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The delivered wholesaler and convenience distributor, soon to be acquired by Co-op, Nisa has announced its trading figures for the last 10 weeks of 2017, including the key festive month of December.  Reported sales for the period of £277m represents an increase of nearly 18% on 2016, boosted significantly by new business gained from its failed competitor, Palmer & Harvey.

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With the last Costcutter deliveries made by collapsed wholesaler, Palmer & Harvey, now at least a week ago, distributor Nisa has announced that it is providing stop-gap supply to some Costcutter stores, covering the interval before the launch of the new wholesale deal with Co-op in the Spring.

How many of the 2,200 stores in the Costcutter network are covered is not clear, but presumably they will include the 89 company-owned Costcutter stores run centrally.  Press reports indicate that further interim Costcutter supply arrangements are also now in place, with deliveries to other stores being handled by Bestway, as well as Musgrave in Northern Ireland.  

Nisa on-boarding Costcutter in advance of the Co-op deal?

With the completion of the acquisition of Nisa by Co-op pretty much likely to coincide with the initiation of the Costcutter wholesale deal, it is convenient that Nisa may already be supplying Costcutter stores in advance.  With its heritage as a specialist distributor to independent convenience stores (including Costcutter before 2014), it would seem logical that the Costcutter contract would be intended to be serviced out of the Nisa network in the future anyway.  If Nisa is already supplying numbers of Costcutter stores before the formal Co-op/Nisa/Costcutter deals align, it will make the Costcutter switchover a smoother one when it officially launches.

Many Costcutter retailers making their own supply arrangements

While Nisa will make an obvious permanent distribution partner for Costcutter, in the meantime many retailers have already been proactively tapping into other sources of supply.  For most, cash & carry wholesalers such as Booker, Bestway and Dhamecha have been the easiest short term solution, while others have been have been supported by fellow retailers sharing upweighted orders from other delivered operators.  While these alternatives do not have the convenience of an organised delivery service, the lower cost prices and availability of cash & carry, in particular,  may make the future job of 'reconverting' some retailers a tougher one for Costcutter.

Arnu Misra, interim CEO of Nisa commented:

"Our two companies (Nisa and Costcutter) have a successful history working together and I'm pleased that we will be supporting Costcutter at this crucial time.  This arrangement will increase our buying power for the benefit of all our members.  We look forward to working with Costcutter over the peak trading period, and providing our traditionally high levels of service to them."

Following the collapse of Palmer & Harvey, major convenience chain McColl's has extended its contract with Nisa on a short-term basis to ensure all its stores can maintain product availability.  As of Monday 4 December all of the McColl's stores previously supplied by Palmer & Harvey will receive ambient stock delivered through existing Nisa-supplied McColl's stores, for onward transfer by McColl's teams.  The c.700 P&H-supplied stores are primarily the smaller, more limited range units in the McColl's 1,611 strong portfolio.

Morrisons starting to take on elements of McColl's supply

As announced back in August in the longer term McColls is transferring the supply of its whole portfolio to Morrisons, with logistics to be provided by DHL.  As originally planned this contract is to roll out from January 2018 in a phased process.  However, in the light of the break-down of P&H supply, it is understood that the Morrisons will now begin to supply affected McColl's stores with tobacco products in the next few days.

Arnu Misra, interim CEO of Nisa Retail commented:

"I'm very pleased that Nisa has been selected by McColl's to further support them at this crucial time.  We have a highly flexible model that enables us to scale quickly to members' needs and as demand dictates. As a result, we will continue to manage both existing and new members without impacting our traditionally high levels of service, especially over the peak trading period."

Following the announcement that the UK's largest delivered wholesaler Palmer & Harvey is now in administration, PwC, the administrators, have advised the company's customers that it cannot provide any further wholesale service and that even orders placed before the administration cannot now be honoured.  Therefore customers "will need to arrange an alternative source of supply going forward."  With sales of £4.4bn from a customer base numbering up to 90,000 retailers and institutions, the resulting redistribution of business-to-business supply is perhaps one of the biggest short-term upheavals ever seen in the UK wholesaling sector, and as such the opportunities for other wholesalers are considerable.

Not all the £4.4bn likely to be 'wholesale accessible'

Amongst Palmer & Harvey's broad customer base is included multiple grocery retailers such as Tesco and Sainsbury's using it mainly as an outsourced specialist distributor of tobacco.  Accounting for an estimated 60% of total company sales it seems likely that this element of the business can be quickly diverted through in the in-house supply chain/logistic functions of these very big customers, and thus the opportunity for wholesale competitors will be limited here.  However, in contrast those many smaller customers without their own supply chain resources will be looking to third party wholesale/distribution sources to fill the gap.  As well as many small scale retailers (with only one or a handful of stores), this category of P&H customers does include some significant, even national, store operators such as McColl's, Esso, Shell and forecourt dealership MRH, and is worth up to £1.7bn on an annual basis.

Booker, Nisa and SPAR: key players in the delivery space

The obvious businesses for larger retailers, needing well-organised multi-site service, to turn to are Booker (in particular the Booker Retail Partners division), Nisa and SPAR all of which operate national delivered wholesale services, and all of which specialise in supplying convenience stores.  However, the scope that these wholesalers have for taking on significant new customer accounts at short notice is unclear.  Typically when new accounts are activated there is a gradual roll-out process with stores switching into the new supply network in manageable batches, a luxury not available in the current circumstances.  Thus while we will see these delivered wholesalers taking on former national account customers of P&H in due course (and of course Morrisons in the case of McColls), in the short term we are likely to see a wide range of ad hoc, short-term contingencies being put into place.

Key cash & carry players to benefit in the short term

The simplest short-term contingency for any smaller retailer will be to turn to cash & carry wholesalers, allowing ready access to stock by collecting it for themselves.  In these current circumstances with distribution arrangements needing time to set up (if only to establish credit facilities), even larger retailers are likely to be dealing with Booker, Bestway and Dhamecha (plus many others) on a cash & carry basis in the next few weeks.  National symbol group Costcutter, including some 2,200 stores has already sought to register all its retailers with local cash & carry depots to ensure access to stock over the coming weeks.  Meanwhile the wholesale buying group Today's has advertised to P&H customers that it is working with suppliers "to ensure upweighted stock holdings and key pricing on critical items in order for independent businesses to be confident in making their local Today's Group member wholesalers (which includes Dhamecha) first choice to support this change."  

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