Bestway has snapped up Bargain Booze, Wine Rack, WS Retail and Select Convenience in a pre-pack deal from the administrators of Conviviality for the knockdown price of £7.25m.
The £2.1bn-sales wholesaler has been trying to consolidate the market for several years, but its overtures to the likes of Blakemore, Costcutter and Nisa have all been spurned as it drove a hard bargain.
However, with Conviviality retailers seeking out new supply deals as stocks ran out, and rivals tied up in restructures, disposals and the integration of new supply contracts, the Bestway team was in pole position to negotiate a deal on the Convenience Retail business, and is expected to seal the deal with administrators PwC on Monday.
Adding 770 Conviviality stores to the 1,500 BestOne symbol retailers and 2,000 shops operating under the Extra Local retail club fascia, Bestway will add £500m in sales and will now supply over 4,000 shops, including the 220 company-owned stores Conviviality had built up.
Some convenience industry sources felt the company-owned stores had been a distraction to Conviviality management and had soaked up valuable cash. As recently as December Conviviality paid £25m to acquire WS Retail (also from PwC, which was acting at the time as the administrator of defunct wholesaler Palmer & Harvey). That’s four times the amount Bestway has paid for the entire Conviviality Retail business. It also acquired the GT News and Rhythm & Booze businesses.
But these company-owned stores are understood to have been a key attraction in acquiring Conviviality Retail.
“It’s far more attractive than buying a bunch of cash & carries, because it gives you a position in retail,” a senior Bestway source who has been involved in the sale process told The Grocer. “We’ll be managing over 200 stores. We can use these as a test bed, in terms of price and range discipline.”
It was also an opportunity to “get close to a whole bunch of [independent] retailers”, he added. “We can always franchise them out, getting closer to bigger retailers in the process. We know the history and the trading of these stores. We might be able to say, ‘do you want to operate them?’”
The source added that franchise stores were also attractive because of Conviviality’s insistence on 90% compliance. “Bargain Booze is the most disciplined symbol operation in retail. The nature of the epos system, the discipline around price control, and the best execution compliance, it gives you the platform to roll that out across our other fascias.”
While plans are not fully fleshed out, the source speculated that the Wine Rack and Bargain Booze brands could also be used as sub-brands within BestOne stores.
And though off licences have come under a lot of pressure in recent years, he predicted that with minimum unit pricing “a slam dunk” in the near future, supermarkets “will not be able to loss lead on alcohol, so we will see a change in shopping back to convenience”.
Under the terms of the pre-pack deal, Bestway will be able to take on the leases under a licence to occupy basis. This controversial practice – which has been used extensively in recent months by a number of retailers and restaurant chains – will enable Bestway to negotiate with landlords on the same or better terms – or walk away.
Bestway will also sign a retention of title clause, which means that it will take on Conviviality Retail’s supplier debts while collecting money owed by its retailer customers on behalf of the banks, for which it will receive commission. It will also take over the loans CVR had given its retailers.
Conviviality owned the head leases on around 50% of the shops it supplied, which meant they were liable when the lease ran out. Retailers also received shares when they took out loans with Conviviality. The idea was to use the dividends to pay back the loans, but with Conviviality plc in administration, those shares – with a market capitalisation of over £750m in November - are worthless.
Earlier this week, Magners owner C&C acquired Conviviality’s on-trade wholesalers Matthew Clark and Bibendum for a “nominal sum”, understood to be as little as £1.
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