Relentless consolidation saw chain after chain snapped up

Tesco kicked off the feeding frenzy with Adminstore in January and before the ink was dry on The Grocer Top 50 in February, everyone and their dog had joined in.

By the end of the year, there had been a staggering 11 deals in 11 months. That’s over 20% of the Top 50 by number.

From the start, c-store bosses appealed to the OFT in vain to slow the march of the multiples into c-store territory.

But as Spar UK MD Jerry Marwood wryly pointed out following the OFT’s decision not to refer the Jacksons takeover to the Competition Commission: “The OFT wants to see a corpse before believing there is even a threat of murder.” It all made for a depressing year for those involved in an increasingly futile battle to convince the OFT the multiples should be prevented from buying up independents because it threatened customer choice.

And they weren’t the only ones having a bad time. Anxiety levels were also rising among suppliers to these c-store chains as they faced the reality of switching to the multiples’ terms.

As Harris International Marketing managing director Tom Fender put it bluntly: “This is depressing for suppliers. Margins will be squeezed.”

So what of the future? In the last two years alone, £1.4bn has been spent on acquisitions in the c-store sector and there appears to be plenty of appetite for more. The average price tag for a c-store may have have risen to £500,000 but it is still peanuts for the likes of Tesco and Sainsbury, which still has more than £200m to spend after the sale of its US subsidiary Shaw’s.

As for The Co-operative Group, it helps to own a bank, and the smaller Co-ops are more than capable of picking off some of the smaller chains - at the moment, at least.

The good news is that independent retailers are facing up to the fact that the ferocious wave of consolidation is likely to continue and they need to do much better at keeping up with changing consumer needs if they are to survive. That competition minister Gerry Sutcliffe is holding talks with the independent sector is also cause for hope.

But if the OFT continues to look at each case in isolation rather than at the cumulative impact, the prognosis for the sector is not good. There may not be a corpse yet, but there soon could be.

*Estimated sales figures

January 2004

The buying spree kicked off with Tesco’s takeover of 45 of the chain’s 70 stores. Convenience store bosses made their first appeal to the OFT to stop Tesco’s march, but to no avail. March 2004

Bells Stores

Eyebrows were raised when Sainsbury bought the 54-store chain but kept the existing management and logistics in place. It became the first retailer to include its acquisition’s name within the new brand.

February 2004
AJ Gillespie

No 42 in The Grocer Top 50, 17 of AJ Gillespie’s Spar stores in Ayrshire, run by Alan Gillespie, were bought by Scottish Spar wholesaler CJ Lang. The deal lifted its store numbers to 70.

March 2004

Somerfield became the first small multiple to join the fray with its acquisition of Aberness’s 36-store Scottish Mace chain, combining Aberness’ local strengths with its strong fresh offer.

May 2004

The Co-operative Group acquired the 64-store Bristol-based chain in May and has now converted the first store to its Welcome format. It sold off 14 of the stores to fellow co-operative Plymco.

July 2004

Number 49 in The Grocer Top 50, Cheers operated 12 stores in North Wales, Shropshire and Cheshire until it was bought by United Co-operatives, which promised more acquisitions to come.

August 2004
Morning Noon & Night

The 50-store chain was sold to co-op retailer Scotmid by Scotland’s highest-profile independent retailer Eddie Thompson. It was the 4th independent c-store chain to be sold in Scotland in 2004.

August 2004

Sainsbury bought the 114-store chain just weeks after it was named best independent retail chain in The Grocer Gold Awards. Once again, c-store bosses called for OFT action. Once again, no joy.

August 2004
Leathley’s Quality Fare

The 19-store, £38m turnover chain was the eighth member of The Grocer Top 50 to go in 2004 and the second deal for United Co-operatives in a month, coming hot on the heels of the Cheers purchase.

October 2004
Metro Discount Stores

Midlands Co-op boosted its estate to 162 stores with the purchase of the eight-store Burton-based chain, which had been shortlisted for best independent retail chain in The Grocer Gold Awards.

November 2004
JB Beaumont

Sainsbury completed its hat trick last month with the six Costcutter-branded stores in the East Midlands. In keeping with its other two Top 50 buys, they become Sainsbury’s at Beaumont’s.

Unwins hoisted up the for sale sign in the summer. Despite reported interest from former Sainsbury director Patrick McHugh, Thresher Group, Bargain Booze, Oddbins and the
Co-operative Group, there is still no deal on the table.