Costcutter and Palmer & Harvey are claiming to have created “unprecedented purchasing power” in the independent convenience market with the formation of a new joint venture buying company with a combined turnover of £5bn.

As part of the same deal, Costcutter will take over management of P&H’s symbol groups Mace, Supershop and Your Store, while P&H has an eight-year agreement to handle product distribution to all stores in the enlarged family. With P&H’s 800 symbol stores joining the 1,700 existing Costcutter and Kwiksave sites, the enlarged group will leap to number two in the symbol market when the transfer comes into effect on April 7.

The announcement ends years of speculation over Costcutter’s future supply arrangements once its current deal with Nisa expires at the end of June 2014. Two company-owned stores are already being supplied by P&H on a trial basis, with further Costcutter-owned outlets expected to come on stream shortly, followed by a phased introduction to independents over the next 15 months. P&H has committed to providing all retail customers with consistent and accurate delivery times, no levies for low or no orders, and the option to have drivers bring cages into store if required.

The new buying company, called The Buyco, is owned 50/50 by P&H and Costcutter and will source all product for the two companies. Costcutter will determine the range and promotions required, and then the Buyco team will be tasked with sourcing them for the lowest possible price. A new own label called Independent is currently under development and will replace the Costcutter and Nisa-owned Heritage own labels in Costcutter stores, and P&H’s M brand.

Costcutter chief executive Darcy Willson-Rymer admitted that he had explored many potential partners before forming the new alliance, including talking to “every multiple”, and did not rule out allowing other retail organisations to join The Buyco in future.

He said: “By buying together we can focus solely on making independent retailers more successful. This is the start of consolidation in the symbol group sector, which needs to happen with the multiples moving in and 20,000 unaffiliated independents looking for the better pricing and better support that symbols provide. It’s all about getting the best possible prices, and taking out unnecessary costs.”

Martyn Ward, current commercial md at P&H and who will become chief executive of The Buyco next month, added: “The whole reason for this is to create value from volume. We believe it is really synergistic, and allows P&H to focus on its core skills of distribution. We think that Mace will benefit significantly.”

Costcutter retailer Paul Cheema from Malcolm’s Store in Coventry was delighted with the new deal. “I’m really excited and energised by this. I think it’ll be great for our business, and I can’t wait for it to start,” he told C-Store.