Morrisons making progress as it plays catch-up
The UK grocery market continues to be a fascinating hotbed of private label development, with most of the main players enjoying high private label penetration and a decent track record in innovation, marketing, new product development, and shopper acceptance. It would not be overly controversial to suggest that Tesco – once the global leader in PL innovation – has taken its foot off the gas in recent years in terms of leading PL evolution in the UK, with several major competitors such as Asda, Sainsbury’s and Waitrose catching up across a broad variety of PL tiers including standard, economy, premium, healthy eating and children’s.
The main exception has been Morrisons, the Yorkshire-based retailer that finally became a national business in 2004 through the acquisition of competitor Safeway. After what can only be described as a fairly hideous and poorly –executed integration process which caused a couple of years of underperformance, Morrisons is back on the front foot in the fiercely competitive UK supermarket sector. Its stores have been rebranded, its marketing refreshed, its price position clarified and its excellent credentials in fresh food (thanks in no small part to its vertical integration which sees it own and control a great deal of its fresh and chilled food supply) have seen it become one of the strongest performers in market share terms among the top four British supermarkets.
All of this has been achieved without the advantage of a strong private brand programme. The retailer has lumbered along for the past five or so years with a curious mix of unimpressive Morrisons brands with a couple of more aspirational brands inherited from Safeway. Some improvements were made under CEO Marc Bolland (who jumped ship to M&S), but it has been under his replacement, Dalton Philips (who joined from Canadian retail and PL powerhouse Loblaw), that the greatest progress has been made. Under his stewardship, and through the strategically important hiring of Belinda Youngs from Canadian rival Sobeys, Morrisons has made huge progress on PL.
The most important step so far in the retailer’s O2O (own label to own brand) strategy has been the launch of M Kitchen. Launched a couple of months ago, the range is a key development in Morrisons closing the gap with its rivals. The retailer states that: We've created a professional kitchen here at Morrisons called M Kitchen. It's a brand-new hub of exciting ideas where our in-house team of chefs create 100s of delicious new dishes. Whether you’re dining with friends or having a quiet night in, our first exciting selection of dishes to come out of the M Kitchen are perfect for every occasion.”
Sub-brands of the range include Bistro (‘Make any evening a special night in with these top quality restaurant-style dishes’) and Chef-created meals (‘top, restaurant quality dishes, specially developed by five of today's greatest chefs to make meal times extra special’); as well as a varity of ranges in areas such as everyday chilled meals, Asian dishes and takeaway foods.
The new lines look fantastic instore and should continue to build on the impressiuve uplifts already reported by Morrisons. The lines really improve the retailer’s quality perceptioin and give its shoppers seeking ‘affordable indulgence’ an opportunity to trade up.
If Morrisons can close the PL penetration gap bewtween itself and rivals like Tesco and Sainsbury’s, tghey could be looking at an extra £1.3bn in significantly higher margin PL sales (Morrisons makes profit on PL than any other retailer). The progress they are making so far is impressive, so I look forward to reporting back on more innovative developments in the coming months.
As a sidenote, those of you with an ongoing interest in Morrisons, or the broader UK supermarket sector, would be well advised to check out Steve Dresser’s excellent blog. It can be found here: http://www.ukretailers.blogspot.com/ |
