Last week Costcutter faced the media for the first time since the closure of Palmer & Harvey nearly put its own survival at risk. Tom Gockelen-Kozlowski reports.
There won’t be many figures in the wholesale business who would describe 2017 as an easy year, but for employees of Costcutter it will go down as particularly tough.
Longstanding supply chain issues led to unhappiness among retailers well before the collapse of Palmer & Harvey. Yet when P&H did fall, it was Costcutter retailers who found themselves in the most vulnerable position. We know now companies including Musgrave, Bestway, Nisa, Co-op and JW Filshill were among those which came to the symbol group’s aid in the immediate days after the collapse.
Now, three months on, and with a supply deal with the Co-op signed and ready to go, the company’s top figures have faced the press to discuss everything from how the firm survived its most difficult period, what the resulting deal with Co-op means for independent retailers in practice and why the future of Costcutter is now secure.
1. A Co-op franchise won’t be for everyone
Independent retailers are (almost certainly) going to have the chance to open their own Co-op stores. The strict franchise model will be trialled with Costcutter’s company-owned stores first and even when it is expanded it is going to be a limited model. “Perhaps this is for people looking to take a step back from their business or to add this as part of their portfolio if they’ve got a group,” said Sean Russell, director of marketing at Costcutter.
Although it might attract headlines, the company tried to deflect attention away from this eye-catching prospect. “We must emphasise that this is not an immediate priority, but it’s something we’re excited about offering in the future,” Mr Russell said.
2. The Co-op transition will “go live” in April
The current interim deal whereby Costutter stores have been supplied by Nisa is planned to phase out in April when the Co-op deal kicks in. “We’ll be having one-to-one meetings with our retailers in March,” said Darcy Willson-Rymer, the company’s chief executive. He added that the group’s retailers were also being updated during the company’s current series of roadshows. The company has suggested that tools for store owners and staff will be made available alongside ranging guides and merchandising advice to help through the process. In one of the boldest predictions at the press conference, Mr Willson-Rymer suggested availability would “fall off the agenda” once Co-op began to distribute to stores.
3. The Costcutter fascias are not under threat
Retailers who feared consolidation could force them to switch symbol groups were given the assurance that this wasn’t the case. Costcutter, Mace and Kwiksave will all retain the place in the company’s strategy in the future. “We’ve always had a portfolio of brands that meet retailer needs and shopper needs – we’re just adding the Co-op to that,” Mr Willson-Rymer said. And adding a note of contrition, Mr Willson-Rymer said: “I think there are opportunities to further that relationship with the Co-op but we’ve got to fix what happened with P&H first. We can look at some of those opportunities.”
4. Costcutter retailers’ own label choice is about to quadruple
The end of Costcutter’s Independent range was confirmed at the press conference, but the advantages of the Co-op range were also emphasised. The range of products will rise from 500 to 2,000. The business case to scrap Costcutter’s own offer had been a clear one, Mr Willson-Rymer suggested: “The fact we get scale allows us to have more products, better quality and get good availability.” The Costcutter boss also described taking Co-op products in store as a “big responsibility”. “When you’re entrusted with other people’s brands you have to make sure that you respect that,” Mr Willson-Rymer said. “The responsibility for maintaining store standards sits with the retailer themselves. I expect the Co-op to take a very keen interest in how that’s going.”
5. Wholesaler consolidation “is a good thing”
Though surprised at how events had unfolded, Mr Willson-Rymer also said he maintained the belief that the era of consolidation would be positive. “If you think about it from a value chain perspective, if you want to get more value for retailers and allow them to create more value for shoppers, then the value you’re looking for is in three places,” he said. These included the cost of goods from suppliers, the cost of distribution and the overheads that wholesalers themselves have. “By consolidating our purchasing with others, by distributing with others and becoming more efficient – it will allow us to be more competitive.”
We spoke to two retailers, who both wish to remain anonymous, one who is staying with Costcutter, and the other who is leaving:
Why I left Costcutter:
It’s going to be a long road ahead for these guys. I think the fact Costcutter taking away Independent is an admission it had a weak own label, but last year we also had constant out of stocks from its own label range too – particularly on categories like take-home soft drinks. Its own label ready meal range went down from 20 to eight. I think it will be challenging for remaining Costcutter retailers to now introduce Nisa’s Heritage products and a few months later offer Co-op label ranges. If they can get through this period, Co-op’s own label is very good, however.
Why I am staying with Costcutter:
So far we’ve been told very little internally – all I knew was that the Co-op transition was planned for some time in the spring, for example. I’m heading to my roadshow with the Co-op tomorrow and I do have a lot of questions. What is the service going to be like? How is it going to operate differently? We need to know their obligations when it comes to service, price and range. This is about them being able to find solutions to problems that have existed for more than three years in our case and at the moment we are still sceptical.