Funding The UK Grocery Market Arms Race

Matt Ford, regional VP, EMEA at PrimeRevenue examines how increased competition in the UK grocery landscape is leading many operators to think beyond the shopping basket.

There has been a lot of buzz about the UK supermarket arms race since the Sainsbury’s-Asda announcement in April 2018. The combination of Sainsbury’s and Asda will overtake Tesco’s lead position to create a new number one in UK supermarkets.

But that’s only part of the story behind this and other recent mergers and acquisitions.

Part of the story is easy to see. Balance sheets and market share rise and fall. Stores open, close, or rebrand. But it’s the less apparent spectre of online grocery shopping that’s casting a lengthening shadow over the UK grocery market and causing grocery sellers to rethink their futures.

Online Grocery Growth

While retailers are still working out the kinks in how to make online grocery shopping profitable, a 2018 Forrester report predicts the market will grow at an annual compound rate of 17%, more than doubling from $150 billion in 2017 to $334 billion by 2022.

The Forrester report positions the UK as a maturing market because of its geographically compact nature and well-developed transportation infrastructure. Corporate reporting is bearing out the analysis.

According to the UK’s big four grocers, soon to be the big three, online grocery sales are steadily rising. Asda reported an 8.3% growth in online grocery sales during the first quarter of 2018. Sainsbury’s reported 7% growth for the year ending March 10, 2018. Tesco reported 5.1% growth in the year ending February 2018, and Morrisons reported 1.9% growth over the same time. Online-only grocer, Ocado, is also gradually gaining a toehold in market share, up from 0.8% in 2014 to 1.2% in May 2018.

And then, there’s Amazon. The online giant Amazon is nibbling away at US market share of food sales, pushing grocers everywhere to think outside their brick-and-mortar boxes. Amazon’s entry into grocery sales has been a little hit-and-miss so far, but don’t count on that to continue.

History has proven that Amazon learns and adapts quickly and its founder, Jeff Bezos, doesn’t mind losing a little money in the quest to get things right.

It’s easy to forget that Amazon lost money for six straight years after launching as an online bookstore in 1995. In 2001, the company turned a profit for the first time and has been doing quite well ever since—extending into new product verticals, supplier relationships, fulfilment systems, delivery mechanisms, loyalty programs, and product development.

The push to compete online—especially before Amazon enters the UK fray in earnest—fills in some of the backstory behind the recent and future UK mergers and acquisitions. Amazon already has a relationship with Morrisons, allowing UK shoppers single-stop access to a full array of products from both companies. And Morrisons, now in third place behind Sainsbury’s-Asda and Tesco, is also partnered with online-only grocer Ocado, positioning the company as the supermarket arms race extends further into cyberspace.

Competing To Win

But Sainsbury’s hasn’t been around since 1869 without learning a thing or two about competing to win. The company recognises that EMEA food retail is in an arms race—and that the race is about more than food. With the 2017 acquisition of Argos and the proposed acquisition of Asda, Sainsbury also secures one of the best distribution networks in the UK.

In a vacuum, the acquisition of nonfood retailer Argos may have seemed like a strange move. However, Argos has a mature e-commerce business with a distribution network that affords it better delivery performance than Amazon in many areas of the UK. Asda, a supermarket chain with excellent performance in nonfood sales, driven by its clothing and home goods brand George, has a less sophisticated e-commerce presence.

The alignment of all three entities with their different strengths will provide food for thought as Amazon approaches.

The other part of the backstory is the increasing competition from Aldi and Lidl. Neither German-owned grocery discounter offers online grocery shopping, but both have aggressive plans to open more stores in the coming years. Opening more stores is expected to fuel continued growth in market share, which has been steadily rising for both brands in the past few years. Aldi jumped from 4.8% in September 2014 to 7.3% in May 2018. Lidl rose from 3.6% to 5.4% during the same period.

The top-ranking supermarket chains face stiff competition on the ground and in cyberspace, but it would be foolish to bet against superpowers in an arms race.

When the merger is complete, Sainsbury-Asda will hold about 31% of the UK grocery market. Tesco currently holds about 28%. Holding 60% of a market is no accident. All three grocers have been around for many decades. They clearly understand the UK market and how to change with the times.

Also, all three expanded into verticals outside the grocery market long before the internet and Amazon were born. Today, each offers a product variety on a par with Amazon and provides excellent online shopping and delivery options, putting them in enviable positions to compete in the digital space.

