What's the likelihood of the big players like woolworths and wesfarmers slowly squeezing the likes of iga out of the market through their competitive advantage of higher margins on a like for like basis?
That's nothing new, IGA has ALWAYS been at a competitive disadvantage compared to Coles and Woolies. Personally I believe the price war is affecting those two more than Metcash because they are crippling each other. Nobody shops at IGAs for price! In addition, the Metcash model of distribution is allowing IGA stores to narrow the price differential.
IGA's advantage is twofold - in cities, it's convenience, especially for people working long hours. I myself frequently go to the local IGA after work because I can't be bothered driving the extra distance to Coles and then standing in line at the checkout if I only need a few things.
In regional areas, it's community. IGAs are locally owned and regional communities are very tight-knit and tend to support their local IGA.
How robust the growth model is long term is anyone's guess. It's the gamble you take. But Metcash has done pretty well the last few years.
MTS Price at posting:
$3.98 Sentiment: None Disclosure: Held
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