Was really unsure where chat about the McColl's collapse > potential Morrisons takeover > potential EG Group takeover should go, glad it has been decided upon.
Really looking at this from the Morrisons angle. Before Morrisons Daily, before the relaunch of the Safeway Brand, and even before M Local, what Sainsbury's and Tesco got right about their small format stores was they were offering something that whilst far short of a full supermarket was still recognisably part of the same group, located in residential areas where previously the best you could hope for would be a small independent booze & cigarette shop, or indeed something like a McColl's. When Morrisons did M Local, what they got right was they had launched a bonefide small-format version of a Morrisons supermarket. What they got wrong was the belief they had to hit the ground running with a large portfolio of these stores, and that could best be achieved by taking on loads of ex-Blockbuster units. Those units were typically located in central areas where a small-format Morrisons store just wasn't the right offering and rather predictably it flopped. Had they gone about it more organically and bothered to research sites in out of town areas where there were either no convenience stores or where Tesco/Sainsbury's were not present then M Local could have been a credible player.
Then a couple of years later when Morrison's went into the supply deal with McColl's and relaunched the dormant Safeway brand to avoid their own brand being used in these locations that was a surprising, but seemingly well-managed move. They don't get the Kudos of having a small format store that the other 2 have, but they can still make the money from it.
And then we got Morrison's Daily. That was really, really weird. Having put so much effort into keeping their brand out of McColl's stores only a year or so previously suddenly they had it plastered on the fascia of them. And no real change has necessarily gone on inside these shops. I was at the one in Minehead last week and it is still just a tatty old McColl's store inside with a limited range yet says Morrisons on the front. This is not the way to compete with Tesco and Sainsbury's on small-format stores.
Then for any potential buyer there is the question of where McColl's sits and what actually needs to be done with the business to turn it around. For me, McColl's despite it's ubiquity has always sat rather awkwardly in terms of who it is supposed to appeal to. A true small format supermarket from Tesco or Sainsbury's is a big draw in a residential area, whilst small independents build up loyalty and have their own appeal. But who actually *wants* a McColl's to be their local convenience store? I just see them as something that is accepted and tolerated and viewed as better than nothing than rather than what anyone's ideal solution for local convenience shopping should be.
But when they often have zero competition in the immediate area, and that they are largely making their money selling products that would already be high margin that are then pushed even higher with their heavily inflated prices, with very few perishables to cause stock loss, and when they are very long established with generally very well sited locations, how on earth can they fail? Any purchaser needs to think about what they are going to do differently. I did actually assume Morrison's would get the gig and go down a second disastrous attempt to launch small-format stores where they imagined changing the fascia on thousands of stores would somehow put them up there with Tesco Express and Sainsbury's Local.
Trouble is now EG, although they will probably do a better job than Morrison's at turning the shops around, look set to do a pre-pack which could screw over the pension scheme.