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Could Marks & Spencer become a wholesaler?

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M&S has teamed up with Costa – could this be the start of their wholesale business?

Mark & ​​Spencer collaboration with Costa Coffee, which launched earlier this month, gave Percy Pig lovers thousands more places to buy their favorite treat – but could wholesale be just as tasty for M&S business?

Managing Director and Chief Operating Officer of M&S Food, Stuart Machin, said the partnership “extends our reach and supports our strategy to make M&S more relevant, more often for families”.

Thanks to the merger, launched on March 3, 33 M&S products, including porridges, sandwiches and salads, are sold in 2,500 Costa stores.

Melissa Minkow, director of retail strategy at digital consultancy CI&T, says putting what she calls M&S’s “menu hits” in front of more people makes M&S more convenient for shoppers.

M&S isn’t the only retailer seeking wholesale partnerships to grow its business.

Morrisons has quietly built a wholesale business which analyst Jeffries says is worth more than £1billion and supplies products to the McColls convenience store chain and Amazon grocery stores.

Morrisons is looking to develop this part of the business further by selling wholesale to pubs, restaurants and cafes. In September, the grocer signed a deal with online platform Starstock that allows hospitality businesses to order directly from suppliers with Morrisons, initially listing 1,500 products on the platform.

Meanwhile, the co-op’s products are sold at businesses including Costcutter and Nisa, the convenience store the grocer bought in 2017.

Could M&S develop a wholesale business to compete with Morrisons and The Co-op?

Callum Saunders, planning director at marketing agency Zeal Creative, believes the tie-up with Costa is the start of a broader push into wholesale for M&S.

He points out that due to the limited M&S products Costa can sell, huge wholesale growth will not be possible with a single partner.

“Therefore, it feels like the opportunity is part of a broader, more holistic takeaway restaurant strategy for M&S, of which Costa plays a key role,” he says.

Take-out food, where people pick up food to eat immediately, is already an area where M&S already has strength.

However, flexible working has hit this side of the business as office staff do not take sandwiches to eat at their desks five days a week. The retailer reported that in its six-month period to Oct. 2, sales were down 18% on a two-year basis.

“It feels like the opportunity is part of a larger, more holistic food-to-go strategy for M&S,” Callum Saunders, Chief Planning Officer, Zeal Creative

Having more locations, in different locations that represent the most diverse ways of working, is essential for growing food on the go. This is what the Costa merger does.

“The partnership gives M&S a wider commercial game and raises awareness of the brand, making it more visible to new customers and building brand equity,” Saunders explains.

External partners may also be essential for M&S to grow its takeaway food category, as its own store strategy has been to move to larger stores, which offer customers greater choice, which may discourage shoppers. looking to grab a quick bite at lunchtime. .

Winning in a Fragmented Food Market

Saunders thinks the move is smart, as the grocery market has become increasingly fragmented with the emergence of new routes to market.

“The disruption caused by e-commerce and rapid commerce has really accelerated changes in the grocery industry over the past two years, but the fragmentation of routes to shoppers is not limited to digital channels.”

He says partnering with foodservice operators in particular opens up new ways to reach shoppers.

Saunders also points out that catering businesses have moved in the other direction with brands such as Itsu, Wasabi and Pret launching at-home ranges in UK supermarkets.

“Pret’s home product line has been a quick and nimble response to lockdowns and is expected to drive sales through grocery stores, rather than out-of-home channels,” he says.

Chris Leadley, marketing director at business consultancy Forbes Burton, believes M&S’ biggest wholesale opportunity could lie outside of retail and cites coffee shops as one place where it could have a big impact.

Coffees like Costa represent an important new marketing channel for M&S

Its Costa deal puts its products in 2,500 stores, but that’s just a fraction of the 25,000 commercial cafes across the UK – that might just be the tip of the iceberg for M&S.

However, Leadley believes that M&S’ higher-end positioning and pricing may limit the number of potential partners, particularly in retail.

The retailer has been working to reset value perceptions with its Remarksable campaign, but as the cost of living crisis rages on, many shoppers are increasingly looking for bargains to stretch their tight budgets.

“M&S is likely to want to retain its high-end positioning, which may not suit the offering of its products in more mass-market stores,” he said.

The success of M&S’s partnership with Ocado helped grow the retailer’s large basket stores; perhaps other wholesale partnerships could help speed up its on-the-go restoration.

Costa is a good start. If the partnership works out, expect other tasty deals to follow, which will not only please Percy Pig fans, but should also sweeten M&S investors.

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