With rising profits and global ambitions, Waitrose's 'chubby grocer' is on a roll

Rupert Steiner catches up with the boss of the middle classes' favourite supermarket at the opening of its 187th store, and hears of his plans to double the size of the business, his commitment to organic farming – and why he doesn't fear the arrival of an upmarket US competitor
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The Independent Online

It is 9am and Jackie is standing in front of the cheese counter fighting a losing battle as she tries to shift thimblefuls of Waitrose's finest Red Lion ale to bleary-eyed customers.

Over by fresh fish, her boss, Mark Price, managing director of Britain's sixth largest supermarket chain, is talking to some of the first shoppers at the hour-old store in leafy Rickmansworth, Hertfordshire, some miles to the north of London – a classic middle-class heartland.

Rickmansworth is Waitrose store number 187 – the latest notch in Price's master plan to double the size of the upmarket grocery retailer in the next 10 years.

"It's not a store," he corrects, half-joking. "It's a shop. This isn't the Naafi – a store is a warehouse."

It's his mission to labour this point as he seeks to differentiate his supermarket "shops" from his rivals' "stores". Despite his name, Price competes on quality and service.

The self-styled "chubby grocer" from Crewe, who believes there is a direct correlation between the girth of a food retailer and the quality of the food he sells, has had a bumper year. Last reported profits stand at £242m on sales of £3.7bn, and figures for the end of 2007 are on course to show a jump in sales by 7 per cent. In its weekly update on Friday, the business reported growth of 5.1 per cent.

Part of the John Lewis Partnership, Waitrose employs 38,000 staff, or partners as they are known, because they all own a small part of the business and take a share in the profits.

At a time when many retailers are sounding a cautious note, Price is upbeat about the prospects for the coming year. He explains why Waitrose is misunderstood, talks about how its approach to organic food is giving a better deal to British farmers, and delivers his verdict on a reconnaissance trip he made last week to the US to check out Tesco's new store concept stateside.

But first he runs through his strategy to grow the business. "We have a three-pronged attack," he says. "We want to organically grow our store network, push our websites and expand internationally."

He has no plans to pop a Waitrose on the Champs-Elysées any time soon, but has launched a salvo to push its branded produce into high-end food retailers around the world.

"Given our size in the UK, building the Waitrose brand abroad gives us an extra push on volume that drives down costs at home and helps us be more price competitive," he says. "We are in talks with partners in China and India. I want to double the size of the business within 10 years, and bolt-on acquisitions will be only one part."

Waitrose owns a 30 per cent stake in Ocado, the popular, but loss-making, internet shopping site, along with its own web offering. The two are complementary, each filling in the geographical gaps overlooked by the other.

When it comes to expanding its chain of stores, Waitrose avoids major acquisition drives, preferring to snap up sites one by one. But it has been frustrated by some of its bigger rivals hoarding land, and by delays in the planning process.

In its recent report following an 18-month investigation into the £128bn UK supermarkets sector – its third in seven years – the Competition Commission recommended a reduction in the land banks held by retailers – sites that have yet to be developed or where planning permission has yet to be granted.

Price says: "If you take the report as a whole, it came to sensible conclusions. Customers are well served in the UK. The issue for me is that in 1986, 35 per cent of the market was controlled by four supermarkets, and now they control 75 per cent.

"The question is whether the market would be well served in a few years if those four controlled 90 per cent. It is right to look at whether we have the right structures in place for competition to move forward."

Price recently incurred the wrath of the Tesco boss Sir Terry Leahy after he sounded off about the property issue and his fears of the spread of "Tescoland". The two traded letters and there was talk of lawyers getting involved. So are they now suing each other?

"No, we're not dating," says Price, who has a reputation for awful jokes. "Did you say seeing or suing? Terry and I have a good professional relationship – there are no problems."

On his visit to California, the Waitrose boss was impressed by Tesco's Fresh & Easy store concept, which launched this month. "It's a sharp, focused formula that is brutally low cost, with low prices," he says. "I'm sure it will be successful."

He also visited a new Whole Foods Market in Pasadena. The high-end US store, which opened its first shop in London earlier this year, makes Waitrose prices look bargain basement. It is competing directly with Waitrose on organic food.

But Price is unfazed. "Anything that raises the bar is a good thing," he says. "We have 18 per cent of the organic market and it is a long-term commitment that means supporting farmers – it takes them five years to make the transition [from non-organic farming].

"We pay a premium on dairy, pork and beef, because we know the commercial cost of production – we run our own 4,000 acre farm. Waitrose is about quality at a fair price, which means bringing fair trade to the UK.

"There is one element of Waitrose that is misunderstood, and that is that we are more expensive than we are. Yes, we stock Krug and caviar, but we also sell ketchup and cornflakes, and the staples have to be priced competitively."

The next six weeks of pre-Christmas shopping represent the most important time of the year for Waitrose. It is fortunate in sourcing its turkeys from Ireland and has not so far been affected by the bird flu scare. Trade in frozen Turkeys was, it reports, brisk last week.

The Waitrose Christmas commercial is about to air in the run-up to the festive season, but don't expect to see any Jamie Oliver-style endorsements.

"The only celebrities who star at Waitrose are the staff," says Price. With 115 different varieties on sale in his supermarkets, the cheese isn't restricted to the cheese counter.