Retailers resigned to multiple-led consolidation

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Much of the independent convenience store sector is resigned to multiple-led consolidation in the wake of the proposed Tesco/Booker deal and Sainsbury’s interest in Nisa.

The mooted industry shake-out, which could see Tesco and Sainsbury’s supply a huge swathe of the independent sector, has been greeted with a mixture of cynicism, scepticism, resignation and anxiety.

Vip Panchmatia, owner of Hexagon Stores in Andover, Hampshire, believes it is difficult to know what will happen until all the terms are on the table. “It depends how the supermarkets look after their own interests and whether they do so ahead of the independents they supply.

“At the moment, manufacturers like to supply the convenience market. I think consolidation is worrying just as Sainsbury’s was worried by Booker’s proposed deal with Tesco, which is why it is looking at Nisa.”

Vip hopes it does not spell the end of the independent sector. “It would be a shame, because independents make decisions in the interest of their community, and supermarkets don’t.”

Justin Taylor, owner of Spar Winford in Somerset, believes a cull of symbol fascias could ensue. “It will be interesting to see which fascias Tesco chooses to keep or retire.”

He believes consolidation is inevitable and that pressure on pricing could result with the combined buying power of Booker and Tesco and possibly Nisa and Sainsbury’s.

Mukesh Patel, owner of Simply Local Moat Stores in Malvern, Worcestershire, believes that being unaffiliated may not be an option in future.

“Massive changes are happening to the benefit of the big boys. Some people say independents will get better buying power, but when the multiples squeeze suppliers, what’s the guarantee they will pass the benefits down to us?

“Even symbol groups don’t do that. Every group has to make money to cover their costs and they are doing so.”

Symbol success

“I recently moved to Premier after being unaffiliated. In the current market it’s inevitable if you want to compete. Sainsbury’s and Nisa will happen, as will Booker and Tesco. ”

Mayur Patel, Saxon Fields Store, Andover, Hampshire

”I’m optimistic but can see difficulties for unaffiliated independents. I think everyone will become affiliated eventually.”

Angela Chilvers, co-owner of Londis Heminbrough, 
Selby, North Yorkshire

Three tiers of supply for nisa

Sainsbury’s is conducting due diligence on an exclusive basis before making a formal offer for Nisa, which would then have to be approved by both the board and the group’s members.

Should the offer go ahead, the multiple is likely to offer members a three-tier supply model comprising a disciplined model, similar to a franchise; a middle tier whereby retailers don’t trade as Sainsbury’s, but can stock the multiple’s own-label; and an independent tier whereby retailers trade without any Sainsbury’s branding, but still benefit from the increased scale.

Readers' comments (14)

  • Vip Panchmatia wonders if the supermarkets will put their own interests ahead of the independents. Really? REALLY?

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  • I cannot imagine a scenario where Sainsbury's would allow the sale of own label product outwith a franchise contract. Want to make a quick buck? Sell your Nisa shares. Want to see some future for independents? Stick with Spar and Nisa.

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  • I am a bit disappointed that some retailers are looking at the future with cynicism and resignation as if it’s an end an era for the convenience sector. In my opinion the best thing that has happened is the consolidation in the market with the mults providing the scale and quality that has been lacking in our sector. Selling poor quality fruit and veg with nonexistence chill is no longer acceptable and yet people are banging on about being independent. The supply chain is shrinking due to the market being totally saturated. We have no choice but to evolve. I have pointed out many a time that the German discounters and now Amazon has left no choice but to consolidate. The mults may have their survival at stake and of course their market share too but we must not dwell too much on what they (mults) are getting out of this. It’s none of our business. What we should be concentrating on is the quality of supply chain that will future proof our survival. Nobody in the merger will dictate how you trade. You will still have a degree of choice in decision making and independence and so painting the doom and gloom scenario is looking rather ridiculous.

    Arjan Mehr Londis Bracknell

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  • Arjan, you are correct about the importance of fresh and chilled so the obvious question is why are you with Londis?
    Nisa and Spar stores are achieving incredible things with fresh. Have you seen Blakemore's latest Daily Deli offering?
    Anyone who thinks that a 1000 Sq ft Londis is going to have access to the full Tesco Express fresh range if Tesker is created really needs to get out and about in the real world more often.

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  • Once upon a time there was a pharmacy wholesaler called Unichem run on the same model as Nisa. The prospect of a cash payout enticed members to give up thir mutuality. Unichem was later absorbed into what is now Walgreens Boots Alliance. No prizes for guessing what has happened to the market share of independent pharmacies over the period.

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  • I as a nisa retailer believes that nisa if one of the best franchise out on the market and it is mutual so we the retailers own the franchise . nisa pricing beats franchises out there in the market . nisa members are fiercely independent and not carpet baggers who will fall for 20 pieces of silver . saying that the offer from Sainsbury will be scrutinised to see if it will be long term beneficial to the members . if not we have the option of walking the independent line .

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  • Professor Calba I am glad you agree on the importance of fresh & chill and where the market is going. I was merely making a generic point that all symbol groups’ not just Londis have not exactly laced themselves in glory historical speaking when it comes to fresh & chill. The bench mark has to be the multiples. I believe that Londis has a great future with a company that has money in the bank and the ability to aim for the bench mark that you and I are aiming for. As for other wonderful symbol groups you mention I wish them well in seeking new partners as we speak.

    Arjan Mehr Londis Bracknell

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  • Nisa chill doesnt touch co-ops never mind any of the big 4's - unfortunately it never will - which is sad to say as I would love Nisa to stay in its current form.

    Spar is a £30billion turnover international brand - yes there chill is better than Nisa's - however the cost of goods reflect that of a franchise model. I'd love to see spar and nisa work together (even bestway/p&h)? is it really that hard for them to do - rather than get rescued by the multiples? It will never happen because the retailers wont let it happen.

    Multiple partnership will be a good thing for the sector - will margins reduce, probably - but will they give us the tools in order to take on/create a proper modern convenience store with a range to match - probably.

    The proofs in the pudding. One Stop franchise is now taking on Tesco chilled (rebranded of course)....Budgens will follow and then Londis......with Premier last - that alone is going to have a major impact on the rest of the groups - leaving them in the past...........if only Nisa had a partner to battle it with.

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  • That's great kp215. I really look forward to the entire Tesco chilled range, re-branded of course, being available to every Premier store from the really good well-managed stores with professional
    operators to the scruffy ones badly run by amateurs.

    This time next year we'll all be millionaires!

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  • Professor Calba, Millionares ! The way the Government is kicking Off with its slow long winded enquiries you will all be pawns in the game and poorer for it

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