McColl’s and Morrisons have agreed to extend their wholesale partnership for a further three years which will see the agreement run until January 2027 and 300 stores converted to the Morrisons Daily format.
Under the extended agreement, Morrisons will be the sole wholesale supplier for the entire McColl’s estate of more than 1,200 stores.
A Morrisons statement said “McColl’s has been an important customer since 2017, and during that time wholesale supply has grown very quickly into a profitable business for Morrisons”.
The partnership between the two retailers will also see the Morrisons Daily format undergo a significant roll-out over the next three years with the number of sites set to increase from 31 to 300. Although the stores will offer a full Morrisons convenience range and will be branded Morrisons Daily, they will continue to be owned and operated by McColl’s
According to a statement announcing the Morrisons Daily estate plans, the current 31 sites have “performed strongest during the pandemic and are in the best position to meet customer demand in the future”.
Chief executive of McColl’s Jonathan Miller said: “I am delighted to extend our partnership with Morrisons by a further three years, ensuring the continued supply of a supermarket-quality offer across our entire estate, as well as the planned conversion of additional Morrisons Daily stores.
“Today’s important milestone has been achieved with the welcome support of our banking syndicate, enabling us to execute our strategy to deliver sustainable profitable growth. “In Morrisons we retain a long-term partner with best-in-class sourcing and manufacturing capabilities and a leading convenience offer for the local neighbourhood communities we serve across the country.
“Despite the challenges presented by COVID-19, the new partnership represents another significant step forward in achieving our strategic goal of increasing our fresh food offering in our store estate, while offering the best value for money for our customers. We are well positioned to continue enhancing our convenience offer and improving the quality of our estate at a time when the importance of neighbourhood stores has never been greater.”
Morrisons chief executive David Potts added: “Today’s agreement is another example of Morrisons extending the reach of our popular brand. In doing so, we are building a broader, stronger Morrisons for customers, and leveraging our existing assets to achieve capital light, profitable growth. “We are delighted to be further expanding our successful partnership with McColl’s and look forward to growing together for many years to come.”
According to analyst Matthew Webb of Panmure Gordon , the extension and site conversions will “significantly increase McColl’s exposure to grocery, particularly fresh food, and reduce its relative exposure to news and tobacco”. He added that that “they will also give the stores access to the full Morrisons product range, rather than just the more limited Safeway range. Therefore, as well as producing a step-change in revenue, the conversions should move the stores onto a better LFL growth trajectory. They will also be beneficial for the gross margin mix, with grocery being significantly more profitable than news and tobacco.”
Webb predicted that “essentially all” of the former Co-op stores will be converted to the Morrisons Daily format as they represent the larger sites in the McColl’s estate.