Nisa shrugs off loss of "low margin" McColl's contract

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Nisa Retail chief executive Nick Read has shrugged off the loss of the McColl’s contract to Morrisons after a competitive tender process that he says was concluded nine weeks earlier than expected.

As a result, Morrisons will start to supply McColl’s stores in a phased roll-out from January 2018, although existing supply contracts with Nisa do not expire until June 2018 in the case of its core business, and March 2020 in the case of the 298 stores McColl’s recently acquired from the Co-operative Group.

Read said: “We are disappointed that the tender process has been halted nine weeks early - before there had been a chance for follow up conversations and proposals - especially when sales at Nisa-supplied McColl’s stores were 8.4% ahead of budget. Nevertheless, Nisa has contracts in place with McColl’s that continue until June 2018 and March 2020, and we remain well placed to deliver our award-winning product to the specialised convenience sector.”

He continued: “Nisa’s third party distribution model is highly flexible, enabling the company to quickly adapt to changes in demand. Moreover, current trading at Nisa is strong, and while we value all our members, the McColl’s business was a low margin contract. Accordingly, with strong trading, our recently announced new bank financing, and several new business wins, we remain well positioned to provide a sustainable business model for the benefit of all our members.”

Nisa recently announced full-year results for the 52 weeks ended 2 April 2017, reporting a pre-tax profit of £2.8m. The business also announced a cheaper and more flexible banking facility in June.

Readers' comments (11)

  • NISA, close the door on your way out of symbol retailing

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  • "Low margin" and "well placed for members" type statements- sounds rather familiar to those made by Costcutter upon losing a substantial amount of MFG sites. Word it however you like the loss of a contract this large is going to have an effect and terms such as "current trading is strong" ignore the longer term effects this decision could have.

    Off topic slightly does this a) ended a potential deal with J Sainsbury for Nisa? and b) Have Costcutter and Select & Save made decisions on their respective supplier arrangements? If not management at Nisa should surely at least attempt to resign one or both symbol groups as part of an overall plan going forward from this news.

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  • I'm ex nisa and this will have a massive impact on them. Before the Sainsbury's takeover rumours they had an offer from best way group as well. Hope for the sake of some of their staff and some of their members they sort themselves out.

    Anyone who is with nisa should be worried. £1.2bn and they will lose 2/5 (40%) of that when the supply contract is severed so that's £480m gone, that's bankruptcy action. There is no way nisa can sustain that especially after studying their last set of accounts and seeing how weak the balance sheet is. I'm lucky to exit when I did, at least I got the proper value for the shares I held. Shame, they used to be a good company to work with. They became very dogmatic, dictatorial and expensive.

    I won't be surprised if Sainsbury's takeover nisa for £1 either.

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  • Mitesh, whether you got the best deal on your shares is yet to be seen. Those of us old enough to remember the JS/Tesco fight over Wm Low know that the best may be yet to come.

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  • Mark Spenser

    I may be confused but I cannot see a comparison? Wm Low was a Scottish supermarket chain wanted by JS and Tesco who had 3 and 17 sites north of the border, and so offered a strong portfolio to the successful bidder.

    Nisa by contrast is a wholesaler that like rival P&H has been rocked by a changing market and loss of business. A budding war seems unlikely with these conditions especially if other customers follow the recent departures in switching suppliers.

    If JS buy Nisa I wonder if a more franchise based model akin to 'One Stop' will be introduced? Given that JS bid away from Nisa to supply McColls the only real benefit of buying Nisa would seem to be the independent retail members, and retaining this base would need to be a priority.

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  • Assumptions are being made that only JS are interested in Nisa. To analyse Nisa's position you need to differentiate between Sales(e.g. To Nisa fascia retailers) and distribution (e.g. To McColls). B&M buying Heron Foods is just one example of others looking for opportunities in the convenience market. watch this space!

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  • I must still be missing something- Wm Low and Heron Foods owned and controlled their premises, and neither were engaged as far as I can see in distribution to third parties. The benefit to the buyer in the former was a substantially increase in their presence in Scotland, and the latter entry into the discount end of convenience with an established brand and outlets that they are keen to develop as a business.

    Nisa have contracts to both sales and distribution of which they have had number losses from both, and they do not own the fascia c-stores so it does depend upon the independent members not only accepting a takeover but presumably agreeing to continue to buy under contract, franchise or some form of ties.

    I do hope for members and staff sake a successful deal with a suitable partner can be made, although as it currently stands I am more skeptical than some of the other commentators.

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  • Strong rumour today that P&H national account staff are to be put on notice very very soon

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  • If Retailer is right and P&H do ultimately fail it will be interesting to see whether the CMA consider the Booker & Tesco deal a key factor or not, and if so how will it affect their findings?

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  • Why has neither CS or The Grocer reported on the Blakemore/Bestway story? Some of us old codgers can remember when The Grocer was always first with grocery trade news. And it only cost 6d !

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