Costcutter strikes supply deal with Co-op after Palmer & Harvey collapse

Costcutter steps in to fill the hole left by the collapse of Palmer & Harvey, the UK's biggest supplier of tobacco

Palmer & Harvey is the UK’s leading supplier of tobacco but collapsed on Tuesday

Convenience store chain Costcutter has struck a wholesale supply deal with the Co-operative Group as it moves to fill the hole left by the collapse of Palmer & Harvey (P&H).

The group, which owns Mace, Simply Fresh, Kwiksave and SuperShop, said the Co-op would start supplying its 2,200-strong store network from the spring of next year.

The move will also see the Co-op offer immediate support to Costcutter, while handing its chain of stores the chance to become Co-op franchises.

It comes after P&H, one of the UK's biggest private firms, crashed into administration on Tuesday, sparking 2,500 job losses and putting a further 900 at risk.

Costcutter chief executive Darcy Willson-Rymer said: "With P&H no longer able to supply our stores, we have activated our contingency plans that will see our retailers supported by the Co-op and other suppliers in the run-up to our deal with the Co-op."

The deal hands further strength to the Co-op, which is pushing through the takeover of rival grocery group Nisa in a £137.5m deal.

The Co-op plans to acquire 100 per cent of the convenience store operator, which has around 1,200 shopkeeper members running over 3,200 stores, assuming the deal is cleared by UK authorities.

Jo Whitfield, Co-op Food chief executive, said: "We are operating in a dynamic market environment and this deal, coming shortly after our Nisa announcement, shows how we are positively responding to the changes occurring within the sector.

"Our food business is going from strength to strength in what is clearly a challenging retail market.

"We recently reported our 14th consecutive quarter of like-for-like sales growth and this agreement will further strengthen our ability to offer customers great products at great prices.

"Whilst our deal with Costcutter will start formally in spring 2018 we are looking at practical ways we can support independent retailers during this busy trading period, in light of the news concerning P&H.

"It is essential that we maintain a strong independent retail sector and the Co-op is committed to playing its part, along with others in the industry, in ensuring this occurs."

P&H appointed PwC as administrators after "challenging trading conditions" heaped pressure on its cash flow and efforts to revive the business failed to take hold.

The group had entered exclusive takeover talks with the Carlyle Group in October, but the US private equity fund's offer of a significant capital investment in exchange for a controlling stake did not progress.

P&H, the UK's biggest supplier of cigarettes, employs about 3,400 people.

It provides alcohol, groceries and frozen food to 90,000 retail accounts - including Tesco - and supplies from 14 regional distribution centres.

PA