
inadequate and it is greatly missing out on excellent opportunities. Making use of
special shopping day sprees like Black Friday does not benefit the Company in the
same way as they do its competitors. Therefore, the involvement in e-commerce needs
to be increased.
The Company also needs to invest more in advertising and in getting its name out there
in the real sense. By real sense it is indicated that the Company shows itself as a
provider of high quality products at low prices and is as good, and even better, than its
competitors. A timid approach would harm the company while a pro-active and a hands
on approach would reap the Company great benefits.
The Company needs to expand more and increase its scale of operation in order to
make greater use of the economies of scale that are attached with a bigger operation.
The opportunities of expansion outside Australia must be exploited as soon as possible
so that the Company has similar amount of time available to build its goodwill abroad
as do its competitors.

New Marketing Strategy

The new marketing strategy that is actually putting Metcash on a path to recovery is its
increased expenditure on advertising. The Company is marketing its enhanced ecommerce platform and making its name in the field. Providing low price products with a
promise of high quality are the values to which the Company adheres and these are
followed in the commerce sector as well.
The Company also has to look to expand abroad and it can take its first steps in that
direction through e-commerce. The idea is to make the Companys product available
online in the countries in which it is logistically possible for it deliver the goods on time.
This would help the Company in setting grounds for a more vast operation in these
areas. At the same time, the Company will have started creating and building its goodwill

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in the yet unexplored markets. This would also have trickledown effect on the Companys
popularity in Australia.

Conclusion
Metcash Ltd.s recent dip owes mostly to its own dismal performance. It has been a bit
complacent and also a little out of touch with how modern markets are operating. The
only concern for the Company right seems to be the recurrent price war with its major
competitors and concerns. But it has to be vary of the fact that price wars are not the
sole determinants of victors in the markets of today. It has to stay updated with modern
commercial practices and the tastes in which customers indulge. Financing through debt
bearing instruments is another area where the Company needs to indulge more.
Metcash, in respect to these strategic options is already in the process of developing new
initiatives by reducing its debts and focusing on quality, service and value. Metcash is on
the forefront of innovation by taking advantage of further store renewal opportunities,
supply chain transformation and a strategic approach to improved operational
efficiencies and continued fund reinvestment in price.

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References
Annual Report 2015, Metcash Ltd. Retrieved 13 Jan 2016 from http://www.metcash.com/wpcontent/uploads/2015-June-15-Metcash-Limited-FY2015-Results.pdf
RAPS Retail Industry Environmental Scan, 2014. http://rapstc.com.au/wp-content/uploads/2011/12/RetailEnvironmental-Scan-2014.pdf (Accessed Jan 2016)
ABS (Australian Bureau of Statistics), 2014e, Counts of Australian Businesses, Including Entries and Exits,
June 2009 to June 2013, April, Canberra.
Deloitte , 2013b, Global Powers of Retailing 2013: Retail Beyond, January, Sydney.
Newell, R. G., Jaffe, A. B., & Stavins, R. N. (2006). The effects of economic and policy incentives on carbon
mitigation technologies. Energy Economics,28(5), 563-578.