Family-owned, independent supermarket operator Drakes Supermarkets has separated itself from wholesaler Metcash, going into competition with the supplier with the opening of its own $125 million distribution centre.
The Drakes’ self-funded, 55,000 square metre facility formalises the break from the Metcash/Foodland Group.
Drake turns over more than $1 billion in annual sales through its 50 stores in South Australia and Queensland.
Drakes Supermarkets was Metcash’s largest wholesale supermarket in South Australia and until now, accounted for roughly 3.5 per cent of its food and grocery sales. The loss of Drakes from the Metcash/Foodland Group was reportedly expected to cost the group around $270 million in sales and $16 million in earnings, a statement from Drakes said.
In June, Metcash and Drakes signed a new agreement for Metcash to supply its South Australian Foodland supermarkets until September. But it also entered a supply deal to supply Queensland for a further five years.
Metcash announced in March a $270 million plan to invest in hardware operations and food and grocery over the next five years.
Food & Drink Business spoke with Drake’s founder and managing director Roger Drake earlier this week, before the official opening.
“We had to remove the middleman. We know the future of retail in South Australia is going to be very very difficult, and we were not able to buy goods at the right price. If you can’t buy right, you can’t store right,” Drake said.
Drake said negotiations with Metcash were unsuccessful so they decided to do something independently.
The company already had its own fruit and vegetable distribution centre, and a state-of-the-art $10 million meat production facility. “We’re probably the only other retailer apart from Coles and Woolworths to have that,” he said.
Drake said he never anticipated opening a distribution centre, thinking acquisitions and stores would be the company’s future.
“The management team travelled the world to see if it was viable for an independent to run its own centre. Then we engaged someone who had set up centres and visited five countries to see best practice in advanced robotics, distribution and logistics systems within the industry.”
The $15 million robotic system used in the distribution centre, supplied by Dematic, is the first of its type in production and will be used to individually pick inventory items for store replenishment using a “goods-to-person” configuration, ensuring accuracy of store orders and leading to superior deliveries and lower cost, Drake said.
Within the advanced robotic system, the robotic arm picks 1000 individual products per hour and the shuttles pick 650 per hour. The centre has 6000 individual SKUs in the robotics single pick lines. The centre will hold 23,000 SKUs.
Drake said: “Implementing robotic piece picking will automate the repetitive pick and pack processes that are labour intensive, difficult for staff and will benefit Drakes employees by reducing physical demands of their jobs and the risk of injury.”
The centre will also be employing a further 140 full-time staff and will provide advanced training to all employees. Drakes currently employs more than 6000 people.
Dematic also won the pallet racking contract. For Drake, that Dematic made everything in Australia gave him peace of mind.
“It was a relief, that we can do these things in Australia and that we had chosen the right company.”
The team worked with Two Elk, Browne Falconer Architects, Lucid Engineering and WT Engineering in the design and functionality of the building as well as the City of Playford to include landscaping, improve local amenities as well as ensure little to no local traffic impact during the extensive build process.
“We didn’t go with a tier one builder, we went with guys who had built a shopping centre for us,” Drake said.
The design, planning and approvals took approximately six months, with the build, fit out and testing taking a further 11 months for completion and employed approximately 300 local trades people during the process.
“We’re the first in Australia to have forklift with lithium batteries, supplied by Crown, which is another family business,” Drake said.
The facility has a fully equipped gym for all employees to use and all meals will be catered for in the onsite kitchen, including free lunches.
The first trucks will leave the Distribution Centre next week to supply all stores in South Australia with the capacity to load 50 semi-trailers per day.
