Blackfriar: Morrisons gets big boost from Rontec deal

There was good news for Morrisons this week.

Morrisons chief executive David Potts

The Bradford-based, big four grocer is extending its wholesale partnership with Rontec, one of the leading players in the UK forecourt industry.

The initial contract will be extended for a further 10 years and the Morrisons Daily offer will be added to more stores.

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Morrisons currently provides its Morrisons Daily fascia and grocery offer, including its Market Street fresh food and food-to-go products, to over 50 of Rontec’s 250 forecourts.

Now the two companies will trial a new concept called Morrisons Select in some of Rontec’s smaller convenience stores.

Morrisons’ chief executive David Potts said Morrisons has a good relationship with Rontec and he is pleased to provide Morrisons food to more people. He added that Rontec’s stores are “very well managed” and have strong store standards.

Rontec’s chairman Gerald Ronson said his customers have responded positively to a Morrisons offer that combines value for money with strong fresh food range. He added that both companies have a “hands-on culture”, giving Rontec the confidence to extend the partnership.

Morrisons and Rontec first came together commercially in 2016, making Rontec one of the first wholesale companies to tie up with Morrisons. Since then Morrisons has added to its wholesale client list, signing deals with Amazon, McColl’s, Harvest Energy, MPK and Sandpaper.

Analyst Clive Black at Shore Capital welcomed the new, long term development. He said Rontec has given the Morrison fascia a greater profile in the growing forecourt retail arena. Before the deal, Morrisons had no presence outside of its own 300 petrol filling stations.

Mr Black added that the new partnership agreement may see more Rontec facilities converted over to Morrisons Daily, benefiting both Morrisons’ profile and wholesale volumes.

For Rontec, collaboration with Morrisons brings access to a high quality direct supply chain in the form of Market Street’s fresh and chilled food plus the supermarket’s authoritative private label lines.

Mr Black said the latest example of Morrisons Daily at Rontec is in east Leeds, which embraces a greater food-to-go and food-for-now offer. He added that the latest deal might persuade other customers to sign a deal with Morrisons.

At a time when we have no idea what will happen with Brexit, Morrisons is far less dependent on imports than its rivals. This positions it in a good place whatever twist the Brexit saga takes next.

Two thirds of Morrisons’ products are British and many come from Morrisons’ own food production arm. Mr Potts has said he would like to increase Morrisons’ sourcing of homegrown products to get British food supply above 66 per cent.

He said this will depend on customers getting behind their local producers and making the decision to support local farmers, growers and food manufacturers. This is a no-brainer and perhaps one area where both Leavers and Remainers can agree - everyone wants to support their local producers.

Rather than splash out £3.7bn to buy a wholesaler (as Tesco did with Booker), Morrisons has been quietly signing up a number of deals that will strengthen its wholesale presence.

Morrisons is having a tough time in the current Brexit fog, but it is quietly making sensible deals and decisions that are low risk and low investment.