Co-op returns to Birtley with purchase of Netto store

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)

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)

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.