Costcutter looks to leverage scale to improve sourcing

Costcutter looks to leverage scale to improve sourcing

Independent convenience operator Costcutter and distribution giant Palmer & Harvey have inked a deal to create the UK's second-largest convenience chain and form a buying joint venture.

The deal, announced yesterday (13 March), will see Costcutter takeover 800 Mace, Supershop and Your Store outlets as P&H quits retailing to focus on its distribution business. The pair will also form a joint buying group that spends around GBP5bn annually.

Commenting on the move, Costcutter CEO Darcy Willson-Rymer described the news as "the biggest shake-up of the GBP34bn convenience sector in years".

Willson-Rymer insisted that through the buying organisation - called The Buyco - the enlarged group would have "unprecedented buying power" that would allow it to compete with the UK's supermarkets on price.

Costcutter is made up of independent retailers that pay a fee to gain access to the firm's marketing and purchasing capabilities.

"This will ensure we have a thriving independent sector alongside the supermarkets. But it is also about consumer trends: people want to shop locally," Willson-Rymer said.

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Costcutter and P&H to transform the UK Convenienve Sector through launch of new buying company

13 Mar 2013

Costcutter Supermarkets Group and Palmer & Harvey today announced the launch of a new joint venture company that will transform the convenience sector in the UK through its £5 billion negotiating and buying power. Called The Buyco, the new company will be unique within the convenience sector, providing Costcutter Supermarkets Group with access to the largest volume buying power in the sector, resulting in the most competitive prices for its members as well as an industry-leading range of products and promotions at highly competitive prices.

As a joint venture business which will be 50% owned by both companies, The Buyco is being set up to allow Costcutter Supermarkets Group to meet the needs of its independent retailers and all of P&H's existing independent retailers. In order to negotiate the best deals through maximum volume, The Buyco will also serve the buying needs of Palmer & Harvey's existing independent retail customer base. Coinciding with the creation of The Buyco, Palmer & Harvey will be moving away from direct management of symbol group convenience retailing to focus on its wholesale distribution strengths.

The Mace, Supershop and Your Store brands, operations and 800 stores will join the Costcutter Supermarket Group family of brands which includes the 1,600 plus Costcutter and kwiksave stores. This transfer will come into effect on April 7th 2013. In addition, Costcutter has signed a new eight year wholesale distribution contract with Palmer & Harvey.

Darcy Willson-Rymer, CEO of Costcutter Supermarkets Group, said: "We have been single-mindedly focussed on creating maximum value for our members and it became wholly apparent that without access to the proportionate benefits of our own buying power this could not happen. Through the creation of The Buyco with Palmer & Harvey, we will have unrivalled purchasing power within the UK convenience sector meaning that we can ensure the best prices, promotions and range for our members. Combine this with the industry leading distribution capabilities of Palmer & Harvey and we firmly believe that Costcutter Supermarkets Group will be offering the best possible service to our Members.

"This will now also include the 800 independent Mace, Supershop and Your Store retailers who I am delighted to welcome to Costcutter Supermarkets Group. Not only will we be providing them with our widely acclaimed retail service and support but we also look forward to listening and learning from their experiences. With the convenience sector still gripped by the tectonic changes of the past decade, we feel we are ideally placed to ensure success for all our members. The values upon which the company was started over 25 years ago, which we know Palmer & Harvey shares, will be strengthened both through the greater control these changes bring but also because, quite simply, the relationship between Costcutter and Palmer & Harvey is culturally and commercially right."

Costcutter Supermarkets Group is also announcing the introduction of a new, bespoke range, negotiated on its behalf by The Buyco. This will include an extensive chilled and fresh proposition, and a new three tier own label range which Costcutter Supermarkets Group is developing for all categories and will support through marketing investment that will see it emerge as an industry leading brand. By working on behalf of Costcutter Supermarkets Group, The Buyco will provide flexibility and agility in product range to meet member requirements. Using feedback from members, Costcutter Supermarkets Group has already developed plans to introduce improved fresh and chilled ranges as well as developing a regional range offering. Through the unrivalled volume-based purchasing power of The Buyco, Costcutter Supermarkets Group aims to offer its members the best deals and promotions available in the industry.

Martyn Ward, CEO of The Buyco and current Managing Director, Commercial and Sales at Palmer & Harvey, said: "The Buyco's sole reason for being is to create value through volume. We will be working closely with suppliers, both those already working with Palmer & Harvey and new suppliers that we will be bringing on board to meet the needs of Costcutter Supermarkets Group members and all of P&H's existing independent retailers, to ensure we are providing not simply the largest range but the highest value range possible. This brings greater value for everyone, including consumers who will ultimately benefit the most from a strong independent convenience sector."

Costcutter Supermarket Group will be contracting with Palmer & Harvey for the wholesale distribution of product to the Group's 1,700 existing Costcutter and kwiksave stores as well as the 800 Mace, Your Store and Supershop stores that are transferring to Costcutter Supermarkets Group. As a result, all Costcutter Supermarkets Group members will receive a considerably improved service made possible by Palmer & Harvey's national leading service and infrastructure of 14 depots offering multi-temperature deliveries. Additional benefits that Palmer & Harvey will bring include consistent and accurate delivery times, no delivery surcharge, no special order charge, no levy charge for 'low orders' or 'no orders', and the option for delivery in cages brought into store by the driver. In addition, P&H provides the reassurance to retailers that because of its nationwide network of depots, the company can retain a high level of customer service should there be a problem at any single site. As part of their renewed focus on wholesale distribution, Palmer & Harvey has signed a lease on a new distribution centre in Northern Ireland that will offer the best level of service to retailers in the province. This new centre will specifically cater for chilled and frozen lines and complement the ambient facility already in place.

Chris Etherington, Chief Executive of Palmer & Harvey, said: "The core of our business has always been world class ‘last mile' delivery to retail stores in every postcode, every day. By divesting our retail operation to Costcutter Supermarkets Group, we can now focus all our energies on extending the delivery benefits already enjoyed by our Mace, Supershop and Your Store retailers to the wider Costcutter Supermarkets Group. This will mean the retailers have greater control and massively increased business efficiency which will ultimately lead to savings for independent retailer. As a business, we are extremely responsive to customer requirements and late demands, all of which means that retailers can focus on running their business and not worrying about delivery."


Original source: Costcutter Supermarkets Group, Palmer & Harvey