Costcutter seeking acquisitions in competitive market

- Last updated on GMT

Related tags: Stores, Competition

Convenience store operator Costcutter is confident that its
business model is the right one to face the increasing challenge
from the major multiples in the small store sector - and that it
can persuade increasing numbers of store owners to switch from
other symbol groups over the next few years.

Costcutter was one of a number of independent retail groups thought to be interested in the Londis chain - the biggest in the UK with around 2,000 stores trading under its banner - and company chairman Colin Graves told some 300 Costcutter retailers at the group's national conference this week that a number of Londis store owners had already switched fascias.

" At the moment we have approximately 40 Londis stores on board, and there are another 20-30 currently in talks with us; we have had to increase our Induction Programme to satisfy demand. We are very pleased with this upturn in recruitment, as the stores we are attracting are very high quality, well run businesses."

He went on to add that while there had been much speculation about Costcutter actually putting in a bid for the total Londis estate, this had never been an option. "Londis are a large group, but with respect, up to half of their stores can be discounted as they do not fulfil our own specific requirements in terms of acquiring top quality businesses - and quality is paramount."

He continued: "The only way for us to succeed against increased competition is to continue to run our businesses effectively, raise store standards and constantly aim for higher levels of professionalism."

But if Londis was not an option, other potential acquisitions are being considered, Graves said. "We are actively looking to enhance our portfolio and would like to add to our current number of stores that are operated under licence agreements,"​ he told delegate, although he gave no indication of which particular symbol groups were being targeted - adding simply that the larger the group became, the stronger its purchasing power would become.

Graves' bullish stance was supported by the latest sales figures from sales & development director David Thompson. "We are pleased to announce that turnover is up by 9.8 per cent to £411 million,"​ he said. "Costcutter consistently performs well - and in fact turnover has more than doubled in the past eight years. However, we are never complacent, and constantly stress that rewards will only come through hard work and high standards."

These standards cover every area of the Costcutter business, from product range and in-store services to retail technology and supply chain management, Thompson said, highlighting in particular a new scanning system called C-poS. "This Windows-based technology has many positive features, such as a virtual-till on a back-office system. This enables the retailer to see everything that goes through the till live, as it happens. The system features extra security aspects which are a necessity these days."

Thompson also revealed that £2 million had been invested on extra staff and equipment to enable the Costcutter sales force to work effectively in an increasingly competitive environment, characterised by the move into the convenience store market of major players such as Tesco.

Trading & marketing director Angela Barber stressed that independent retailers could no longer afford to lag behind their larger counterparts if they wanted to compete effectively. "As more and more independents are swallowed-up by the multiples, we need to realise that stores have to improve in every single department and put in greater effort to add additional services. We have to develop businesses that are such a strong part of the community that customers cannot do without them."

Colin Graves gave a number of examples of COstcutter stores more than holding their own with Tesco or Sainsbury's outlets. "The Costcutter in Tunbridge Wells now has Tesco in direct competition, and the Costcutter Dronfield store in Sheffield is up against Sainsbury's. We are pleased to say that both stores have done extremely well and both have maintained their previous sales levels. This shows that if we are prepared to fight our corner, we have much more chance of securing our future."

Related topics: Market Trends

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