The Co-operative Group has secured a wholesale deal to supply 2,500 Costcutter shops in the wake of the collapse of the UK’s biggest tobacco distributor Palmer & Harvey.
P&H, which distributes cigarettes and branded food and drinks to 90,000 shops around the UK, fell into administration on Tuesday after running out of cash.
The collapse of P&H caused problems for Costcutter after its supply contract ended at midnight on Tuesday.
Co-op said that it was looking at "practical short-term ways" it can support Costcutter's independent retailers ahead of the new supply contract, which will begin next year.
Costcutter is understood to be currently relying on group of wholesalers to supply its goods in the run up to Christmas.
The convenience store chain and Co-op have been in talks for the past couple of months.
In August, Costcutter owner Sir Michael Bibby said he hoped to respond to the “exciting opportunities” following the Competition and Markets Authority’s approval of Tesco PLC’s (LON:TSCO) takeover of wholesale business Booker Group (LON:BOK).
Tesco, Sainsbury and Co-op expanding into new business
Supermarkets have been expanding outside their core business in an attempt to claw back market share amid tough competition from discounters Aldi and Lidl.
J Sainsbury (LON:SBRY) bought catalogue retailer Argos last year in response to a supermarket price war that has eaten into profits.
The Co-op has also branched out with the acquisition of convenience store chain Nisa. Earlier in November Nisa members narrowly approved the deal.
“We are operating in a dynamic market environment and this deal, coming shortly after our Nisa announcement, shows how we are positively responding to the changes occurring within the sector," said Co-op food boss Jo Whitfield.
"Whilst our deal with Costcutter will start formally in Spring 2018 we are looking at practical ways we can support independent retailers during this busy trading period, in light of the news concerning P&H.”
Supermarkets seek to reassure smokers after P&H collapse
Co-op said it has activated contingency plans to continue to support its retailers after P&H's demise.
Tesco and Sainsbury‘s said on Wednesday they have also kicked off contingency plans to ensure stores are stocked with enough tobacco products.
“We can reassure Sainsbury’s customers that we have strong contingencies in place,” said a spokesman for the chain.
A Tesco spokesman said: “We will now work to ensure that we can continue to meet our customers’ shopping needs.”