Costcutter begins a new era with opening of first Kwiksave store

It’s Kwik Save, but not as we know it. Last weekend, Costcutter cut the ribbon on the first of a new generation of Kwik Save stores in Little Lever, Bolton.

The symbol group bought the rights to the name when the retailer collapsed into administration in 2007 and is now on a mission to relaunch the brand as a lower-cased ‘kwiksave’, though the more significant decision is surely its abandonment of any pretence that it’s a discounter in the old Kwik Save mould.

“We’re trying to create a Kwiksave as a convenience model, not a pile ‘em high, sell ‘em cheap retailer,” explains Costcutter’s marketing director Ian Bishop. “We want to keep the heritage of the brand but evolve it into a convenience offer.”

For Costcutter, it marks a new chapter in more ways than one, as it emerges for the first time without its founder Colin Graves, who quit after 26 years earlier this month, following a row with parent company Bibby Line Group. Sir Michael Bibby had acquired a majority stake in 2007, and bought out the remainder of the shares last November, renaming the business Bibby Retail Services. On the surface, it was business as usual, with Graves as chairman and Nick Ivel promoted from MD to CEO. And it has continued to grow, adding 237 new members in the past year, it announced last month, and boasting 1,620 stores, up 4.5%, according to the latest Grocery Retail Structure.

Behind closed doors, however, Graves and Bibby were clashing: was Graves to be executive chairman, leading its direction, or a non-executive figurehead? After months spent rowing, the departure of Graves was used to announce that Costcutter was “strengthening its board”, with the appointment of former Ugo commercial director Richard Collins as retail operations director responsible for company-owned stores Steve Potter as strategy and operations director, and Bob Marshall as finance director.

So what will life be like for Costcutter without Graves? What can we expect from the convenience operator in the future? And where does Kwiksave fit in?

It will certainly be different. “Life without Colin will be harder than Bibby thinks,” says one senior convenience source. “He inspired a great deal of retailer loyalty. It would have been wiser for Bibby to have kept him on-side.” But while “Graves is a big loss to Costcutter,” another industry source believes “it needs to move on. Will Costcutter fail without him? No. But will they miss his skills and expertise? Absolutely.”

The first signs of a new direction emerged last summer. For 25 years the chain had just one fascia, but in September last year it announced plans to launch two secondary fascias - Kwiksave, as a cheaper alternative for retailers to enter the sector, and MyCostcutter as a premium fascia. In March, it added a fourth fascia, following the surprise announcement it had bought Top 50 indie R&M Swaine, owner of the Rhythm & Booze off-licence chain, out of administration. This is to be relaunched as a franchise package “imminently”, according to Bishop.

With the new structure in place, the launch of the first Kwiksave store, a former Premier, in April, will be watched closely. The signs are encouraging. In its first week it took £28,600 - £10,000 up on average takings before. And sales have remained at about £30,000 since then, despite a Tesco Metro - ironically a former Kwik Save - just a few doors away.

The plan is to give the old Kwik Save a “21st-century makeover”. Prices, however, are “very similar” to Costcutter stores, Bishop admits, although Kwiksave retailers will be encouraged to buy into offers from Costcutter or its preferred suppliers - a tactic store manager Bhavesh Parekh is already using.

Parekh has set aside the first aisle of the 3,000 sq ft store “to flood with offers” and he’s also introduced a ‘wall of value’ at the back of the store. “The wall of value is anything I can buy into that I can get my hands on through Costcutter,” he says. “It’s up to me to buy into the offers and shout about them.”Parekh sells milk at two for £2 and also runs a bread and milk deal offering a £1.39 bottle of milk and a £1.38 800g loaf of Warburtons bread for £2. The Tesco Metro copied the deal within a week, according to Parekh. There’s also ‘mega packs’ of Fairy dishwasher tablets down from £12.99 to £5 and 750g boxes of Kellogg’s cereal for £2.

Nearly every area of the store has been changed, in a refurbishment that cost just £60,000. The frozen section has been reduced to just one aisle - before, frozen accounted for an incredible 50% of the store. However, the store’s daily frozen order is still the same size as the weekly order of a typical Costcutter.

Parekh has also doubled the store’s fresh produce offer, which has tripled fresh sales, while grocery and chilled have both substantially increased. With the help of Costcutter, he has also blitzed the local area to encourage footfall. Before the official opening, goodie bags were sent to 500 local residents containing a mug, tea, coffee, sugar and a £5 gift voucher.

Alternative
An embittered Graves believes Kwiksave is “only an alternative fascia, so it’s a non-starter as far as I’m concerned”. Others are also still to be won over. “They’re trying to recreate a brand with a lot of heritage,” says one senior source. “When people went into a Kwik Save, they knew what they were getting. If they haven’t got the low prices, they aren’t going to get that. The old management tried to do that when they switched to Fresh Xpress and it didn’t work.”

But Bishop is confident Costcutter is on to a good thing. The second Kwiksave is already scheduled to open in Scotland next month. “We have trialled the fascia and graphics with Bhavesh and are now ready to roll it out to the masses,” he says. “It is a simple and cost-effective way for retailers to get on board and it’s a great fighting brand, so we’ll be talking to members with Tescos nearby.”

Work on its other fascias also continues apace. The standard Costcutter fascia rolls out a new refreshed look later this month, followed by the first premium MyCostcutter a few weeks later. But with a new fascia strategy, a new management team, and a new buying contract to negotiate when the Nisa deal runs out in 2014, the new era for Bibby Retail Services is no Kwik fix.