Under the “long-term” agreement, the supermarket – which has 17 food manufacturing sites across Britain – will initially supply national brands to 1,300 McColl’s convenience shops, and 350 newsagents across the UK.
Products from Morrison’s new Safeway range – which has been in development since the end of 2016, and comprises more than 400 fresh, frozen and ambient food items – will also be exclusively stocked by McColl’s for 12 months.
The arrangement will also migrate across the remainder of the McColl’s estate – about 300 recently acquired convenience shops – in due course, Morrisons said.
‘Morrisons stands apart from the competition’
“As a large, leading multiple grocery retailer, with its own outstanding food manufacturing capability, Morrisons stands apart from the competition, and we are truly delighted to be entering into partnership with them,” said Jonathan Miller, McColl’s chief executive.
“In McColl’s, Morrisons gains a long-term partner of significant scale, with a growing neighbourhood convenience estate. In Morrisons, we gain access to their best-in-class sourcing and manufacturing capabilities.
“This will enable us to provide our customers with the highest quality fresh food through the relaunch of the much loved and trusted Safeway brand. This is a defining moment for McColl’s, and builds on the transformational deal we announced last year to acquire 298 high-quality convenience stores.”
More than £1bn in sales
Morrisons said the agreement would take its wholesale supply sales to more than £1bn “in due course”, and expected its total annualised wholesale sales across all of its partners to be in excess of £700M (including tobacco) by the end of 2018.
The new initiative was expected to give McColl’s an initial profit contribution in 2018/19, and increase thereafter, added the retailer.
David Potts, Morrisons chief executive, said: “We are very pleased to partner with McColl’s, and look forward to developing a long and successful relationship together. We are also pleased to be reviving the Safeway brand, which we know customers will enjoy.
“This new partnership is a further example of Morrisons leveraging existing assets to access the UK’s growing convenience food market in a capital light way. Wholesale supply will help make us a broader, stronger business.”
Morrisons deal with McColl’s – what the analysts say
- “We see this as an excellent development, which sweats existing assets and further bolsters the growth, the cash flows and returns of Morrisons.”
Clive Black and Darren Shirley, Shore Capital