Morrisons is to make a further push into the convenience market after agreeing a supply deal to McColl’s in a move that may spell trouble for Nisa.
The winning tender will see the supermarket supply 1,300 McColl’s convenience stores and 350 newsagents, and is designed to enhance McColl’s, fresh food offering.
However, Nisa, which is in its own talks with Sainsbury’s, will lose two contracts with the chain. One five-year supply deal to McColl’s expires next year and a separate contract to supply 300 stores McColl’s acquired from the Co-op last year expires in 2020.
As part of the McColl’s deal, the multiple will also revive its Safeway brand with around 400 products to be supplied exclusively through the convenience and newsagent chain.
Nick Read, chief executive of Nisa, said: “We are disappointed that the tender process has been halted nine weeks early – before there had been a chance for follow up conversations and proposals – especially when sales at Nisa-supplied McColl’s stores were 8.4% ahead of budget.”
While the deal will undergo a transition period, it is another sign of Morrisons’ intentions to be a major player in the fast-growing convenience market. In 2015, the supermarket was forced to scrap its M Local brand. However, last year it launched 10 Morrisons Daily stores and also trialled a convenience offer with forecourt operator, Motor Fuel Group.
Commenting on the deal, Premier retailer Mo Razzaq said: “It’s not surprising. With the Tesco-Booker merger and Nisa-Sainsbury’s on the cards there’s a correlation. This is where retail is heading.
“Retailers know they need to be under some sort of umbrella with the benefits of things like fixed promotions and logos. Convenience is evolving.
“There are challenges coming our way, but I see this as an opportunity for others.”