In Scotland, there is more supermarket floorspace per head than anywhere else in the UK. It’s no surprise then that Scottish indies are feeling the heat, but some are triumphing. Peter Cripps heads north to discover David Sands’ blueprint for the c-store of tomorrow

It's 11am and I'm walking around one of David Sands' three Dunfermline stores. The busiest part of the store is the food-to-go counter, where a middle-aged woman has just ordered a chicken tikka masala to go.

It's an interesting brunch choice by anyone's standards but hot food-to-go in the newly opened store is a popular draw throughout the morning and lunch, and it underscores just how right CEO David Sands was to add the service to a dozen of his 29 stores.

The Scot is one of a growing number of independents hoping to get one over on the big box multiples by making foodservice an integral part of the mix. In his case, however, we're not just talking a fancy third-party coffee shop offer, we're talking food that the retailer itself produces be it for its hot food-t0-go counter or for the chilled ready meal aisle under the 'Deliciously... David Sands' label.

In short, we're talking full-on foodservice, which for a smaller player is a move not without risks. So why has Sands decided to play such a high-stakes game and is he winning?

It certainly helps that the Central Kitchen, the factory above his Kinross store where the food is made, is owned and run by Sands and was kitted out with fittings from a failed sandwich factory at a cost of just £50,000. It would have cost three times that had it been built from scratch, he claims, and rent-free, it paid for itself within nine months.

But the driver wasn't low start-up costs. It was the improved margins the retailer could make by taking on the manufacturing responsibility itself. This month, the company announced a 13.9% hike in sales to £39.4m [52w/e 31 December], while pre-tax profits were up 5.1% to £1.4m.

When Sands was serving food-to-go and ready meals made by other suppliers, gross margins were about 30%, now they are more than 40%. This is helping drag his overall gross margin up by half a percentage point "Not inconsiderable when you are talking about a £40m turnover," he says.

The factory now produces £10,000 worth of food or 1,000 meals a week everything from curries, bolognese, soups and pizzas to wraps, sandwiches, salads and fruit pots. And with Sands eyeing another 20 store openings across Scotland in the coming years, production is set to be ramped up further.

In addition to the obvious financial benefits, going it alone has allowed Sands to cater for local tastes. He has now added 'stovies' a meat and potato dish to a list of local delicacies that includes battered haggis, Lorne sausage and potted hough (a shredded meat dish).

This is part of a wider push to tap into the growing demand for Scottish cuisine from his shoppers. His use of local suppliers has already grown to the extent that 22% of his total stock is now locally sourced and in the coming years, Sands wants to increase this to a third.

The key, he says, is to stand out from the crowd. "The thing that terrifies me is having c-stores that are the same as everyone else's," he says. "Too many operators have become clones. I would hope we are not just functional but have things people find interesting, that they'll remember long after they've paid."

Rival retailers have certainly found the improved quality of the sandwiches and ready meals interesting. So much so that some have asked Sands if they can stock them too. The answer has been an unequivocal no. "We want Central Kitchen to be unique to David Sands stores so that we have a point of difference," he reasons.

For Sands, establishing and maintaining a point of difference could not be more ­critical, especially given the continued inroads the big box multiples are making into independent territory. His is not the only indie store that has turned its hand to foodservice and/or manufacturing recently, however.

Last year, Spar wholesaler and retailer James Hall & Co bought a sandwich factory, where it now produces its Great Northern Sandwich Co and Spar-branded sandwiches. Budgens retailer Andrew Thornton grows some of his own produce on a rooftop garden in Crouch End (see page 40) and Welsh retailer Harry Tuffins has begun bottling water for itself and other retailers and wholesalers.

The cost of entry can be prohibitive, but can pay dividends, says Sands. "We didn't really realise the potential of ready meals," he adds. "Traditionally, indies have been weak on ready meals and we always felt we were weaker than the mults. Now we are producing a product that's genuinely good and are getting repeat business. I taste them regularly to ensure we're on top. We are not trying to be cheap but to concentrate on quality."

As he looks for sites for new stores, space for food-to-go counters is a must. Currently four of Sands' stores have seating areas to encourage on-site snacking, a feature that may become more common. Expanding the reach of the food-to-go offer is another goal. Presently, each of his 12 food-to-go counters shuts at 3pm, but Sands would like them to develop an offer that is sold until the stores shut at 10pm.

The goal is for chicken tikka masala lovers to be able to get their fix at any time of the day. As Sands says: "Our industry is changing all the time and those that don't change with it are going to perish."

The Sandsman: David Sands snapshot

Age: 43
Career: After Edinburgh University, Sands was a graduate trainee at a Sainsbury's store in London. He returned to Scotland after a year to help his father run the family business. They opened a second store within a year.
Hobbies: Skiing, fishing and "being outdoors". Sands is a 'Munro bagger' and aims to hike all of Scotland's mountains.
Proudest moment: "The births of each of my three children. Professionally speaking, I get a real thrill when we open a new store or when a store has record sales." Sands also loves Scotch, a passion reflected in his stores' extensive spirits range.
Motivation: "I like to see our staff develop and for the business to try different things. As Einstein said: 'Insanity is doing the same thing time and time again and expecting different results.' "