Proving Adeptness

Ten years from now, which grocery retailer comes out on top will likely depend on which brands are most adept at:

• Maintaining a strong brick-and-mortar presence
• Coming up with the winning strategy to create a viable, profitable online business model
• Nurturing good relationships with customers, employees, vendors, and suppliers
• Having enough cash to execute simultaneously on the ground and online while maintaining good relationships with all stakeholders

The list order is, of course, upside down. It’s going to take a great deal of cash to fund the first three points. So how will supermarket brands come up with the cash they need?

They can take the actions most companies do when they need cash—raise prices, make deep cost cuts, borrow money, issue additional equity, extend accounts payable terms, or sell off assets. These approaches work, but they come at high costs—both direct and indirect:

• Raising prices drives away shoppers. Period.
• Deep cost cuts reduce customer service and damage employee morale, which can result in a company becoming less competitive over time.
• Selling off assets trims back a grocery chain’s competitive reach. The reason Walmart sold Asda was that the company needed cash to compete against Amazon in the U.S. market. Though it retains a share in the Sainsbury’s-Asda combination, Walmart is essentially exiting the UK market.
• Borrowing money costs money, and lenders often impose restrictions that limit a company’s flexibility.
• Adding days to the accounts payable cycle upsets suppliers and vendors
• Neither internal nor external shareholders appreciate equity dilutions.

Another way supermarkets increase cash flow is by improving working capital, freeing up cash to fund strategic initiatives. Rather than adopting the traditional tactic of adding days to the accounts payable cycle, companies are finding new ways to achieve the same outcome.

Approaches include early payment programs, such as dynamic discounting, where companies negotiate with suppliers and vendors to reduce the invoice amount by paying earlier. Buyers pay less for goods and services, but they have to make early payments. Suppliers and vendors can better predict cash flow, but they get paid less for the goods and services they provide.

Supply Chain Finance

Supply chain finance (SCF), or reverse factoring, is another option adopted across many industry sectors. Here, the grocery retailer works with a third party to add time to the accounts payable cycle while offering suppliers the choice to get paid early in exchange for a nominal fee.

The retailer effectively sells the invoice to the third-party funder, which removes the invoice from the buyer’s books. Suppliers can opt to pay the fee and get paid earlier, and they pay nothing if they decide against the early payment option. SCF is popular with buyers and suppliers.

It doesn’t require the supplier to discount invoices and fees are surprisingly modest. Buyers retain cash by extending payments in a way that doesn’t negatively affect their balance sheets. The net result is that SCF improves buyers’ cash flow while keeping suppliers and vendors happy.

As the UK supermarket wars heat up, contenders are going to need cash to fund their initiatives. Supply chain finance is one cash-management strategy that’s adopted by companies in multiple industries around the world. And it’s one that could help UK grocers pay for this fight.

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Stephanie Wargo

VP, Global Head of Marketing

Stephanie joined PrimeRevenue in 2015 and oversees the company’s global marketing team and strategy. With a data-driven approach, Stephanie focuses on demand generation and thought leadership to drive brand awareness, strengthen client/partner relationships, and generate new sales opportunities. Stephanie has guided PrimeRevenue through new technology releases and an evolving FinTech landscape. In addition to leading PrimeRevenue’s internal and external communications, she implemented innovative demand generation and marketing strategies to enhance the company’s overall sales pipeline.

Stephanie has extensive experience in marketing and customer success. She previously served as Vice President of Marketing and Communications at BitPay and Vice President of Client Relations and Marketing at FirstView Financial. Stephanie earned a B.A. degree in Political Science from Agnes Scott College in Decatur, Georgia.

Brian Medley

VP, Global Head of Sales

Brian joined PrimeRevenue in early 2012, after more than 20 years of sales leadership, executive-level consultant and business growth experience. As VP, Global Head of Sales, Brian leads a growing team of fintech sales professionals with a focus on developing strong customer relationships, improving sales predictability and helping PrimeRevenue enter the lucrative mid-market.

Prior to PrimeRevenue, Brian honed his enterprise software sales leadership skills at Clarus Corporation. He also served as an operations and IT management consultant for Kurt Salmon Associates. In addition to his sales and consulting background, Brian has deep experience in the financial industry having founded a successful residential mortgage broker and lending business. He is a graduate of the Georgia Institute of Technology having earned a B.S. in Industrial Engineering and Economics and M.B.A. in Global Business.

Jason Green

SVP, Global Customer Success

Jason joined PrimeRevenue in 2021 following more than two decades in the fintech/financial services industry. He brings a strong background is sales leadership due to his impressive relationship building capability as well as a successful track record in creating structure and process improvements. In his role, Jason uses his keen attention to detail to strengthen the customer experience and enhance the company’s solutions to deliver more value to clients.

