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.”