Somerfield dismantles Kwik-Save chain
of underperforming soft discount chain Kwik-Save to an
entrepreneurial consortium, ending months of speculation.
Somerfield, which was itself bought out by a private group last November, will offload 171 of the 350 Kwik-Save stores to Back to the Future Ltd (BTTF) for a reported £200m.
BTTF is headed by Paul Niklas, the former managing director of Formica, and Richard Kirk, chief executive of discount clothing retailer Peacocks.
Niklas indicated BTTF will continue to operate Kwik-Save on a discount strategy, saying: "Today marks a recommitment to the Kwik-Save brand and its already strong local presence. We will, over time, be refreshing the store image while maintaining the existing offer of quality branded products at competitive prices."
The deal comes as discount retailers move to take a growing market share in the UK and across Europe. Hard discounters, such as Netto, Lidl and Aldi, are showing signs of resurgence and adaptation after failing to make a significant breakthrough when they entered the British retail market in the 1990s.
Netto and Aldi are both offering repackaged private label products and a greater selection of fresh produce in a bid to win business from the conventional grocery market. Together with Lidl they currently take just over 5 per cent of the market share, according to TNS figures.
But the Institute of Grocery Distribution (IGD) forecasts a 56 per cent increase in discount store numbers by 2010 as they focus on significant expansion across the UK. This translates to an increase in turnover from £3.5bn in 2005 to £6.2bn in 2010.
Meanwhile Somerfield will concentrate on maintaining it's fifth place position, converting 102 of the remaining discount stores to the Somerfield banner later this year.
The remaining 77 shops will be sold to other retailers, believed to include European discount chains Aldi and Netto.
Late last year the European Commission approved the takeover of Somerfield by the Apax consortium.
Somerfield accepted a £1.1billion (€1.6bn) from the consortium which includes Iranian property tycoon Robert Tchenguiz, private equity firm Apax Partners, investment bank Barclays Capital and four of Somerfield's executive directors, including chief executive Steve Back.