Consolidation in the industry is likely to have profound and transformational consequences, but small stores may be the better for it

We’re now seeing £1 in every £5 spent in stores measuring less than 3,000sq ft. Recent trading results also show that grocery multiples’ convenience retailers are performing ahead of the impulse channel. The merging of large supermarkets and smaller convenience operators has set the scene for what is going to be a transformative three to five years in this sector.

The Tesco and Booker merger has received CMA approval and now also shareholder approval, McColl’s has signed a new supply deal with Morrisons, Nisa members approved a takeover by the Co-operative Group and awaits CMA approval, and Palmer & Harvey went into administration. So what does all this activity mean for the convenience shopper and retailers alike in years to come?

As a result of these acquisitions and mergers, shoppers are likely to see enhanced range options for fresh and healthy foods – and convenience stores that do this well should really benefit from the increased footfall this will bring.

A recent Nielsen consumer survey shows that even in traditional impulse categories the share of shelf has shifted in core snacking categories, with the average number of lines for soft drinks and confectionery in decline, but snack bars, popcorn and rice cakes are all seeing increases in space allocated in an average store.

Fresh fruit and veg, fresh meal preps and fresh food-to-go snacking options (sushi, for example), are all categories that are in strong growth in the grocery multiples, so the 
structural changes we are expecting should mean that more convenience retailers will be better positioned to meet these growing needs.

Mergers and acquisitions in the channel also present a real opportunity for small store retailers to bring a better availability of good quality produce before their shoppers. The share of the market that private label has compared with branded products is growing still, and premium private label – particularly in the areas of wine, speciality coffee, ready to eat meals and meal preparations – are all areas with significant room for growth.

The recent mergers and acquisitions in the market should provide a wider choice for smaller convenience retailers with regards to private label offerings which, in turn, should benefit the shopper as well as retailer margins.

Larger supermarket ‘parent’ chains typically have a wealth of experience, analysis and data available, which could be of significant value to their independent retailers, providing extra insights to help grow the business.

Consolidation will bring benefits

Vic Grewal

“Personally, I think that the Booker-Tesco consolidation will be good for business; Tesco has a lot of buying power.

“Down the road we’ll get cheaper stuff, better promotions, perhaps a sales increase, and probably more profit.

“You won’t see any sudden changes; the benefits will come six or 12 months down the line.

“Nisa and Costcutter will both benefit from the Co-op tie-up. We left Costcutter Simply Fresh because of availability issues; they’ll now benefit from improved fresh and chilled availability.

“I don’t want to expand in convenience any more, things are going to get tougher. Amazon and others are getting into fresh and chilled. That will make a huge difference to the marketplace.”

Vic Grewal

Budgens Thames Ditton, Surrey