Two of the high street's biggest rivals, The Co-operative Group and Spar UK, have joined forces in a buying alliance to reduce the cost of own label goods and give them a more competitive position in the market.
The companies are pooling volumes in targeted areas of own label products (see boxout), equating to an estimated cost value of £200m. The Co-operative Retail Trading Group (CRTG) will be managing the initiative but there will be no redundancies within Spar's buying team as roles will be altered to fit the new way of working.
Both The Co-operative Group and Spar UK stressed this was not a step towards a merger and that they would be retaining their own label branding, promotions and marketing.
"There is no risk that this will infringe on how we develop our retail propositions," said Guy McCracken, chief executive, food retail, for The Co-operative Group.
"It is only in buying. We are centralising negotiating and buying in a number of own label areas.
"It is a test for us and we still have healthy but friendly competition."
Spar UK managing director Jerry Marwood said: "It is not a merger. We are collaborating while remaining independent.
"This is about quality and efficiency. It reduces the cost of goods and we can pass that on. We need to see what value we derive from it, but Spar's fundamental task is to retain its independence and any strategy that adds value and longevity to this will be employed."
All affected categories will be reviewed, with both existing and new suppliers invited to consider the new volumes and pitch for the business.
"Obviously there is the scale factor. Suppliers will get volume and longer runs. We will be as sensible as we can and are setting up meetings with suppliers quickly," said McCracken.
Suppliers and retailers were being informed this week. The Co-operative Group will be communicating through letters and its internal publication.
Spar retailers will be receiving letters, while information will cascade down from regional distribution centres and central office.
Marwood said there were no plans to take the initiative into branded goods and that a push into other own label categories would depend on an evaluation in 12 months' time.
"We are focused on delivering the benefits for the categories we have identified. The industry is littered with buying alliances of a grand scale that ultimately were too complicated to work in the real world.
"We will deliver what we have committed to do and then review," he said.
Marwood added that by combining volumes Spar UK could ultimately have a stronger offer in areas in which it was somewhat weaker at the moment, for example in fresh foods.
The CRTG currently handles more than £5bn worth of food sales on behalf of some 3,000 Co-op stores, while Spar has sales of £2.5bn through its 2,742 stores.categories affected
Paper (toilet, kitchen and facial), foil and wraps, cooking oils, olive oils, fats, pasta (dry), sauces and pickles, canned fruit and veg, fruit juice, frozen foods, carbonates, household and laundry, spirits, water, eggs
The companies are pooling volumes in targeted areas of own label products (see boxout), equating to an estimated cost value of £200m. The Co-operative Retail Trading Group (CRTG) will be managing the initiative but there will be no redundancies within Spar's buying team as roles will be altered to fit the new way of working.
Both The Co-operative Group and Spar UK stressed this was not a step towards a merger and that they would be retaining their own label branding, promotions and marketing.
"There is no risk that this will infringe on how we develop our retail propositions," said Guy McCracken, chief executive, food retail, for The Co-operative Group.
"It is only in buying. We are centralising negotiating and buying in a number of own label areas.
"It is a test for us and we still have healthy but friendly competition."
Spar UK managing director Jerry Marwood said: "It is not a merger. We are collaborating while remaining independent.
"This is about quality and efficiency. It reduces the cost of goods and we can pass that on. We need to see what value we derive from it, but Spar's fundamental task is to retain its independence and any strategy that adds value and longevity to this will be employed."
All affected categories will be reviewed, with both existing and new suppliers invited to consider the new volumes and pitch for the business.
"Obviously there is the scale factor. Suppliers will get volume and longer runs. We will be as sensible as we can and are setting up meetings with suppliers quickly," said McCracken.
Suppliers and retailers were being informed this week. The Co-operative Group will be communicating through letters and its internal publication.
Spar retailers will be receiving letters, while information will cascade down from regional distribution centres and central office.
Marwood said there were no plans to take the initiative into branded goods and that a push into other own label categories would depend on an evaluation in 12 months' time.
"We are focused on delivering the benefits for the categories we have identified. The industry is littered with buying alliances of a grand scale that ultimately were too complicated to work in the real world.
"We will deliver what we have committed to do and then review," he said.
Marwood added that by combining volumes Spar UK could ultimately have a stronger offer in areas in which it was somewhat weaker at the moment, for example in fresh foods.
The CRTG currently handles more than £5bn worth of food sales on behalf of some 3,000 Co-op stores, while Spar has sales of £2.5bn through its 2,742 stores.categories affected
Paper (toilet, kitchen and facial), foil and wraps, cooking oils, olive oils, fats, pasta (dry), sauces and pickles, canned fruit and veg, fruit juice, frozen foods, carbonates, household and laundry, spirits, water, eggs
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