UK convenience group McColl's has announced an agreement with Morrisons that will see the retailer supply selected products to McColl's estate of 1,300 convenience stores and 350 newsagents.
The deal will see Morrisons supply products from the relaunched Safeway brand and its own branded products to McColl's, with a phased roll-out programme set to commence in January 2018.
"As a large, leading multiple grocery retailer with its own outstanding food-manufacturing capability, Morrisons stands apart from the competition, and we are truly delighted to be entering into partnership with them," commented Jonathan Miller, chief executive of McColl's.
"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 best-in-class sourcing and manufacturing capabilities."
The group said that the agreement will "significantly advance" its fresh-food credentials and "provide its customers with an enhanced range". It will also enable the group to simplify its operations, as it "migrates to a single wholesale partner for the entire estate".
"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," said David Potts, Morrisons' chief executive. "Wholesale supply will help make us a broader, stronger business."
Commenting on the move, Barclays European Food Retail Equity Research said, "From Morrison's perspective, this helps to build its nascent wholesale business and gives it a proxy presence in convenience.
"This has to be seen as a positive for Morrison, but we should also see it in perspective. McColl's recently commented that there was very strong interest in bidding for its supply contract, so Morrison may have had to price keenly."
Elsewhere, Catherine Shuttleworth, CEO at Savvy, said, “This supply deal demonstrates the changing nature of the destiny of our Big Four retailers as they change from retailers to retailer, wholesaler and supplier. It makes sense for Morrisons and McColl, and piles on the pressure to the 'traditional' wholesale businesses like Palmer & Harvey and Nisa.
"With the upcoming CMA review of the sector, we should expect more of the unexpected, and we anticipate that the shake-up of UK grocery-supply businesses is about to start a chain of significant changes to the structure of the marketplace.”
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.