AUSTRALIA: Fresco Supermarkets reveal ambitious expansion plans; may buy Franklins stores
New South Wales (NSW) retailer Fresco Supermarkets is embarking on an ambitious expansion drive in preparation for a listing on the Australian Stock Exchange by 2003. In a bid to gain some of the market share from the sector's few closely-knit competitors, the company has signalled interest in nearly half of the 287 stores currently controlled by beleaguered discount chain Franklins.
Fresco, which was established in 1999 from Metcash spin off Jewel Food Stores, currently controls just 20 supermarkets. Managing director Joe Sargo stated on 22 March however that 55 new stores would be opened within the next three years, with a view to the company owning 100 stores by 2006.
Sargo revealed that Fresco's growth could be swiftly accelerated with a purchase of Franklins stores. This may be a distinct possibility, as Fresco will not face the same regulatory hurdles that will dog sector giants Woolworths and Coles Myer. The chain has not yet however conducted discussions with Dairy Farm International, the Hong-Kong based parent of Franklins.
If it cannot purchase the Franklin stores, Fresco has revealed that it will look to buy stand-alone outlets or smaller grocery chains.
Fresco claims that it has sufficient resources and financial support to embark on expansion, having achieved a sustainable profit margin of 2.5%. In its first year of trading, the company posted a A$2.4m pre-tax profit and sales of A$161m. For this financial year, which begins this month, Fresco is expecting earnings of A$6.25m.
In the second part of this week's focus on the Australian food retail market, David Robertson looks at Woolworths' main rival, Coles Myer, which accounts for around 16% of all retail spending in Austr...
With 76% of Australia's food retail market, just two companies, Woolworths and Coles, dominate the region. In a two-part review, David Robertson looks at both supermarket chains. The first article wil...
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