Morrisons revives Safeway brand via major supply deal

● Move comes alongside fresh contract with Mccoll’s convenience store chain

Morrisons is relaunching the Safeway brand after more than a decade, striking a deal with Mccoll’s to supply the convenience store chain with groceries worth an estimated £700 million annually.

The supermarket giant, whose UK estate includes some 60 stores in Scotland, said the tie-up starting in January 2018 could see wholesale sales of both Morrisons and Safeway own-brand products top £1 billion “in due course”.

It is a remarkable turnaround for the Safeway brand, with Morrisons plunging to a £313m loss in 2006 due to a botched integration two years after it bought the rival supermarket group.

The acquisition expanded Bradford-based Morrisons’ footprint into Scotland and the south of England, but the group was soon issuing a flurry of profit warnings as fusing the two groups proved tougher than anticipated.

Morrisons chief executive David Potts said yesterday: “We are very pleased to partner with Mccoll’s, and look forward to developing a long and successful relationship together.

“We are also pleased to be reviving the Safeway brand which we know customers will enjoy. This new partnership is a further example of Morrisons leveraging existing assets to access the UK’S growing convenience food market in a capital-light way.

“Wholesale supply will help make us a broader, stronger business.”

The deal will see the supermarket supply 1,300 convenience shops and 350 newsagents owned by Mccoll’s, which includes the Glasgowbased RS Mccoll chain.

The supply deal is exclusive for 12 months. One senior source said: “Safeway is obviously a brand that people still remember. Morrisons have done some consumer testing and recognition levels are high. People feel good about the brand so it makes sense to revive it.”

There are no plans to restore Safeway to any fascias in the Morrison estate, the latest move being purely a wholesaling initiative.

Jonathan Miller, chief executive of Mccoll’s, said the tie-up was transformational for the company and would prove to be a “defining moment” after acquiring nearly 300 Co-op stores late last year.

The company revealed last month that its half-time profits had halved to £4.5m due to a £2.3m exceptional charge related to the Co-op acquisition.

Revenues rose 7 per cent to £504.8m, while same-floorspace sales lifted 0.2 per cent.

Miller said: “As a large, leading multiple grocery retailer with its own outstanding food manufacturing capability Morrisons stands apart from the competition, and we are delighted to be entering into partnership with them.

“In Mccoll’s, Morrisons gain a long-term partner of significant scale with a growing neighbourhood convenience estate and in Morrisons we gain access to their (industry best) sourcing and manufacturing capabilities.”