RETAIL MORRISONS: It’s good to talk

It’s been a bumpy ride absorbing the Safeway estate but, through communication and rationalisation, Morrisons is now back on track, says Charlotte Hey

Morrisons’ interim report on the year’s financial performance at the end of September contained some rather better news than shareholders had received 12 months earlier. In the 25 weeks to July 2006 the group’s turnover had not increased so drastically – from £5,847.7 million to £5,859.5m – but, more importantly, profit before tax had risen from a considerable loss of £82.1m to £134.2m, reducing the debt from £1,101m to £881.2m this year. The well-documented fall from grace of northern England’s star supermarket appears to have been halted. But the turnaround has not been easy and the beers, wines and spirits department has not been exempt from the trials and tribulations of absorbing the Safeway estate.

“We had one or two issues to resolve and it’s great to see the share price back at the £2.60 mark,” says John Spurs, licenced trades director. “But it’s one thing to change the badge on a store, the other is to win customer confidence,” he admits. “At one point we were converting four stores a week from their previous lay-out to the Morrisons format. Twelve integration teams worked across the UK for nearly 18 months, finally finishing in November of last year. With a
core of 373 stores that was no mean feat.”

Refurbishment
“On top of the extensive process of refurbishment we were then faced with the challenge of altering the ethos of the people who worked in the former Safeway stores,” Spurs continues. “What we had to reinforce to our new colleagues was the importance of communication, that we work as a unit and that the primary focus is always on the consumer.

“To be honest, communication with those stores previously owned by Safeway and their then-HQ was non-existent. We set about changing that. What we did was to create a link between stores and HQ in the shape of Tim Phillips, our BWS store specialist. His role is essential in creating and implementing policies. Moreover, because he is going round all of the stores all of the time, he reinforces the fact that the stores are part of the team and that we are all responsible for the standards set.”

This focus on communication has worked according to Spurs, and training forms a key part of the mix with 99% of the company’s BWS in-store managers now in possession of a WSET certificate.

Communication was one problem, stock control, it appears, was another when it came to discovering what was really lurking in Safeway’s warehouses. As Stuart Purdie, the long-standing head of wine buying at Morrisons, points out, “The range was a challenge. The old Morrisons regime was a simple one; one range for every store. It was really quite easy. When we acquired Safeway they had different sized stores and therefore a much broader range.” To be precise 790 lines in total for Safeway as opposed to 540 in Morrisons – and only 136 of those were shared. “It took us a good 12 months to clear down all of the remaining stock,” says Purdie. “Safeway had an enormous inventory; we inherited just under 1,000 lines and we had to sell them.”

“There were about two and a half million cases to get rid of,” adds Spurs, “As Stuart mentions, it took us 12 months to shift them with a final value of about £4m worth of bin-end sales. The stores did a fab job. We could have sold the whole lot off at once but we wanted to give the opportunity to our loyal customers to get their hands on something interesting, and it was also a very good way of working closely with the individual stores.”

“Once we had started to move the excess stock we set about tackling the new format for the Morrisons range,” says Purdie. “With the acquisition there was the possibility of creating distinct tiers for BWS within our estate. We conducted an analysis of the retail selling points and created three ranges to fit in with the stores and where they were.”

He explains, “Now we have a standard store range, a premium store range – there are 160 of these who lose some of the SKUs at the lower end – and the ‘Super Fines’, of which there are 43. Each store at each level carries 560 lines.”

Interesting parcels
The “Super Fine” stores’ range is designed to accommodate more interesting parcels of wine that might become available and it includes a range of 30 wines above the £30 mark.

“Our aim is to go for a quality offer but still retain a strong reputation for delivering relative value,” says Purdie.

In addition to all the changes at range and store level, the BWS at the new Bradford HQ, completed in April of this year, has also expanded. “The larger team now means there is more opportunity for range reviews,” says Purdie.

“If something better comes up then we’ll make the change. We are continually looking at the performance of individual lines in order to have the best range possible to suit our customers’ needs.”

And this is where the BWS team at Morrisons has really turned all of its attention – consumers and meeting their needs. Neither Purdie nor Spurs are denying that the last year has had its challenges, but a dedication to meeting customer needs and the communication of those needs between head office and the stores has been paramount in turning the corner in terms of performance.

Purdie smiles, “The chairman has never given us a pat on the back for buying well; it’s all about selling the product. The only way we are going get that right is having the right lines on the shelves when the customer wants them. Now we are at the stage where we can really start to maximise the potential of the new ranges and shout about what we have achieved.”

Stuart Purdie
Trading manager, wines & spirits

– on country performance:
“France was struggling a year ago and needed to redevelop some lines, but we are beginning to see a change. We are seeing good growth with South Africa and the US; growth in the latter is largely driven by Gallo and Blossom Hill. With South Africa, sales and interest are back up again and the key here, I think, is that winemakers are starting to come through with some interesting stuff.

Champagne and fizz were tremendous at the end of last year but it has been hard work keeping those sales up. We face the challenge of grabbing market share from some of our competitors but we are in a much better position to do this now, given that two-thirds of all Champagne in the UK is sold within the M25.”
 
– on brands:
“I think there’s consumer country loyalty but very little brand loyalty at all. The promotions are simply too good.”

John Spurs
Licenced trade director

“When it comes to beer we are even-stevens with the marketplace. Next year I get the feeling there will be a slight downturn but at the moment growth is pretty flat.

We’ve cornered a certain sector of the market with bottled beers and I think that what has helped to push our market share up by 30% is presentation in-store and ease of range.

As for cider, well this has been its year, hasn’t it? The consumer has really latched on to the offer and now is the time for premium ciders. We’ve split our cider fixture into three sections – cans, 3-litre and premium ciders – and we’ve seen more than 60% growth year on year for the premium category.

For spirits the total market is flat, but we saw 7% growth at Morrisons. It’s difficult to sell during the summer; you really just have to promote well and stick with your chosen programme which, if you are clever and have had the right offers, gives you some leeway to get off to a headstart at Christmas.”

© db January 2007