FNArena Scoop: Metcash, Amazon In Talks

This story features METCASH LIMITED, and other companies. For more info SHARE ANALYSIS: MTS

Amazon and Metcash are negotiating a distribution deal to support deliveries of goods to households across Australia

-Contract talks between Amazon Australia and Metcash are advancing
-Metcash distribution can substantially strengthen Amazon's delivery capabilities
-Metcash also under threat of losing independents as customer

By Rudi Filapek-Vandyck, Editor FNArena

Online commerce giant Amazon and locally based Metcash ((MTS)) are in negotiation to use the latter's distribution network to support Amazon Australia's goods delivery service throughout the country.

According to information received by FNArena, talks between the two companies are advancing while share market speculation suggests Amazon could be interested in acquiring local distribution through either Caltex Australia ((CTX)) or yet to be spun off Coles supermarkets from WA conglomerate Wesfarmers ((WES)).

Metcash, whose logistics and distribution network delivers goods to some 1600 independently owned stores across Australia, is reportedly facing the threat of some independents, such as Drakes Supermarkets in Queensland, potentially switching to digital start-up Irexchange, which offers direct access to suppliers, and has reportedly signed up 350 independents to date.

Amazon Australia launched in early December last year. The company has copped some criticism as its local presence thus far failed to live up to the pre-launch hype, and with its founder and CEO, Jeff Bezos, under personal attack from the US President.

Metcash is probably best known as the support network behind supermarkets operating under IGA and Foodland IGA brands, while its Convenience division provides service to some 150,000 convenience stores, restaurants, small coffee bars and fresh food outlets. The company's corporate website presents Metcash as "Marketing and wholesale distribution business specialising in grocery, liquor, hardware and other fast moving consumer goods."

Metcash also is Australia's second-largest broad range liquor wholesaler, supplying over 2,500 stores including Cellarbrations, The Bottle-O, and IGA Liquor.

Apart from general share market weakness following on from a retreat in US equities since late January, Metcash's share price has come under pressure after  the company announced last month its CEO of Supermarkets and Convenience operations, Steven Cain, had accepted a job in home base Melbourne. As it turned out, Cain is returning as the new CEO of major competitor Coles, which he left 14 years ago.

Increased delivery capabilities will substantially strengthen Amazon Australia's intention to build up significant market share in local household spending.

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