McColl's to be supplied by Morrisons from January

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McColl’s Retail Group has signed a deal with supermarket chain Morrisons for the multiple grocer to supply its entire estate of 1,300 convenience stores and 350 newsagents.

Morrisons will supply both Safeway and branded products to McColl’s, with a phased rollout programme starting in January 2018. The Safeway brand, which Morrisons has previously said it was resurrecting as a wholesale label, will be exclusively available to McColl’s for an initial 12 months.

The new agreement will come as a blow to McColl’s existing supply partners Nisa and P&H, who distribute products to the c-stores and newsagents in the estate respectively. It is understood that both of these organisations, along with others, lost out in a competitive tender process to Morrisons. The decision also throws into uncertainty Sainsbury’s potential acquisition offer for Nisa, for which the multiple retailer is currently conducting due diligence, although contingency plans would undoubtedly have been drawn up in the event of McColl’s seeking a new supplier.

Nisa’s contract to supply McColl’s core c-store estate expires in June 2018, with a further agreement to supply the 298 stores acquired from the Co-op Group scheduled to run until March 2020, so the changes in supply line will happen gradually. Nisa’s logistics partner DHL is understood to be lined up to fulfil the distribution on behalf of Morrisons.

McColl’s maintained that the new partnership provides McColl’s with a best-in-class fresh food and grocery offer through the relaunched Safeway brand, and this will “significantly advance” McColl’s range and fresh food credentials. The agreement also allows McColl’s to improve its commercial terms and simplify its operations as it migrates to a single wholesale partner for the entire estate.

McColl’s chief executive Jonathan Miller said: “As a large, leading multiple grocery retailer with its own outstanding food manufacturing capability Morrisons stands apart from the competition, and we are truly delighted to be entering into partnership with them.

“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. This is a defining moment for McColl’s and builds on the transformational deal we announced last year to acquire 298 high quality convenience stores.”

David Potts, chief executive of Morrisons, added: “We are very pleased to partner with McColl’s, and look forward to developing a long and successful relationship together. We are also pleased to be reviving the Safeway brand which we know customers will enjoy.

“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.”

Readers' comments (13)

  • Morrisons do not have the logistics for this scale,think it will end up at p&h ,as they already supply Safeway products to morrisons /rontec forecourts.

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  • Sadly we will look back on this day as the end of Nisa. A complete disaster for the group as retailers will now be paying more for goods. Glad I got out when i did

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  • Retailer, read the fourth paragraph. P&H is about to fail so nobody is about to award them any contracts.

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  • Body blow for Nisa and P&H but ideal for Morrison Supermarkets, access to 1,650 outlets plus the ongoing Rontec arrangements will probably be a profitable situation against their previous attempts to enter the convenience sector.

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  • I agree with you James but it will be interesting to see if Morrisons fresh supply chain can be truly transformational for McColls. Morrisons own c stores had that benefit but still failed.

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  • When the Tesco/Booker deal is knocked back,the sector will see a major shake up.Get a feeling that the government will kick the merger into touch

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  • It’s perfectly clear that the multiples are now looking at the convenience sector through different lenses. Hence the rush to do deals with various symbols who are either living for another day or waiting for some kind of consolidation. They (mults) have realised the threat of online businesses and the new entrants like Amazon and the German discounters are here to stay. What this means in practice is that Bricks & mortar businesses are not going to give them the kind of return they once hoped for in the convenience sector. To the “mults” Convenience stores are not cost effective nor profitable as they once hoped for. Instead they are all now looking at getting scale on the whole sale business which would give them greater return without the kind of capital expenditure of the past.
    This of course also helps the symbols in getting the kind of supply chain in terms of quality and price that we are all looking for. I don’t buy the idea that all this supply chain agreement would be engineered to the detriment of the independent sector who may be competing against their own stores. I think the market is working in our favour for once!!!

    Arjan Mehr Londis Bracknell

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  • Professor Calba

    It will be a challenge for Morrisons but at least this time the c-stores will not be financed by the supermarket chain, and if the "Safeway" brand proves competitive it could improve the offer and sales at McColls neighbourhood c-stores.

    Also the locations of "Morrisons Local" stores here in South Devon always seemed to be set in very secondary sites, with the two in my area both in lesser footfall areas and both competing with Tesco Extra or Tesco Metro stores in prime locations and less than two or three minutes walk away. If this was a similar scenario for the chain elsewhere then amongst other reasons it is perhaps not surprising that it failed.

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  • Some good points James but my concern is the expectation that access to a multiple's supply chain will be a silver bullet for McColls. Many independents also seem to have this expectation of the Tesco/Booker tie up. With relatively small stores and limited refrigeration can they really exploit the benefits of the enhanced supply chain?

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  • Regarding DHL for the logistics partner, if this is a success could Morrisons also switch their Rontec partner stores from P&H supplies to this format?

    Whichever way yhe CMA goes with Booker/Tesco it will be a much changed landscape by 2018.

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