Morrisons to revive Safeway brand after striking supply deal with McColl’s

File photo of a Safeway supermarket sign. Supermarket giant Morrisons is relaunching the Safeway brand after striking a deal with McColl's to supply the convenience store chain with groceries. PRESS ASSOCIATION Photo. Issue date: Tuesday August 1, 2017. The partnership will see the supermarket supply both Morrisons and Safeway own-brand products to 1,300 convenience shops and 350 newsagents starting from January next year. Photo:  Barry Batchelor/PA Wire
File photo of a Safeway supermarket sign. Supermarket giant Morrisons is relaunching the Safeway brand after striking a deal with McColl's to supply the convenience store chain with groceries. PRESS ASSOCIATION Photo. Issue date: Tuesday August 1, 2017. The partnership will see the supermarket supply both Morrisons and Safeway own-brand products to 1,300 convenience shops and 350 newsagents starting from January next year. Photo: Barry Batchelor/PA Wire
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Supermarket giant Morrisons is relaunching the Safeway brand after striking a deal with McColl’s to supply the convenience store chain with groceries.

The partnership will see the supermarket supply both Safeway and national brands, such as Heinz or Walkers. to 1,300 convenience shops and 350 newsagents starting from January next year.

Jonathan Miller, chief executive of McColl’s, said the tie-up was “transformational” for the company and would prove to be a “defining moment” after boosting its estate by snapping up 298 Co-op stores.

He said: “As a large, leading multiple grocery retailer with its own outstanding food manufacturing capability Morrisons stands apart from the competition, and we are truly delighted to be entering into partnership with them.

“In McColl’s, Morrisons gain a long-term partner of significant scale with a growing neighbourhood convenience estate and in Morrisons we gain access to their best-in-class sourcing and manufacturing capabilities.”

It comes after McColl’s announced last month that pre-tax profits almost halved after the firm factored in the cost of snapping up nearly 300 stores from the Co-op.

The group said pre-tax profits fell from £8.2 million to £4.5 million in the first half of the year after it booked £2.3 million in exceptional cost linked to the deal.

But revenue rose 7.6% to £504.8 million in the six months to May 28, with like-for-like sales growing 0.2%.

Focusing on the supply chain partnership, Morrisons chief executive David Potts said: “We are very pleased to partner with McColl’s, and look forward to developing a long and successful relationship together.

“We are also pleased to be reviving the Safeway brand which we know customers will enjoy.

“This new partnership is a further example of Morrisons leveraging existing assets to access the UK’s growing convenience food market in a capital light way.

“Wholesale supply will help make us a broader, stronger business.”

Shares in Morrisons rose more than 1% in early trading on the London Stock Exchange.

Graham Pearce of KPMG

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