UK Convenience UK Wholesaler P&H Goes into Administration

Sarah Coleman (Senior Retail Analyst)
29 November 2017
P&H was the UK's largest delivered wholesaler to convenience stores and particularly important for the distribution of tobacco products.
P&H
P&H was the UK's largest delivered wholesaler to convenience stores and particularly important for the distribution of tobacco products.

UK Wholesaler Palmer & Harvey McLane Limited (P&H) has gone into administration, following the collapse of talks over a rescue takeover by investment group Carlyle. At the end of October, the two groups entered a period of exclusivity and signed Heads of Terms with the intention of securing significant capital investment for the ailing wholesaler. The breakdown of talks and insufficient cash to trade beyond the short term has left the company’s directors with no choice but to put the business into administration.  

P&H was the UK's largest delivered wholesaler and has been trading since 1925, with annual turnover of GBP4.4bn (EUR5.4bn) in 2016. P&H served some 90,000 customers – delivering directly to independent convenience stores as well as major accounts including Tesco, Sainsbury’s, Shell and Costcutter. The latter has already announced a new five-year supply arrangement with The Co-op.  

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Sarah Coleman (Senior Retail Analyst)
Sarah Coleman (Senior Retail Analyst)

Opinion Expect Disruption

29 November 2017

The UK convenience channel has been going through unprecedented change and whilst there have been winners – most notably Tesco, whose merger with wholesaler Booker has now been approved by the UK competition authority; as well as The Co-op, who picked up Nisa recently – there will also inevitably be losers. P&H has been hanging on by a thread for some time, with a GBP16.4mn (EUR20mn) loss last year as it wiped out its profits in servicing its significant debts. But P&H had a significant role to play as the UK’s biggest distributor of tobacco, as well as a key supplier to Tesco and Sainsbury’s, amongst others.

The former of these roles seemed to be keeping the business safe for a time, with the vested interest of Imperial Brands and Japanese Tobacco International, who needed P&H to deliver their cigarette brands, providing bail out cash payments to keep the business going. Sadly, this wasn’t enough as a serious cashflow problem put paid to talks with Carlyle, who were expected to take over P&H by Christmas. Despite JTI’s assertions to the contrary, it is expected that stocks of cigarettes could be severely affected due to P&H’s importance in the supply chain. 

Similarly, other P&H customers could also see their supply affected on the run up to the busiest time of the year – although of course, all competing wholesalers have been quick to offer their services to those affected by P&H’s demise. Quickest off the mark has been The Co-op, announcing a new exclusive five-year supply deal with Costcutter within 24 hours of the P&H announcement. Described by Costcutter’s CEO as a ‘contingency plan’, this is something we suggested could happen as part of The Co-op’s ambitions to lead UK convenience.

As for Tesco – P&H’s biggest customer, accounting for 40% of turnover – in the short term it can expect to be at the mercy of supply issues too. P&H were delivering tobacco and postage stamps to every Tesco in the UK as well as other categories to its forecourts and smaller Express stores. A new three-year deal was signed back in April (to appease the competition authorities?) – Tesco of course has the advantage of having Booker already waiting in the wings. 

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