Co-op 'fifth biggest' after Somerfield buyout

The Co-op today hailed its return to the big league of food retailing thanks to a £1.6 billion takeover of rival Somerfield.

The deal - the biggest in its history - cements the Co-op's position as the UK's fifth biggest food retailer, creating a chain of more than 3,000 outlets with a market share of 8 per cent.

Retail giant Tesco currently leads the way with 31 per cent of the UK's £120 billion grocery market, followed by Asda and Sainsbury's with around 16 per cent and Morrisons which has more than 11 per cent.

Co-op chief executive Peter Marks said the Somerfield acquisition, which is subject to regulatory approval, meant "people should now be referring to the 'big five' retailers" rather than the big four above. It provided "rocket fuel" for the group's growth plans and was good news for consumers, he added.

Mr Marks said convenience stores were already winning customers from their bigger out-of-town rivals thanks to higher fuel costs persuading more people to shop locally.

"We will create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach," he said.

"In terms of the convenience market, it has been been growing at a faster rate than the grocery market itself.

"People are concerned about time, but also about the cost of fuel.

"When they are making a decision 'do I drive five miles to a superstore or do I go down the bottom of the road and visit my local Co-op', that's affecting their decision making."

Somerfield, which is owned by a consortium including property tycoon Robert Tchenguiz, private equity firm Apax and investment bank Barclays Capital, has around 880 stores and generated £4.2 billion of net sales in the year to April.

Its owners were reported at the weekend to be looking for a price of £2.5 billion.

Mr Marks said: "We think we have got a very good deal, but it's a good deal for Somerfield in the current climate."

He added that competition watchdogs would likely require some of Somerfield stores to be sold.

"We will be working with the Office of Fair Trading to analyse which stores and how we deal with them," he said.

Other food retailers are expected to be interested in any of the disposals, Mr Marks added.

The takeover will result in "very significant" cost benefits, he said, which will be passed on to consumers. A "limited" number of job losses will also result, but it was too early to say how many.

Completion of the deal was expected within a few months, after which the Somerfield brand will disappear, Mr Marks said.

The Co-op's 2,300 food stores enjoyed a 4.7 per cent like-for-like sales rise during the first half of the year, while Somerfield's sales experienced "similar" growth.

Manchester-based Co-op, which is a mutual company with 2.5 million members, unveiled a three-year plan in April to double profits and invest £1.5 billion in transforming its retail estate.

As well as currently being the UK's fifth largest food retailer, it is the third largest pharmaceuticals chain, the biggest provider of funeral services and the largest independent travel business in the country.

The business can trace its roots back to 1844, when the Rochdale Society of Equitable Pioneers was created by 28 impoverished weavers and artisans after being forced back to work after a strike. Each put £1 into the kitty and they opened up a shop selling food they would not have been able to afford.

The Co-operative Wholesale Society was formed in 1863, and by 1955 British co-operatives boasted a food market share of 20 per cent.

Its business was challenged by reward card schemes from rivals such as Sainsbury's and Tesco, and the group got a rude awakening with a very public hostile takeover attempt in 1997. The bid was thwarted as a result of the steadfast commitment, both by individual and corporate members, to its ownership structure.

Since then the group has differentiated itself by pioneering in areas such as Fair Trade products.

Somerfield began life as JH Mills in Bristol in 1875, but changed its name to Gateway in 1950 because the city was the "gateway to the West Country". The group dropped the Gateway name in 1994 to become Somerfield and listed on the Stock Exchange two years later.

It was taken private by its current owners in a £1.1 billion deal in December 2005.

Somerfield chief executive Paul Mason said today: "With Somerfield and the Co-operative Group as one business, we believe that we can learn from each other's strengths to ensure we continue to develop the best local grocery shops in Britain."

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible