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Costcutter to Lead Consolidation ofUKConvenience Sector Through Partnership With Palmer & Harvey


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Costcutter to Lead Consolidation of UK Convenience Sector Through Partnership With Palmer & Harvey
13 March 2013

Unique joint venture buying company with £5 billion buying power created; Costcutter to increase store portfolio to 2,500 through addition of P&H's 800 Mace convenience stores; P&H to focus on its core wholesale distribution business


Wednesday, March 13th 2013:Costcutter Supermarkets Group and Palmer &Harveytoday announced a strategic partnership that will transform the UK's £34bn convenience sector. In a unique move for the sector, the two companies are launching The Buyco, a new joint venture buying company that will command an unrivalled £5bn negotiating and buying power. At the same time, Palmer & Harvey's Mace, Your Store and Supershopstores will join the Costcutter Supermarkets Group. Together, these two moves will position Costcutter Supermarkets Group asaleading symbol group retailer, commanding 15% of the UK market. In addition, Costcutter Supermarkets Group has signed a new eight year wholesale distribution contract with Palmer & Harveythe UK's largest food and drink wholesaler, andthe UK's 6th largest privately owned company.


This deal represents a significant shift for Costcutter Supermarkets Group, as it will now have complete control of the range, price and promotions it offers its independent member retailers. As a joint venture company with £5bn buying power, The Buyco will provide Costcutter Supermarkets Group withaccess to thelargest volume buying power in the sector, resulting in the most competitive prices for its members. This will ensure Costcutter Supermarkets Group maximises its members' growth potential in the symbol group sector. That sector is predicted to grow by 31% by 2017 to £17.8bn, which will represent 40% of the convenience retail market.


With Palmer & Harvey's 800 Mace, Supershop and Your Store brands increasing Costcutter Supermarkets Group's store portfolio to 2,500, it will have the second largest number of symbol group stores in theUK. This move means thatPalmer &Harvey will be moving away fromdirect management of symbol group convenience retailing to focus on its wholesale distribution strengths.


Darcy Willson-Rymer, CEO of Costcutter, said: "With the convenience sector still gripped by the tectonic changes of the past decade, it is essential that we provide our symbol group members with the best possible means for them to compete. The Buyco together with the supply agreement will enable us to do this through its control of £5bn of negotiating power which is unprecedented in the symbol group sector.This means we can provide our members with the most competitive prices, range and promotions available.


"Convenience retailing has never been stronger and all indications are that it will continue to weather the economic storm and enjoy healthy levels of growth. This is driven by consumer demand where convenience shopping is seen as an increasingly attractive option. Accelerating the competitiveness of our independent retailers has therefore been the core focus for Costcutter Supermarkets Group.


"This is why we have partnered with Palmer & Harvey to create a buying company with unrivalled purchasing power within theUKsymbol group sector meaning that we can ensure the best prices, promotions and range for our members. Combine this with the industry leading distribution capabilities of Palmer &Harvey and we firmly believe that Costcutter Supermarkets Group will be offering the best possible service to our Members."


In announcing the launch of this joint venture buying company, Costcutter Supermarkets Group is also announcing the introduction of a new, bespoke range to benegotiated by The Buyco. This will include anextensive chilled and fresh proposition, and anew three tier own label range which Costcutter Supermarkets Group is developing for all categories and will support through marketing investment that will see it emerge as an industry leading brand.


By working on behalf of Costcutter Supermarkets Group, TheBuyco will provide flexibility and agilityin the productrange to meet member requirements. Using feedback from members Costcutter Supermarkets Group hasalready developed plans to introduceimproved fresh and chilled ranges as well as developing a regional range offering.


Martyn Ward, CEO of The Buyco and current Managing Director, Commercial and Sales at Palmer &Harvey, said: "The Buyco is an innovationwithin the convenience retail market as its sole reason for being is to create value through volume. To achieve this we will be working closely with suppliers, both those already working with Palmer &Harvey and new suppliers that we will be bringing on board to meet the needs of Costcutter Supermarkets Groupmembers, to ensure we are providing not simply the largest range but the highest valuerange possible. This brings greater value for everyone, including Costcutter Supermarkets Group's customers and all of P&H's independent retailers,as well as ultimately consumers, who will benefit from a strong independent convenience sector."


Costcutter Supermarkets Group will be contracting with Palmer & Harvey for the wholesale distribution of product to the Group's 1,700 existing Costcutter and kwiksave stores as well as the 800 Mace, Your Store and Supershopstores that are transferring to the Costcutter Supermarkets Group. As a result, all Costcutter Supermarkets Groupmembers willreceive a considerably improved service made possible byP&H's national leading service and infrastructure of14 depots, offering multi-temperature deliveries.


Chris Etherington, Chief Executive of Palmer &Harvey, said: "The core of our business has always been world class 'last mile' delivery to retail stores in every postcode, every day. By divesting our retail operation to Costcutter Supermarkets Group, we can now focus all our energies on extending the delivery benefits already enjoyed by our Mace, Supershop and Your Store retailers to the wider Costcutter Group. This willmean the retailers have greater control and massively increased business efficiency which will ultimatelylead to savings for Costcutter Supermarkets Group'sindependent retailer. As a business, we are extremely responsive to customer requirements and late demands, all of which means that retailers can focus on running their business and not worrying about delivery."


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