Sainsbury's and Shell in convenience store tie-up

J Sainsbury continued the major supermarkets' push into convenience stores yesterday when it announced a deal to open 100 mini-supermarkets on the forecourts of Shell petrol stations.

The tie-up will create 2,000 jobs and follows a trial on six sites. The outlets will be opened over the next three years and be branded under the Sainsbury's Local fascia which already has 58 branches. They will sell ready meals, fresh fruit and vegetables, alcohol and staple products such as bread and milk.

Shell has 1,100 petrol stations in the UK but neither the oil giant nor Sainsbury's would be drawn on how many stores might eventually be included in the scheme.

Sainsbury's already has plans to open 25 branches of Sainsbury's Local this year but it is still a long way behind its arch-rival Tesco in the convenience market. Tesco has 110 of its Tesco Express format, most of which are run in conjunction with Esso. Tesco's acquisition of T&S stores last year will also see it convert 450 of the One Stop chain into Tesco Express stores, though these are not on petrol forecourts. It is also opening another 40 Tesco Expresses this year.

Convenience stores have become the new battleground for the major supermarkets which find it increasingly difficult to secure planning permission for large, out-of-town stores. In September the Co-op became the largest convenience store operator in the UK when it snapped up the Alldays chain for £113m. It now has 1,071 branches.

Tesco's £377m acquisition of the T&S chain in November helped it on its way to fulfil its ambition of having 1,000 Tesco Express branches in this country. Safeway has 58 stores on BP petrol stations, while Somerfield has 19 smaller outlets via a link-up with TotalElfFina.

Meanwhile Marks & Spencer hopes to have some 200 of its Simply Food convenience store format, which have started to open near and within railway stations.

Motorway service stations and airport terminals are tipped to be the next locations to be targeted by the supermarkets as they fight for extra market share.

Safeway scorned Sainsbury's tardy entry into the petrol forecourt market. Kevin Hawkins, director of communications, said: "It is interesting to note Sainsbury's late venture into this successful market. We are now well established with 58 stores across the UK, having opened our first site seven years ago in 1996." Safeway said its 50-50 joint venture with BP achieved sales of £386m last year, with profits up by 38 per cent.

Sainsbury's, which is involved in the five-way bid battle for Safeway, declined to say how much it was investing in the Shell venture or how the proceeds would be divided.

Sir Peter Davis, Sainsbury's chief executive, said: "The Sainsbury's Local format is a great success; measured by sales per square foot, 11 of the top 20 performing stores in the company are Locals and three of these are located on Shell forecourts."