Spar UK regional distribution company, A F Blakemore, has been the subject of rumours regarding a potential sale of its wholesale division. According to The Telegraph, family-owned A F Blakemore has hired advisors to explore a possible sale; however, the company has hit back stating it is not for sale.
Spar UK’s parent company, Spar Food Distributors Limited, is owned by five regional distribution companies – of which AF Blakemore (covering the Midlands, Wales and South East) is the largest. The other four companies are Appleby Westward (South West), James Hall (North), C J Lang (Scotland) and Hendersons (Northern Ireland). Together these five companies own around 600 Spar stores, with the remaining 2,000 stores being independently owned sites branded Spar and supplied by the afore mentioned distributors.
Spar ranks 13th in LZ Retailytics ranking of UK grocers, making it the third largest convenience player in our ranking, after Co-operative Group and Booker.
Consolidation is the key theme in the UK convenience and wholesale sector right now. Tesco’s move on Booker is so significant that it has shaken up the entire market and almost daily there seems to be more speculation of consolidation and further reaction. And with good reason, Tesco and Booker represent two power houses in their respective channels – big boxes/online grocery and convenience/wholesale respectively. As a combined entity, they can challenge the discounters, who have turned the UK market on its head these last few years. In the wake of this disruption, the British press is speculating at length on the next moves by competitors, which are not expected to remain idle but to focus on strengthening operations with two primary objectives – multichannel and scale.
Multichannel is a good explanation for why the big UK players are so interested in the convenience market. To shore themselves up against the discounters and distribute their revenues across more channels, the likes of Tesco and Sainsbury’s are eyeing up established convenience players, as a quicker route to growth than finding their own sites – which is getting increasingly challenging. Scale is critical because of market concentration and margins in wholesale are thin. This is confirmed by a quick look at the wholesaler at the centre of speculation: Spar's A F Blakemore. Its latest financial results: pre-tax profit of GBP 7.6mn (EUR 9.3mn) on a turnover of GBP 1.3bn (EUR 1.6bn), meaning just 0.58% of total sales. Buying power and an efficient supply network are key to success in the disparate convenience market. Not forgetting the simple equation that if you multiply a small margin by a big enough number, it is possible to make a large profit… hence scale is critical.
So why couldn't A F Blakemore be the next Booker? In terms of scale, Spar is around half the size of Booker in terms of convenience store numbers; and unlike rival Booker post the Tesco merger, Spar is only operating in the minimarket channel (plus a minor presence in supermarkets). It is also a pretty complicated organisation, with its central office controlling national marketing and buying and the five RDC's managing distribution and the store estate – not forgetting the Netherlands-based Spar International organisation, which ultimately owns the brand – meaning it can be challenging for suppliers to navigate. As for most of its rivals in the convenience sector, we expect tough times ahead for Spar in a post Tesco-Booker world; as such it would be no surprise if the business and its RDC’s were considering all its options.