A Co-op and Nisa tie-up would be most convenient

There are cultural as well as commercial reasons to get hitched.

by Adam Gale
Last Updated: 31 Aug 2017

The Co-operative Group has emerged as the leading suitor for independent grocery wholesaler Nisa. The two are now in exclusive talks over a £140m acquisition, leaving Sainsbury’s out in the cold.

The groceries sector is under intense pressure from three forces – the growth of online shopping, the market-share-stealing rise of Aldi and Lidl and, most importantly, the shift to convenience shopping.

The latter pushed Tesco to strike a £3.7bn deal to acquire leading wholesaler Booker in January this year. That’s since been stalled by the competition authorities, but it’s left Nisa nervous. The wholesaler, which supplies over 3,000 stores, had been in exclusive talks with Sainsbury’s, until the grocery major got cold feet. Could the Co-op be a better fit?

What’s in it for the Co-op?

The Co-op’s strategy is to target the convenience sector, where it is widely considered second only to Tesco. Nisa is a major wholesale supplier to the convenience sector – both its own members and other operators. The obvious advantages for the Co-op therefore are greater buying power and a bigger slice of a growing sector, where finding suitable locations is becoming more and more difficult.

What’s in it for Nisa?

Fundamentally, Nisa doesn’t want to be left behind. The possible emergence of a Tesco-Booker behemoth sent ripples through the sector. The fact that Morrison’s recently nabbed its contract to supply McColl’s – a contract representing over a third of Nisa’s revenues – will only have focused its mind.

Will it work?

The acquisition faces two major obstacles. The first is the Competition and Markets Authority. It scared Sainsbury’s off, but then the Co-op is a lot smaller and therefore, you'd think, less likely to come a cropper. The only real risk here is if the CMA looks at the convenience market only, where the Co-op is more significant.

The second obstacle is the membership. Nisa is a mutual, owned by its store members, many of whom are suspicious of handing their business to a listed company. As 70% need to approve any deal, it’s possible Sainsbury’s wouldn’t have managed it in any case.

But the Co-op isn’t listed. It’s also a mutual, albeit of the customer-owned variety, so its values and business model are much more closely aligned.

Read more: Why Aldi and Lidl will make it the Big Six

Image credit: Sludge G/Flickr


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