Retail group RedOrange signed its new supply deal with Costcutter because it could guarantee better rebates than by dealing with Nisa directly, Convenience Store has learned.

RedOrange announced last week that it had agreed a new supply contract with Costcutter after being a member of Nisa for 25 years. It is understood that Nisa offered a two-year deal at a reduced level of rebate, but Costcutter trumped that with a five-year deal at the previous level.

As Costcutter is also supplied by Nisa, goods will be delivered via the same route, but RedOrange felt that a five-year deal with Costcutter offered members greater security.

RedOrange managing director Chris Futter said: "It was clear that to develop further we had to make a strategic change. Over recent years RedOrange members have seen a dilution of Nisa commercial terms and the frustration of finding that our supply chain partner is also a major competitor who has been targeting our members."

Costcutter managing director Nick Ivel added: "We are delighted to welcome RedOrange and its retailers to the group. It is an unacceptable situation with Nisa at the moment as they continue to develop their symbol group to compete directly with their non-symbol members who are shareholders in the business."

Nisa-Today's chief executive Neil Turton dismissed the deal as "a small issue for us" and described comments made by both groups as "triumphalist and unhelpful".

"RedOrange only accounts for about 0.5% of our business, and their terms have declined as they have shrunk," he told C-Store. "RedOrange will continue to be supplied by Nisa-Today's, but they will lose their stake in mutuality, which is something that we and most of the retailer members are committed to."