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Cargo Club converts Kellogg's but not Sony

KELLOGG'S cornflakes, Nescafe coffee and Persil soap powder will shortly be on the shelves of Cargo Club, the warehouse clubs run by Nurdin & Peacock. Sony and other Japanese electrical retailers are still refusing to supply it.

Nurdin & Peacock has complained to the Office of Fair Trading and the European Commission about the refusal. The commission is already studying Sony's dealership agreement - which requires, for example, that shops have carpets, good acoustics and smart sales staff - after lobbying by the Japanese company for greater access to European markets.

Nurdin & Peacock and the OFT have submitted comments to the commission and are waiting for its reaction. Cargo Club is selling Sony products but it has to buy them from middle-men, reducing the scope for discounting. It believes that Sony's refusal is due to pressure from other retailers.

It has, however, won around Kellogg's, Lever Brothers and Nestle, which would not supply their products when the first Cargo Club opened in Croydon, south London, in March.

Opening and promoting the Croydon store and a second in Wednesbury in the West Midlands cost the group pounds 2m in the six months to 1 July. The additional pounds 3m cost of converting its cash-and-carry branches to Trade and Business Warehouses helped to send profits tumbling from pounds 7.1m to pounds 2.1m before tax in the period.

A further pounds 5.5m of exceptional costs are likely in the second half, partly for its third Cargo Club, due to open in Bristol in November.

Nigel Hall, finance director, said the cash-and-carry conversions were stemming the decline in sales of recent years and he expected them to start growing in the second half. The 60,000 club members signed up so far had exceeded expectations.

Nurdin's earnings were 1.67p, down from 3.88p, but the interim dividend was raised 5 per cent to 2.16p.