Co-op returns to Birtley with purchase of Netto store

Netto, Birtley (24 Jan 2011). Photograph by Graham Soult

Netto, Birtley (24 Jan 2011)

The Co-operative Group has announced today that it is to acquire the Netto store in Birtley, Gateshead – one of the six remaining sites that Asda is required to divest following its takeover of the Danish supermarket chain.

The OFT-approved deal is good news in that it secures the future of Birtley’s only supermarket, along with two more Netto sites in Whalley Range, Manchester and Stanton Hill, Nottinghamshire. It means that only three more Netto stores – in Wallasey, Keighley and Barrow-in-Furness – remain to be divested by Asda.

The Co-op has exchanged contracts on the newly acquired stores, which David Roberts, Director of Property for The Co-operative Food, has described as “a valuable addition to our portfolio and another important step in our expansion plans.” The sale is expected to be completed later this year, and the 42 staff employed across the three stores will then all transfer to The Co-operative Group. Until then, my assumption is that Asda will continue to trade the divestment stores under the Netto fascia, as required by the Office of Fair Trading.

Closed down Somerfield, Birtley (24 Jan 2011). Photograph by Graham Soult

Closed down Somerfield, Birtley (24 Jan 2011)

The deal also marks the Co-op’s return to Birtley after a two-year absence, when it traded – briefly – from the Somerfield site across the road. Occupied historically by Presto, Safeway and then Somerfield, the Co-op sold the store that it had acquired to Morrisons in April 2009, only for the Bradford-based chain to close it down. The site remains empty today, hence the especial interest in the fate of Birtley’s Netto, the town’s last supermarket standing.

Today’s news is a reminder of how the Co-op is continuing to grow its supermarket empire following its £1.565bn acquisition of Somerfield, back in March 2009. The Group currently has a 2,800-strong food store network, and intends to add another 300 outlets over the next three years, which will employ 7,000 people.

Recently opened Co-operative Food store in the Strand, London (6 Apr 2011). Photograph by Graham Soult

Recently opened Co-operative Food store in the Strand, London (6 Apr 2011)

50 store openings are planned for 2011 alone, with nine – including three in central London – opened to date. Edinburgh, Glasgow, Southampton, Liverpool, Manchester and Swansea are apparently among the locations that will see new Co-op stores before the end of the year.

The latest UK grocery market share data from Kantar, released this week, continues to show the Co-op firmly in fifth place, its 6.9% share well ahead of Waitrose’s 4.3% but some way behind Morrisons (12.0%) in fourth. However, the Co-op’s present-day share is still somewhat lower than the 7.7% share that the separate Co-op (4.4%) and Somerfield (3.3.%) businesses held at the time of the takeover.

While disposals to other retailers – as required by the OFT – obviously account for some of the drop, a report in Retail Week last year suggested that sales had “collapsed” at former Somerfield stores following acquisition. Data cited by Retail Week showed a 13.3% drop at unconverted stores in the month to April 2010, and a 14.1% decline at stores converted to the Co-op fascia. In contrast, trade at established Co-operative Food stores was up a healthy 1.6%, month on month.

The Co-op argued that lowering prices at Somerfield to match its own accounted for some of the decline; equally, there was always going to be some cannibalisation in creating such an extensive combined store estate. In addition, some consumers who liked Somerfield will no doubt have switched to other supermarkets rather than stay at the Co-op, though other Co-op-loving shoppers may, of course, have moved in the other direction. It’s a complex picture, and with the Somerfield fascia now all but disappeared from the market share data, it will at least be easier to keep track of the Co-op chain’s true performance relative to its peers.

10 Responses to “Co-op returns to Birtley with purchase of Netto store”

  1. Ian Swindall said:

    Jun 24, 11 at 16:43

    There were only 6 Netto’s left unsold before this transaction, I suspect that you have overlooked the 2 additional stores bought by Morrisons last month (Little Hulton (Salford) and Houghton Regis (Dunstable). This leaves only three more stores to sell- Wallasey, Keighley and Barrow in Furness.

  2. Graham Soult said:

    Jun 24, 11 at 17:15

    Thanks Ian! Yes, I’d missed those extra Morrisons ones. I’ll update the blog to reflect that

  3. John said:

    Jul 01, 11 at 16:48

    Bet Birtley shoppers will be THRILLED at the overpriced Co-Op opening in what was a discount trading outlet. The co-op is twice the price on many brands that Netto sold. I find it very odd, and I have said this before, that this could not be an Asda Supermarket, considering that Netto Gosforth is going to be an Asda even though we have a 24 hour one less than 10 minutes walk away and there will be two at opposite ends of Cowpen Road in Blyth once that Netto converts.

  4. Graham Soult said:

    Jul 01, 11 at 17:00

    That’s a very fair point John. I suppose the danger is that the people of Birtley might have ended up with nothing at all had the Co-op not come in. But yes, I think ideally a Lidl, Aldi or even a UGO would have been a better fit in meeting local people’s shopping needs.

  5. Soult's Retail View » Tamworth’s ex-Netto Morrisons is small but (almost) perfectly formed said:

    Jul 01, 11 at 17:25

    [...] Group has acquired 20 sites, which it has now converted to its UGO brand, while Iceland and the Co-op have each bought three. This means that of the 47 Netto sites that overlapped with existing Asda [...]

  6. Steve Dresser said:

    Jul 01, 11 at 17:44

    Keighley is one of those that they’ll struggle to sell as it has every major retailer within a mile of each other.

    Cant see who will take it.

  7. Valerie Beal said:

    Jul 06, 11 at 18:15

    Agreed with John – I just fail to see why ASDA couldn’t trade at the Birtley site – they have a number of stores very close together. One old Netto store is now open as ASDA in very close proximity to another new store. The OFT is a bit of a joke – if you are Tesco you can open virtually anywhere – look at some big cities with stores in walking distance of each other. Birtley is an area where many people are on low incomes – they need a cheaper supermarket and it would be popular. A lot of people use the bus just go along to the local shops – many of them living in the large number of sheltered housing complexes for the elderly.

  8. Aminita said:

    Jul 14, 11 at 12:41

    It’s a shame that co-op have stepped in with this store, as Valerie says the OFT are a joke when you see where Tesco are allowed to do pretty much whatever they want. It’s not just their larger branded stores everywhere either, they now own the Mills group sites and are branding them as One Stop.

    Asda would have been perfect for the Birtley site, and you only have to go into their newly rebranded Old Fold store to see how popular a replacement it is.

    We can only hope that Morrisons aquire the old Morrison’s construction site behind the old Somerfield store and provide a decent store in the area. Co-op are rediculously expensive when compared with Netto prices, but maybe this will be of benefit to the other smaller local shops on Durham Road, such as Birtley Convenience which is only a minute from the current Netto store.

    People need to vote with their feet.

  9. Sean said:

    Jul 25, 11 at 15:26

    with the co-op distribution centre only half a mile away it should be in the cheapest price band. have any of you ever shopped in a tesco metro or a sainsburys local, if so you will see the co-op in not at all expensive , ok they cant compete with the large superstores on range but they can on pricing

  10. Ian Swindall said:

    Nov 06, 11 at 13:22

    Aminita will be pleased as she has her wish, Morrisons have acquired the adjoining sites and plan to build a brand new supestore in Birtley.

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