McColl’s has signed a supply deal with Morrisons which will see the supermarket chain become the sole wholesale supplier for the convenience retailer’s growing network of c-stores and newsagents.
A phased rollout starts in January 2018. Nisa currently holds two contracts to supply McColl’s, one of which expires in June next year and one in June 2020.
McColl’s was Nisa’s biggest customer, accounting for roughly one-third of its sales, and also a shareholder. Sainsbury’s is currently looking to buy Nisa, and it is understood that McColl’s wanted the mult to improve its £130m offer. A source close to the situation said the Sainsbury’s proposal was not conditional on Nisa retaining the McColl’s contract. Sainsbury’s may want to revise its bid however, given that such a hefty source of income has been lost.
The move to a single wholesaler will allow McColl’s to simplify its operations and improve its commercial terms. Its estate currently stands at 1,292 stores and 358 newsagents. The recent acquisition of 298 stores from the Co-op helped boost its revenues for the last six months by 7.6%.
Commenting on the mutually beneficial arrangement, Jonathan Miller (pictured), Chief Executive of McColl’s, said: “In McColl’s, Morrisons gain a long-term partner of significant scale with a growing neighbourhood convenience estate and in Morrisons we gain access to their best-in-class sourcing and manufacturing capabilities.
“This will enable us to provide our customers with the highest quality fresh food through the relaunch of the much loved and trusted Safeway brand.”
Morrisons recently introduced a range of fresh, frozen and ambient lines under the revived Safeway brand, which McColl’s will enjoy exclusively for a 12-month period.
Alongside Sainbury’s wooing of Nisa, the agreement comes as Tesco proposes to merge with Booker. It gives Morrisons a foothold back in the fast-growing convenience market after shedding its M-local stores in 2015 to focus on its core supermarket business.
David Potts, Chief Executive of Morrisons, said: “This new partnership is a further example of Morrisons leveraging existing assets to access the UK’s growing convenience food market in a capital light way. Wholesale supply will help make us a broader, stronger business.”
Industry commentators have praised Morrisons on a smart piece of business. Molly Johnson-Jones, Senior Analyst at GlobalData, said: “It is a high return, low investment opportunity which would improve brand visibility and allow further geographical reach without the cost of running stores. All in all, we see it as a positive move if it goes ahead. The Safeway brand revival with one of the largest convenience players offers a low risk, potentially high reward opportunity.”
