Nisa and Costcutter group retailers suspect a Costcutter-Co-op tie-up is on the cards, with rumours circulating that it will be announced at Costcutter’s annual Expo event on October 4.

A letter from Michael Bibby, managing director of the company that owns Costcutter – Bibby Line, was sent out to Costcutter retailers at the end of August. The letter said a major merger was imminent but did not reveal the other party. He commented: “There are exciting opportunities on the table right now,” adding: “I hope and expect to be able to make a formal announcement soon.”

Several Costcutter group retailers told Retail Express that the Co-op is the missing party. One said: “I’ve heard the Co-op are in talks to buy the Costcutter group, but whoever it is, the most important thing is that it drastically improves our stock situation.”

Costcutter signed an eight year wholesale deal with P&H in 2013, but recent and reoccurring stock shortages have left retailers disillusioned and hoping the upcoming announcement will mark the end of the arrangement. The same retailer stated: “It’s not a good relationship with P&H, we are constantly forced to shop around to be able to fill our shelves. We need to change our wholesale arrangements.”

Another told Retail Express: “Co-op are said to be interested and I’m happy for anything that will allow us to move away from P&H. It’s got to the stage where we are having to spread our buying between P&H and local cash and carries not just on groceries, but on tobacco too. P&H has had a consistent Malboro Lights shortage and it’s really disrupting our cash flow.”

The shortages were referenced by Michael Bibby in his letter to retailers. P&H has until the end of September to find £50m to meet debt repayment deadlines. JTI and Imperial, Sainsbury’s and investment firms such as the Carlyle Group and Brookfield Business Partners have all been rumoured as potential investors.

Responding to the rumours, Costcutter spokesperson told Retail Express: “When we wrote to our retailers in late August to update them on discussions we are having in the market, we fully expected this to fuel rumour and speculation. However, while we continue to explore all possible opportunities, we will not be making any response until we are ready to make an announcement to our retailers.”

Commenting on the supply issues, the spokesperson continued: “Resolving supply chain issues is a priority for our business and we continue to work closely with P&H to ensure availability improves.”