Supermarket group Morrisons has won a supply deal with convenience store operator McColl’s Retail Group to supply fresh produce and grocery across its 1,300 convenience stores and 350 newsagents.
McColl’s said the long-term partnership, agreed following a competitive tender process, has been agreed with the relaunched Safeway brand following a competitive tender process.
The deal will also see Safeway supply exclusively to McColl’s for a period of 12 months.
McColl’s said the deal is a “defining moment” for the group, allowing it to “improve its commercial terms and simplify its operations as it migrates to a single wholesale partner for the entire estate”.
Morrisons announced last November it was reviving the Safeway brand as part of a wider plan to build its convenience store presence, which included a pilot of a new convenience store offering, Morrisons Daily, in 10 petrol station shops owned by forecourt operator, Rontec.
The group sold off its M Local convenience store chain in 2015 to Greybull Capital for £25 million in a deal fronted by retail entrepreneur Mike Greene, booking a £20 million loss on the transaction.
M Local, which was rebranded to My Local, went into administration last June of last year blaming “intense competition”.
McColl’s said the new deal with Safeway will “significantly advance” its fresh food credentials and enhance the product range it offers to customers.
Morrisons will supply both Safeway and branded products to McColl’s, with a phased rollout programme beginning in January 2018.
Initially Morrisons will supply around 1,000 McColl’s convenience stores and 350 newsagents, with the remainder of the estate , the 298 Co-op Food convenience stores recently acquired from Co-op Group, migrating in due course.
McColl’s chief executive Jonathan 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 truly 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 best-in-class sourcing and manufacturing capabilities.
“This will enable us to provide our customers with the highest quality fresh food through the relaunch of the much loved and trusted Safeway brand.
“This is a defining moment for McColl’s and builds on the transformational deal we announced last year to acquire 298 high quality convenience stores.”
Morrisons chief executive David Potts said: “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.”
Shares in Morrisons were up 0.6 per cent in early trading and shares in McColl’s were up 6.8 per cent.