Prior to joining the company, Jason held several senior level and executive roles with a focus on building and scaling sales and support organizations at both large and small companies. Jason graduated from Murray State University with a B.S in Marketing.

Matt Ford

SVP, Global Product Innovation

Matt joined PrimeRevenue in early 2015 and is responsible for overseeing all commercial, strategic and operational aspects of PrimeRevenue’s supply chain finance offerings throughout EMEA, based in Prague. He has been instrumental in gaining global alignment and developing supplier enablement processes for the region.

Matt joined PrimeRevenue following a 15-year career at Morgan Stanley, where he worked in fixed income operations covering debt syndication through bonds, EMTNS, corporate loans and other debt securitization. Notably, he set up non-core location operations in Europe (Budapest) and all lending operations in Baltimore from scratch.

Matt, who was born and raised in South East England, earned a B.S. in Sports Science at University of Teesside where he mastered the art of TEAM development and accountability as a youth international rugby player.

Dominic Capolongo

EVP, Global Head of Funding

Dominic joined PrimeRevenue in 2016, and is responsible for leading our bank and capital markets funding strategies and execution. He focuses on building global, scalable and highly efficient funding structures that maximize options for supporting PrimeRevenue’s programs. Dominic began his career as an attorney and was a partner with Kaye Scholer before joining DLJ as a senior banker. Dominic brings tremendous strategic and capital markets experience in all areas of finance having held senior positions at, among others, Credit Suisse and RBC Capital Markets in addition to DLJ. Dominic earned a JD from Fordham University School of Law and a BA from SUNY Binghamton.

Gavin Cicchinelli

Chief Operating Officer

Gavin joined PrimeRevenue as Chief Operating Officer in 2021. With more than two decades of leadership and executive experience along with a deep understanding of the payments space, Gavin provides a unique focus on improving and strengthening operational strategies and implementing GTM growth execution. He is responsible for leading transformation across corporate and operational strategies as well as building a repeatable and scalable commercial growth strategy that aligns with PrimeRevenue’s core business while delivering key adjacent growth opportunities.

Prior to joining PrimeRevenue, Gavin served as President and Chief Revenue Officer of Integrated Solutions at TSYS, a global payment processing services company acquired by Global Payments (NYSE:GPN). There, he also served as Head of Product and divisional COO. Throughout his career, Gavin has held multiple leadership positions including VP of Sales, SVP of Business Development, and President of Financial Institutions. Gavin graduated from the University of Northern Colorado, Greeley.

David Quillian

Chief Legal Officer

David joined PrimeRevenue as General Counsel in 2007. He and his team have been instrumental in successfully creating the unique legal structures that support PrimeRevenue’s multi-funder model and global funding capabilities. David is also the lead named inventor on PrimeRevenue’s two patents for Electronic Time Drafts, which allow PrimeRevenue to manage supply chain finance programs using electronic negotiable instruments as opposed to accounts receivable. Prior to PrimeRevenue, David was General Counsel at Harbor Payments, which was acquired by American Express (AXP) in 2006, and Magnet Communications, which was acquired by Digital Insight (DGIN) in 2003. He holds degrees in Economics and History from Duke University, and Juris Doctor and M.B.A. degrees from the University of Georgia.

Nathan Feather


Nathan has successfully ushered PrimeRevenue from our very early days as a visionary startup, through the financial crisis to today’s position as a thriving mid-sized leader in the cloud-enabled supply chain finance marketplace since joining PrimeRevenue in January 2006. He was instrumental in recapitalizing the company with an $80M investment led by BBH Capital Partners in 2015. Prior to PrimeRevenue, he held various financial management roles with Ariba, Freemarkets and PriceWaterhouseCoopers. Nathan holds a BS in Accounting from Pennsylvania State University.

PJ Bain


PJ has an impressive and accomplished track record as an enterprise software entrepreneur and executive. PJ has built a solid record of success with PrimeRevenue since being appointed Chief Executive Officer in July of 2009. The company has received numerous awards for growth, customer service, innovation, along with being recognized as a top employer.

PJ is a life-long software and technology entrepreneur having been involved in numerous firms in the roles of founder, executive, advisor and investor. Immediately prior to PrimeRevenue, PJ was the VP and General Manager of Exact Holding N.V. (NYSE/AMS: EXACT), a leading global provider of business software solutions. He was previously Founder and CEO of Inspired Solutions, an Atlanta-based, B2B software and services firm that grew to be the largest reseller of Exact Software in North America, later acquired by Exact. PJ holds a Bachelor of Industrial Engineering from Georgia Institute of Technology.