Morrisons resurrects Safeway brand in supply deal with Mccoll’s
MCCOLL’S, the convenience shop chain, has signed a new supply deal with Morrisons in a move that will resurrect the Safeway brand and spell further trouble for wholesalers Palmer & Harvey and Nisa.
The deal means that Mccoll’s, which has 1,300 convenience shops and 350 newsagents across the country, will be exclusively supplied with around 400 Safeway own-brand products. The chain will also benefit from Morrisons’ fresh food offer, including its bakery and sandwiches, as well as the supermarket’s purchasing power with consumer giants such as Dove soap-maker Unilever and Ariel washing powder producer Procter & Gamble. The revival of the Safeway brand comes more than 13 years after Morrisons bought the supermarket in a £3bn deal.
Jonathan Miller, Mccoll’s chief executive, said that it was a “groundbreaking” deal that would “enable us to provide our customers with the highest quality fresh food”. Since the rampant expansion of Tesco Express and Sainsbury’s Local stores, corner shops have been under pressure to improve the fresh food they offer, rather than relying on tinned and packaged products.
Mr Miller said that Morrisons had won the contract over rivals, thought to have included the Co-op, Nisa and Palmer & Harvey, as the supermarket offered an improvement on the current deals it had with Palmer & Harvey and Nisa. He said that Morrisons offered “security and stability” for the business, drawing a stark comparison with the financial troubles at Palmer & Harvey.
The Mccoll’s boss said the wholesaler’s cash issues were “one of the factors” the business took into account when considering with whom to proceed. Losing Mccoll’s to Morrisons will heap further pressure on Palmer & Harvey as it looks to raise £50m before a September deadline, as revealed by The Sunday Telegraph.
A Palmer & Harvey spokesman said that it was disappointed to have lost the Morrisons tender but was “encouraged” by talks it was having with other existing and potential customers. It added that the Mccoll’s contract had been “loss-making for some time”.
The decision to ditch Nisa also has potential ramifications for a £130m looming takeover by Sainsbury’s, as Mccoll’s accounts for 40pc of Nisa’s revenues. Nisa also said it was disappointed about the tender process. Its main contract with Mccolls lasts until next June.
Morrisons said that it was on track to generate around £700m in wholesale revenues by next year. It already has a wholesale agreement with Amazon and is rolling out more petrol forecourt shops in a wholesale deal. Mccoll’s shares jumped 7.1pc to 250p while Morrisons ended up 2.3p at 242.7p.