The Buyco issue

Will it mean lower prices and better service?

This is the key question. Costcutter has never strictly speaking been a wholesaler, but the deal will separate the distribution and the retail expertise to an even greater extent than currently exists with Nisa. No other major symbol group does this. In fact, many are taking more direct control, not less, of the distribution of products.

Is volume everything?

Volume helps, but it’s not the only thing suppliers want. The combination with P&H will, it can be assumed, produce lower prices for tobacco and possibly for direct drop shipment supply, too. But what about fresh and chilled?
Through the Buyco, the new group will be asking for the best price in the market, without any additional control over the retail execution. And, to start with at least, there will be seven different symbol brands to manage.

Do buying alliances work?

Not in the independent grocery trade, at least not so far. A number of wholesale groups have tried and failed in recent years, and Nisa’s buying alliance for its affiliated chains, CBC, was abandoned in 2004. Intriguingly though, the Buyco team raised the possibility of other organisations joining in future.

Who’s taking the risk?

On the surface, it seems like P&H is. They will buy the goods, take title to them and deliver to a larger symbol estate. The range will not be under its control but Costcutter’s and, for fresh and chilled, will have to be bigger than P&H currently provides. Costcutter retailers have also been promised better service, and no surcharges for small drops, and P&H has to deliver this.

How will competitors react?

Aggressively. Nisa has been offering sweeteners to Costcutter retailers for some time, and will probably step this up. Other symbol groups will doubtless see the change as a great opportunity to recruit new members, too.

How will retailers react?

Time will tell. For fresh and chilled, few wholesalers enjoy a better reputation than Nisa. For tobacco, few enjoy a better reputation than P&H. But which one of those provides a better bedrock for retail businesses in future? At Convenience Store, we are in favour of retailers getting the best deal, and we like the idea of them having the widest possible choice, so we’re excited about the future. Congratulations go to our recently-crowned Convenience Retailers of the Year, the Cheema brothers from Malcolm’s Store in Coventry, who have said they are sticking with Costcutter. Most of their decisions have all been right so far, so maybe that tells us something.