Given that major supermarkets have been falling over each other to play down fears over supply chain issues disrupting Christmas, it was a bit of shock to see McColl’s warning that poor availability was set to hit its profits.
Yes, the convenience retailer did sow this seed of doubt in its interim results in August. But of late there has been a sense across the grocery sector that while supply issues are still occurring, they have broadly settled down to more manageable levels.
The particularly interesting element in this tale is that McColl’s is, of course, supplied by Morrisons. Today, the former said it was “working collaboratively” with the supermarket giant to lessen the effect of the disruption, but it was unable to fully mitigate the impact on its stores.
This contrasts with the tone taken in Morrisons’ half-year results, posted in September, when it was far more bullish about the impact of the supply crisis on its own operations.
“The whole British food industry is currently facing into the continued challenges of Covid-19 and sustained supply chain cost increases, which are largely outside of our control,” it said. ”However, we are working to address those challenges and second-half 2021/22 profit before tax and exceptionals is expected to be considerably higher than the £105m achieved in the first half.
“We are planning for significantly lower lost profit year on year in the key business areas of fuel, café, and food to go. Among other assumptions, we are also budgeting for minimal further direct Covid-19 costs, continued improvement in online and wholesale profitability, and lower marketing costs from the My Morrisons loyalty scheme and stakeholder discounts.”
This is not the first time McColl’s has faced availability issues since switching to Morrisons as its exclusive wholesale partner. There were teething problems when the pair first got together. A phased rollout was planned for January 2018, but some of this had to be stepped up sooner when McColl’s previous partner Palmer & Harvey collapsed in November 2017.
During that first year, McColl’s flagged up on several occasions that it was having to work with Morrisons to address issues with its service levels.
Both retailers will be therefore hoping the current concerns are just a short-term glitch caused by wider industry issues rather than a reflection of Morrisons’ ability to service convenience.
That is particularly pertinent as Morrisons is clearly looking to tempt more independent retailers to switch to its wholesale supply arm. This week, well-known Nisa retailer Harj Dhasee confirmed he will be switching his two stores in the Cotswolds to the Morrisons Daily fascia just after Christmas. Morrisons confirmed it was working with other indies and actively encouraging more to get on board.
If this trickle is going to become more of a flood, Morrisons will need to ensure its service levels and availability are bang on – especially as indies talk to each other and won’t hold back if the service falls short.
On the other hand, if it is good, then Morrisons could pretty quickly become a major force in supplying independents – there is a lot on the line here.
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