What you need to know:

• Metcash is aiming for a $30m annual earnings contribution from retail media by 2029.
• It’s rolling out to supermarkets this year, followed by liquor in year two and the rest of the group in year three, if all goes to plan.
• The ASX-listed group sees upside from local advertising and targeting to communities and SMEs via a vast network of independent stores. It’s also working on a profit share for those independents.
• Meanwhile Australia’s retail media market is expanding rapidly – and beyond traditional retailers.

Metcash media

Independent retail buying group, Metcash, has become the latest Australian retail giant to join the retail media fray, confirming that its initial rollout out across IGA supermarket stores is beginning to move the needle. 

Metcash is the buying group parent servicing a network of 5,600 bannered independent retailers across food, liquor and hardware pillars. It also services 95,000 other un-bannered supermarkets, liquor stores and hardware retailers across the country.

During its latest investor day, the group said it plans to hit at least $30m in annual EBIT contribution from its retail media network in the next five years across its retail portfolio.

In his presentation on the day, Metcash Group CEO, Doug Jones revealed the Metcash food division has been quietly building what’s being called the ‘IGA Media Centre’, though “very low capital” has been deployed so far as it works to flesh out the proposition.

Regardless, Jones said few investors needed convincing about how powerful a revenue opportunity and connecting force retail media can be to the Metcash network.

“I don’t need to educate any of you in the room about our retail centre or the strategic merits of it. For me in 2024, it comes down to being relevant both to suppliers and to our shoppers,” Jones said. “There is a significant financial opportunity.”

While he didn’t detail the “positive results” thus far seen across the IGA stores involved in trialling the retail network, Jones confirmed the plan is now to put the pedal to the metal on rolling our retail media across the IGA supermarket network. This will lead into a phase two including Metcash’s liquor retail network.

“They’ll then [the team] make an assessment of whether and how to bring the rest of the business onboard,” Jones said. “This is a great example of a strategy of incubating a capability inside one part of the business without delaying progress in other pillars.

“What’s most important when you think about a retail media centre, inside of Metcash, is our key competitor advantage: Independence. Our network of thousands of independent retailers and suppliers both in our network bannered today and potentially in the future, un-bannered and in our network in our future, is a core and differentiating competitive advantage for us.”

$30m prize

According to Metcash’s investor presentation, the rollout is slated to take three years starting with the food network in year one, liquor in year two and then, all being well, hardware in year three. The expectation is Metcash’s retail media network will deliver about $30 million in EBIT contribution by the 2029 financial year, net of retailer benefits.

In its description of the retail media proposition, Metcash said it’s looking at this as a revenue opportunity for its independent retailers, and said it had spied a significant and distinct opportunity for independent networks, pillars, shoppers and ad buyers.

According to the presentation, this will enable advertising to thousands of local communities and small businesses across Australia, with effective targeting by targeting local communities represented by IGA’s stores across the country. Assets include direct engagement, ecommerce and digital screens.

Metcash said it’s devising a profit share and commercial model for its retailer program, and is building a central content data platform with data and privacy at its heart, as well as retail tech media solutions. The offering is being overseen by the sales and operations teams, with the support of project management, change management, legal and risk and compliance teams.

No further details have been disclosed.

Network effects

According to its latest financial report, Metcash network sales now exceed $9.6 billion across food, as well as about $5bn in liquor annually. The hardware and Total Tools businesses combined, meanwhile, are worth about $4.5bn in annual sales. In all, Metcash reported $18.1bn in group sales revenue in FY23 and is looking at least $1bn more in the next year after a number of acquisitions including Superior Foods in February this year.

Metcash is joining a growing pool of retailers building retail media might in Australia, including Coles, Woolworths, Winning Group, Endeavour Group, Chemist Warehouse, Kogan, David Jones and others.

According to owned media consultancy Sonder, ones to watch are Bunnings, Accent Group, JB-Hi-Fi, Mecca and Kmart. In grocery and liquor it’s First Choice and Vintage Cellars, while in finance it's Visa and Mastercard. Co-founder Jonathan Hopkins says the market is now at a "tipping point" – with banks and telcos also poised to better leverage their massive datasets via owned media networks.

GroupM predicts global advertising revenue from retail media channels will grow 9.9 per cent to reach US$125.7 billion in 2023, hitting US$180 billion in five years and surpassing TV ad spend in 2028.

Spending on retail media advertising in Australia was two years ago projected to hit $1 billion by 2025 but has already passed that point. Morgan Stanley estimates Woolworth's Cartology alone is booking $550m, and forecasts a $2.83bn retail media market by 2027.

In the US, retail media channels are taking share from social media channels and TV as well as search. Amazon is powering towards a US$50bn ads business that is pushing into streaming, while Walmart is rapidly expanding capability, formats and partnerships. Locally, media buyers and ecom experts think most social and performance channels face increasing competition, though Morgan Stanley's report suggests TV networks could see biggest revenue leakage – albeit with some potential upside as retailers push into shopper data-powered targeting via BVOD channels.