Bestway is still looking at different partners to supply Costcutter with own-label, but hinted the contract could remain with Co-op Wholesale.

The current deal supplying Co-op own label into Costcutter sites will expire in six months, with clauses in store contracts promising a like-for-like replacement.

However, when asked about the supply deal during an interview with Better Retailing last week at the Bestway Retail Showcase in Coventry, Bestway managing director Dawood Pervez responded: “We’re still supplied by Nisa. Technically speaking it ends on 31 December… We’re looking at lots of solutions in the marketplace, it’s an exhaustive search, we are working up those solutions right now, they will be as good as or better than what we currently have and then we’ll announce it. We’re keeping our powder dry, but that solution may well be staying where we are.”

Alongside Co-op Wholesale, Morrisons and Sainsbury’s had previously been named as potential replacements by industry sources, but Pervez declined to state whether Bestway had entered final discussions with one potential partner.

Responding to the convenience squeeze

The Bestway Retail Showcase saw hundreds of retailers meet with the 130 exhibitors in attendance. Dawood said the interaction was a ‘vote of confidence from suppliers’ in what he admitted had been ‘a really tough year and a half’ for the independent channel.

A few months on from this year’s dramatic living wage, national insurance and other cost rises in April, the managing director explained Bestway having more than 5,000 staff meant: “The cost of business is massively increasing inflation and our cost to supply stores. He revealed Bestway is responding by installing solar panels on depots, using AI in ordering and invoicing and off-shoring back-office roles.

Pervez noted the impact on stores was similar, stating that higher interest rates and low shopper confidence had driven a break in the 25-year trend of greater convenience spending as consumers revert back to big weekly shops. He also blamed the trend on suppliers spending less on TV and other consumer advertising in favour of supermarket loyalty scheme discounts and retail media.

While digital media screen provider Elonex was present at Bestway’s event and the team said it had signed up a good number of attendees, Pervez said there were overall challenges in the independent sector competing with supermarkets on the key areas squeezing the independent convenience sector – reward schemes and retail media.

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He explained: “It’s a very difficult thing for us to do because we don’t have direct contact with consumers beyond point of sale material and our discussion with retailers. For convenience retailers to go out and reach consumers would need stores to adopt a rewards app universally and universally redeem the deals and push it to consumers. What we’re seeing is companies like Jisp, one minute they’re a delivery businessness, then they are a loyalty business. Snappy are going the same way, they’re doing something with Booker, then Nisa. It’s going to create a fragmented market that’s very hard to monetize and get support from brands.

“The [delivery and rewards schemes] that are successful are the ones who spend £30-100m in consumer sign-ups. That’s what it takes and I don’t think anybody is ready to do that at the moment, but it’s not impossible.”

A brighter future

Despite the difficult trading conditions, he described the return to big supermarket spends as a ‘slight hiccup’ in the long trend of increasing convenience share. “Pre-covid we were in the era of ultimate flexibility on how people spent, they were on the go the whole time and a white van man was happy to spend £3 on a Costa Coffee. In 2002 that would’ve been unimaginable… That’s the overall macro trend for convenience and local retailing. It’s gaining more share of market over the longer period. As quality of life improves people eat out more and shop on the go.”

Pervez said increased gap between supermarkets and convenience is ‘resetting’, and is currently just a quarter of what it was at its worst. In good news for hard-hit stores he added: “With some more good weather I wouldn’t be surprised if convenience goes into higher growth than supermarkets this summer.”

Evolving Bestway’s retail brands

Last year’s Bestway Retail Showcase focused on new hybrid formats – dual branded stores combining Bargain Booze or Wine Rack with Costcutter or Best-one. The managing director said the sales uplifts in converted sites showed it is ‘the most successful thing we’ve done’, with one site taking sales from a supermarket-owned store on the same parade.

A major step towards adding more dual-branded sites is an upcoming move to align the different promotional cycles for the different fascias, with some currently operating a three cycle while others operate on a four week cycle. Pervez admitted this is likely to also affect some stores operating on a single Bestway-owned fascia brand.

Despite the success of the dual formats, Dawood explained they’re not right for all stores, stating:  “At this moment of time, not a lot of our refreshes are the dual brand, it requires quite a lot of space in the store, more than 10 bays of off-licence and not all can do that. We don’t want to spray this offer, if you want dual branding it has to be a certain proposition on range, layout look and feel, so we are being choosier.”

Bestway Retail provides update on Costcutter supply arrangements

Bestway’s Best-one fascia is also enjoying its refresh, which he said are driving a ‘good uplift in sales’. The managing director explained: “We’ve done a lot of development of Best-one, we refreshed the whole Best-one store format and design, the new stores we’re launching look really striking and they’re seeing good uplifts in sales. We’ve worked on a lot of back of house points which were pinch points for stores, essentially we’ve made it easier to trade with us, whether in cash and carry, collect or delivered, and getting the rebate as well.”

Regulatory opportunities and challenges

Bestway’s bringing together of off-trade and convenience with its new formats also sets stores up to benefit from potential restrictions. Pervez said this would put independent stores in a ‘very good’ position if alcohol minimum unit pricing and widespread multi-buy promotions are introduced, as has been promoted by a Government-backed report last year.

However, there are also looming threats for stores, with strong criticism for the Government’s implementation of the disposable vape ban. He explained: “The more regulation you create without enforcement, it just incentivises those who don’t comply with the law. Half the vape market is already black, if you incentivise the black market you penalise those doing the right thing. Everybody knows where these illegal vapes are coming from, but nothing is being done. Trading standards have no teeth, so who’s enforcing it?

“It’s great for Government and civil servants to come up with principles and to communicate that to voters, but the results are far, far from what the soundbites put out.”

While further away, Pervez is also monitoring the UK’s progress to launching a deposit return scheme in 2027, aided by the appointment of a company to start and run the scheme. This body includes former senior Bestway staffer Richard Booth, who sits on the deposit management organisation’s board.

Pervez told Better Retailing: “I’m watching eagerly what’s happening from DRS and getting feedback about Ireland.” Ireland launched its own DRS last year, but few independent stores are providing returns services. He added: “Apparently sales in indies in Ireland are good and it’s not damaging them, if that all works out fine that’s great, but instinctively pushing footfall into a supermarket carpark doesn’t sound good.”

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