Costcutter CEO Darcy Willson-Rymer has told just-food the UK c-store group’s new venture with wholesaler Palmer & Harvey will benefit independent retailers and suppliers.
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 venture will form the UK’s second-largest symbol retailing group. Under the agreement, the pair will also form a joint buying group that spends around GBP5bn annually. In addition, Costcutter, which is nearing the end of a distribution deal with Nisa, has signed an eight-year wholesale distribution contract with Palmer & Harvey.
Major food manufacturers including Kellogg are looking to the convenience sector to boost sales. The convenience channel is one of the fastest-growing parts of the UK grocery sector. Industry analysts at the IGD estimate the UK convenience market is worth GBP34bn and forecasts it will hit GBP44bn by 2017.
Speaking to just-food today, Willson-Rymer acknowledged the buying power the new deal will bring to the symbol group but insisted major suppliers had backed the agreement.
“Of course this is about leveraging value through volume,” Willson-Rymer said. “[But] also it’s in the interests of our retailers, our suppliers, our company in order to have a thriving independent retail space. It’s better for society as a whole. We met our top 30 suppliers last night. They welcome this. They are anxious to work with us. It’s the largest shake-up of the convenience sector in a long time and I think people will welcome it.”
The venture will see the Mace, Supershop and Your Store outlets join 1,600-plus Costcutter and Kwiksave stores. The combined business will be the number two symbol group in the UK behind Booker Group’s Premier chain.
Willson-Rymer said deals like the one between Costcutter and P&H were “inevitable” amid increased competition in the convenience channel.
“My message is that consolidation in the symbol space either at the purchasing level, distribution level or retail level is inevitable if we are to get the size and scale to compete with the multiples,” he said. “What I would say is come and join our buying group.”
The likes of Tesco and Sainsbury’s have expanded their convenience store networks in the UK in recent years. Morrisons is building its own convenience store chain and said today it plans to have 100 stores open by the end of the year. Upmarket retailer Waitrose is also expanding into convenience.
Willson-Rymer agreed the P&H deal would form a stronger group that can compete with the multiples but said independent retailers can already compete effectively with the likes of Tesco.
“Because we are improving our scale, our retailers should see a better, range, price, better promotions. The convenience sector is the fastest-growing part of retail, you’ve got the multiples wanting to expand in the space, we think it’s very important that we have a thriving independent retail sector. In order to do that and to allow the thriving independent retailer, actually the best space for them is to be in a symbol group. We can provide them with expertise and we can consolidate the volume and bring them prices that they probably can’t get on their own,” he said.
“We can do things that multiples can’t do. The whole notion of service and local, independent retailers can do better than the multiples. Although we have to sit side by side with the multiples, there are things independents can do that they can’t and we are trying to help them,” he said.
The IGD’s forecasts also estimate symbol groups will account for half of all convenience sales in 2020. They now generate 40% of sales.