Palmer and Harvey has gone into administration after efforts to restructure the business proved unsuccessful.
The UK’s largest delivered wholesaler to the convenience trade employed around 3,400 staff. There will be 2,500 immediate redundancies from P&H’s head office and across its network of 14 distribution centres. The remaining employees will assist administrators PwC in closing down the business.
“The P&H Group has faced a challenging trading environment,” said Matthew Callaghan of PwC. “The company has insufficient cash resources to continue to trade beyond the short term and the directors have concluded that there is no longer any reasonable prospect of a sale.
“This is a devastating blow for everyone who has been involved in the business. The administration team will focus on working with employees, clients and suppliers to facilitate a smooth and effective wind-down or transfer of operations over the next few weeks.”
The company, which was Britain’s biggest tobacco supplier, had been struggling to manage substantial debt and had recently undergone a refinancing deal with JTI and Imperial Tobacco.
It had been in exclusive negotiations with private equity firm Carlyle, with a proposed buyout conditional on additional loans and funding from JTI and Imperial. However, talks collapsed after a serious cashflow problem was revealed and the company’s directors were forced to bring down the shutters.
Palmer and Harvey supplied around 90,000 customers including multiples and symbol groups like Costcutter. Its closure will have a considerable knock-on effect throughout the industry.
Costcutter Group has already confirmed that its 2,200 Costcutter, Mace, Simply Fresh, Supershop and kwiksave stores will be stocked by the Co-op from spring 2018. The deal also gives Costcutter’s independent retailers the chance to become Co-op franchisees.
In the short term Costcutter has activated contingency plans, and is opening wholesale and cash & carry accounts for its retailers.
JTI also has a contingency plan in place. A spokesperson said: “We do not expect any significant interruption in the supply of our products.”
Mark Todd, from shopworkers’ union Usdaw, said the announcement was a “massive shock to our members and is an extremely distressing situation for all concerned, especially in the run up to Christmas. We will of course be doing everything possible to protect our members’ interests going forward.”
The demise of P&H comes at a time of massive upheaval in the convenience industry. Its biggest customer Tesco, which accounted for 40% of sales, recently got provisional approval from the Competition and Markets Authority for a £3.7bn of rival wholesaler Booker.
Meanwhile Nisa store owners recently accepted an offer from the Co-op to buy the business for up to £137.5m.