The number of Londis and Budgens stores on independent forecourts is set to soar after Top 50 Indie Motor Fuel Group (MFG) signed a new shop supply agreement with Booker Retail Partners (BRP), commencing on July 1.
Some 300 of MFG’s network of 374 stations will start to be supplied by BRP from this date and, at the same time; a major rebranding programme will commence introducing both the Londis and Budgens brands to the network.
MFG has had a partnership deal with Costcutter since 2012, during a period in which it has grown from under 50 sites to 374, but last year it began shop trials with Costcutter, Booker and Morrisons to determine a new strategy for its shop offering.
Jeremy Clarke, chief operating officer, said: "After many months of trials and negotiations, we are delighted to be now working with the team at BRP. We believe that they can help us to develop our rapidly growing business model and also provide a rewarding offering for our contract managers and customers."
MFG has been tight-lipped about its work with Morrisons since it was revealed late last year. At that time one trial store was launched in Crewe with a new fascia, Morrisons Daily, and it was receiving deliveries of fresh and ambient food utilising Morrisons existing supply chain including food to go, fruit & veg, meat, fish, ready meals as well as essential groceries. Morrisons said it would use the first pilot to test and refine its offer before opening four more trial stores, creating different propositions for each location. Clarke said: "This supply change will not affect our ongoing pilot with Morrisons which has recently been expanded."
He added: "Costcutter will continue to be an important supplier to our business as we diversify our brands to meet customer expectations and I would like to take this opportunity to thank them for their support in helping us build and develop our existing forecourt shop offer over the last four years."
Steve Fox, managing director, Booker Group - Retail, said: "It is a privilege to serve the Motor Fuel Group. This new agreement is a fantastic opportunity for Booker Retail Partners to work in partnership with MFG and its contract managers to help grow and develop its business. We are delighted that the stores are joining the Londis and Budgens brands and I am looking forward to serving them from July."
Dan Quest, retail director, Costcutter Supermarkets Group, said: "We are disappointed that MFG is reducing the number of stores they have with us. However, we are pleased that we will maintain our long-standing relationship with them through the remaining stores that we will continue to service.
"It is extremely regrettable that we were unable to reach mutually acceptable terms to retain the whole MFG estate. However, we are of the firm opinion that this change will leave Costcutter Supermarkets Group and our retailers in a strong position for the future.
"We do not believe the lost volume will impact us or our retailers as the majority of the MFG volume is from tobacco where margins are small. As such, our actual revenue exposure is relatively low. Our strong recruitment programme means that we will be able to more than replace the lost volume and we do not expect any impact on our buying power because of the combined purchasing strength we have through the Buyco.
"We are also grateful to MFG for the opportunity they gave us to trial our new forecourt approach late last year. In those trials, we achieved impressive sales uplifts across the three sites through the introduction of a much wider offering of fresh, locally sourced foods and food-to-go. We are now in the process of formalising a new forecourt format developed from the output of that trial which we look forward to showcasing to our other 400-plus forecourt retailers. We know that our forecourt strategy of increasing retailer profit by focusing on sales growth through increased footfall and basket spend is the right way forward for our forecourt retailers.
"We look forward to continuing to work with MFG and using our expertise to further develop their retail offer."
moving up the Top 50 indies
MFG has come a long way since 2011 when the MFG management team partnered with Patron Capital and Scottish oil tycoon Alasdair Locke to take ownership of the business.
At that point it was ranked fifth in the Forecourt Trader Top 50 Indies with 58 sites. Today, it is ranked second. Through a series of strategic acquisitions Patron and MFG management grew the company to its current total of 374 company owned service stations operating under the BP, Shell, Texaco and Jet brands.
In June 2015 MFG announced that private investment firm Clayton, Dubilier & Rice, (CD&R) would be partnering with the management of MFG to acquire the company from its original institutional investor, Patron, in a transaction valued at approximately £500m.
In addition, MFG also operates the Murco-branded dealer network of more than 200 sites.
increasing market share
As Forecourt Trader observed when Booker took over Londis and Budgens last June, the UK’s biggest wholesaler was under-represented in the forecourt sector compared with its biggest rivals Spar and Palmer and Harvey (which supplies both Mace and Costcutter as well as MRH’s 450 sites) and it offered an opportunity for expansion.
MFG would not divulge the split of how the 300 stores would be divided between Londis and Budgens, but it will give a substantial boost to the numbers of each currently on forecourts. According to Experian Catalist there were 268 Londis stores on UK forecourts in January 2016, and 39 Budgens. This compared with 799 Spar stores, 390 Costcutter stores and 352 Mace stores.
However, last year Experian Catalist ranked Budgens as the second most effective forecourt fascia (shop market share/shop outlet share) after BP M&S Simply Food. This helped Budgens and Londis to a combined market share on forecourts of 4.3%, well behind Spar’s 12%, equal with Costcutter and greater than Mace’s 3.9%. Add in the market share of Booker’s other shop fascia, Premier, and this new deal with MFG, and Booker is beginning to hunt down its two rivals in the forecourt sector.