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
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
Sport
Ronaldinho signs the t-shirt of a pitch invader
footballProof they are getting bolder
News
peopleStella McCartney apologises over controversial Instagram picture
News
William Hague
people... when he called Hague the county's greatest
Voices
voicesBy the man who has
News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Ed Sheeran performs at his Amazon Front Row event on Tuesday 30 September
musicHe spotted PM at private gig
Sport
Arsene Wenger tried to sign Eden Hazard
footballAfter 18 years with Arsenal, here are 18 things he has still never done as the Gunners' manager
News
Floyd
newsFloyd 'Creeky' Creekmore still performed regularly to raise money for local hospitals
Extras
indybestKeep extra warm this year with our 10 best bedspreads
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
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

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?