Asda was given a gift from the gods this week when The Co-op sold the Issa brothers its portfolio of 132 petrol forecourt sites
The supemarket’s owners, the Issa brothers, have pinpointed convenience as a key tenet of their growth plans, which on paper makes complete sense.
Convenience stores continue to outperform supermarkets. Just last week data from NielsenIQ revealed that convenience store sales jumped 5.4% in the four weeks ending 13 August, with sales volumes up 2.7% compared to a 3.8% sales volume decline at supermarkets.
The big problem in the Issas c-store masterplan was how it was going to grow this part of its business rapidly.
Asda is a late-comer to the c-store party with a fledgling convenience business, especially compared to Tesco and Sainsbury’s. The c-store space race over the past decade means that many of the prime sites had already been snapped up.
The Co-op petrol station store acquisition solves that problem and gives Asda a ready-made portfolio of profit-making c-stores – the shops acquired made £53 million EBITDA on £863 million sales in the year to June 2022.
SUBSCRIBE TO RETAIL GAZETTE FOR FREE
Sign up here to get the latest news on Asda and the UK grocery market straight into your inbox each morning
But why does The Co-op want to sell the business?
The Co-op is offloading the stores, which it says are “non-core”, and will reinvest into its “core” c-store business, along with pricing and reducing its debt.
The Co-op has been suffering of late with annual pre-tax profits plunging £70 million and has been vying to cut costs by both scaling back projects and cutting 400 head office jobs.
The store sale is more about boosting its balance sheet than getting rid of an underperforming part of its business.
What is non-core for The Co-op looks to be spot-on for Asda. The supermarket’s new owners, the billionaire Issa brothers, made their fortune in petrol station retail through EG Group. It’s an industry they know well and see a huge opportunity for Asda in.
The grocer already has a fledgling petrol c-store business with 36 Asda On The Move shops with plans to roll this format out across EG Group’s petrol stations “as quickly as this can be achieved”.
Petrol forecourts can be lucrative places. Retailers have a captive audience and price, which appears to be the be-all in grocery retail right now, is less of a factor.
Shoppers grabbing a sarnie and a pint of milk when topping up their petrol don’t tend to think “could I get that cheaper at Aldi?’.
The Co-op has gifted Asda a great growth opportunity in the fastest-growing part of the sector. It’s a growth opportunity that is much needed as the grocer is struggling in a market where the discounters are a more attractive shopping option than ever for hard-up consumers.
Asda like-for-like sales, excluding fuel, fell by 1.9% year-on-year in its second quarter to 30 June and plunged 9.2% the quarter previously.
It may only be 132 stores but this acquisition will put Asda on the map in convenience store retail and puts the accelerator on the Issa brothers’ growth plans.
It also shows how Asda’s acquisitive owners are well-placed to pounce on opportunities to get the grocer motoring. The rest of grocery retail beware.
Click here to sign up to Retail Gazette‘s free daily email newsletter
