Earlier this month, Sainsbury’s put its £130m takeover talks with convenience store brand Nisa on hold.
The supermarket decided to pause talks due to the Competition and Markets Authority (CMA) investigation into Tesco’s £3.7bn takeover deal with the wholesaler Booker.
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However, it looks like the Co-op has taken advantage in this break in discussions to launch its own bid for Nisa.
According to Sky News, the board of Nisa has “granted a period of exclusivity” to Co-op to negotiate a takeover of the convenience store chain.
In a note to shareholders, Nisa’s chairman Peter Hartley, said:
Subject to the results of the due diligence, it is anticipated that the Co-op could be in a position to make a final offer to the Members for your consideration.
Though the Co-op is outside of the UK’s so-called big four supermarkets, it is one of the most widespread supermarkets in the UK.
It currently has around 4,200 stores across the country. If it combines this power with Nisa’s 4,000 convenience stores, then it will be the most prolific supermarket brand.
In comparison, Sainsbury’s only has 1,412 stores – made up of supermarkets and smaller convenience stores under its Sainsbury’s Local brand.
Acquiring Nisa’s 4,000 smaller stores would really have boosted Sainsbury’s.
However, despite Co-op being so widespread, it is only the sixth biggest supermarket in the UK.
Tesco is highest, with 28.1 percent of the market share, and Co-op was recently overtaken by Aldi which now has around seven percent of the market share.
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Tom Berry, a retail analyst at research firm GlobalData, told Verdict that discounter stores like Aldi and Lidl have been improving their market position as inflation goes up.
The discounters are in a stronger position to minimise price inflation and undercut the big four, appealing to price sensitive consumers in search of greater value.
Although, Co-op is in a prime position to take advantage of the challenges Brexit poses to the UK food market.
The British Retail Consortium (BRC) has raised concerns that there will be shortages in supermarkets if food products get held up at the UK border if a customs union deal is not reached before March 2019.
Unlike other supermarket brands, the Co-op sources all its meat, apart from lamb, and salmon from the UK.
It has also pledged that all in season potatoes, carrots, parsnips, and lamb will be British by 2018.
If Co-op doubles its store base with the Nisa deal and has the advantage of sourcing British products, it could become one of the biggest supermarkets after Brexit.