Costcutter and Palmer & Harvey have formed a joint venture company with a combined buying power of £5 billion in a deal designed to counter the increasing power of the supermarkets.

The move will see Costcutter take over management of P&H’s Mace, Supershop and Your Store convenience brands, bringing the combined retail estate of the two companies up to around 2,400 stores.

P&H will focus on its core wholesaling business and will supply the combined retail estate.

The joint venture will be known as The Buyco and will have Martyn Ward, P&H’s managing director for commercial and sales, as its chief executive.

Ward said: “The Buyco’s sole reason for being is to create value through volume.

“This brings greater value for every- one, including consumers who will ultimately benefit the most from a strong independent convenience sector.”

Costcutter chief executive Darcy Willson-Rymer said: “We have been single-mindedly focused on creating maximum value for our members and it became apparent that without access to the proportionate benefits of our own buying power this could not happen.

“Through the creation of The Buyco we will have unrivalled purchasing power within the UK convenience sector, meaning we can ensure the best prices, promotions and range for our members

“With the convenience sector still gripped by the tectonic changes of the past decade, we feel we are ideally placed to ensure success for all our members.”

Willson-Rymer said the relationship between Costcutter and P&H felt “culturally and commercially right”.

P&H chief executive Chris Etherington said divesting its retail side would allow it to focus on top levels of service in delivery and order fulfilment.

“This will mean the retailers have greater control and massively increased business efficiency, which will ultimately lead to savings,” he said.

“We are extremely responsive to customer requirements and late demands, which means retailers can focus on running their business and not worrying about delivery.”