Costcutter and Palmer & Harvey have pledged to make independent retailers more competitive against supermarket rivals after forming a joint venture company with £5bn worth of “unprecedented purchasing power”.  The new venture, called The Buyco, launches on 7 April and will aim to source and negotiate the lowest possible prices on products for members belonging to both firms.

The move will also see Costcutter add P&H’s 800 stores, including Mace, Supershop and Your Store, to its 1,700 Costcutter and Kwiksave outlets to create the second biggest symbol group behind Booker’s Premier. In return, P&H will move away from retail operations to focus on supplying the stores as part of an eight year distribution deal.

Retailers will also be able to take advantage of a new own label range called Independent, which will split into three tiers – Independent Trader, Independent and Independent Specialist. Costcutter CEO Darcy Willson-Rymer said: “This is the largest shake-up in the £34bn convenience sector for some time. It will give us unprecedented purchasing power and, given the rise in multiple convenience, will help us to make independent retailers more competitive.”

P&H managing director Martyn Ward, who takes on the role as CEO for The Buyco, added: “We will create value from volume to leverage the best deals, promotions and exclusive offers for our retailers.” The news was welcomed by Costcutter retailers, including Paul Cheema of Malcolm’s Store in Coventry who said: “The own label range looks the part, and having £5bn of buying power will help us have more control over our own destiny.”

Andrew Stevens, retail analyst at Verdict, said the consolidation would have a “huge impact” on the convenience sector: “The overall package is going to be far more attractive because the buying efficiency it brings can only make prices more attractive to retailers. It will also breed growth for the group as a whole.”