Northern invader's cut-price buy stuns shopping giants of the South

If customers and staff at branches of Safeway supermarkets see an elderly, shirt-sleeved gentleman, vigorously rooting about in the dustbins outside, they should not be concerned that this is a vagrant searching for scraps. He is the new owner of the company and he's worth about £1.3bn.

Inspecting the contents of the dustbins – "it's a good guide to how a store is run" - is just one of the distinctive traits of Sir Ken Morrison, the executive chairman of Morrisons, the Yorkshire-based chain which announced yesterday the takeover of the much larger Safeway and created Britain's fourth largest supermarket chain.

Other traits of Sir Ken, 71, include shunning new-fangled stuff such as management consultants, internet shopping and loyalty cards, refusing to have non-executive directors on the board, and rejecting the chance to be in Who's Who. And Morrisons are a bit dubious about all this computerisation and modernisation: reputedly the decor in the company's Bradford headquarters is perfect late 1960s – so old-fashioned it now looks almost retro-chic.

In interviews, Sir Ken plays the jacket-off, bluff, down-to-earth Yorkshireman who learnt his trade working in his father's warehouse from the age of five, almost to the point of caricature. Running supermarkets, he says, is easy: "It's just taking money off people. And giving them something in return." Women are, inevitably, addressed as "luv" and he confesses not to be a follower of women's liberation. If in doubt, he says, the best thing to do is have a cup of tea.

All of this should not disguise the fact that he may be Britain's best grocer. The family firm he took over 50 years ago, has expanded and thrived to become Britain's fifth biggest supermarket group while the four biggest players – Tesco, Sainsbury's, Asda and Safeway – have constantly fought with each other and devised more and more ways, such as smaller outlets and loyalty cards, to stay on top.

On paper, the £2.9bn marriage of Morrisons and Safeway makes geographical sense. Morrisons' 119 stores are mainly based in the North of England, with only a couple of outlets in the South. It is efficient and profitable. Safeway's 600 branches are concentrated in the South and Scotland; it has long been seen as vulnerable to takeover. Most of Safeway outlets will be now be rebranded as Morrisons in name and image; a number of smaller inner-city outlets will retain the Safeway name.

Northern shoppers like the friendly Morrisons style which has hardly varied since Sir Ken opened his first big supermarket in a disused cinema in Bradford in 1962: separate fishmonger's, butcher's, greengrocer's and baker's within the store, aiming to recreate the High Street feel, low prices and lots of promotions. "It's a very nice shopping experience. I think people in the South who have been used to Safeways will be pleasantly surprised," said Sian Harrington, the deputy editor of Grocer magazine.

The City likes Morrisons: its shares have doubled in value since 2000 and in 2001 it joined the FTSE100 index. Pre-tax profits for the six months to mid-August last year were £114.5m, up from £98.6m over the same period in the previous year. Sales last year grew by about 5 per cent, more than Tesco, Britain's biggest chain. Sir Ken's personal fortune comes from the family's 38 per cent stake.

And the trade like them: "People enjoy doing business with Morrisons. They may be a little behind other chains on technological development, but they are incredibly well respected as a company. They are very straight, down-the-line people, proper traders and loyal to their suppliers,'' said Ms Harrington.

But the question now is whether Morrisons can translate from being a robust regional company to a national force, with logistical problems different from those involved in managing a small, tightly grouped chain. And will the largely southern-based Safeway customers take to them? Certainly they will benefit from better value if Morrisons maintains its policy of keeping the same prices in all stores. But some industry pundits predicted that many shoppers would move away in search of a more upmarket feel.

Steve Gotham, a senior research analyst at retail consultancy Verdict Research, said: "I think it is going to upset a few applecarts – particularly for Tesco and Asda. I think Tesco and Asda will find a stronger competitive threat, but I think perversely Sainsbury's will benefit. Some of the more affluent Safeway shoppers may migrate to Sainsbury's as they could be alienated by a stronger price-led company."

Inevitably, Sir Ken has his own views. "They [southern shoppers] like to think they are sophisticated, don't they. But they're not," he told The Independent in 1999 after his first South of England store opened. "There's not so much difference down there. They say poor people need a bargain, wealthy people appreciate one." Whether Sir Ken's philosophy can deal with The Lemongrass Question, remains to be seen. Many consumers, possibly in higher proportions in the South, look to their supermarkets to provide exotic ingredients, such as oriental vegetables, to cook the latest recipes from Nigella, Jamie and so forth. Safeway, under its now departing but highly regarded chief executive, Carlos Criado-Perez, has recently given many older stores a bright, modern look and has been good at providing such items. If Morrisons do not have lemongrass alongside the family-size packs of toilet rolls, shoppers may go elsewhere.

And like all the big four, Safeway has increased the stock of organic foods. Although Morrisons stock a few branded organic lines, their own label organic tea and some fruit and vegetables, they admit that organic food is not a "major" area for them. "These things are not the natural territory for Morrisons, so there is going to be a big learning curve for them," said Ms Harrington. But she said experience suggested the company could cope.

The other major question mark hanging over a company so identified with one man is that of the succession to Sir Ken. Only one of his three children from his first marriage, Eleanor, 28, works in the business, as a buyer. But since Sir Ken shows no sign of wanting to quit, perhaps it is his daughter, Grace, six, from his second marriage, he will be taking to inspect the dustbins.

How the big players line up

The takeover of Safeway by William Morrison will certainly increase the chain's firepower but Tesco remains top of the pile. With a market share of 25.8 per cent, Tesco is well ahead of its nearest rival, J Sainsbury on 17.2 per cent. Asda is third with 16.1 per cent and is forecast to overtake Sainsbury's as Britain's second biggest grocer this year. The combined Safeway-Morrisons group would be a strong fourth.

But nothing stays the same for long in this cut-throat industry. As recently as the mid-1990s Sainsbury's was the market leader. But a combination of poor management and Tesco's relentless expansion saw it steal Sainsbury's crown.

Ten years ago Asda was a basket case, labouring under huge debts. But a young executive called Archie Norman was appointed in 1992 and he gradually turned the Leeds-based company around. It was Mr Norman, now a Conservative MP, who lured George Davies, the former Next boss, to create the George label for the company. George is now one of the fastest growing clothes brands in UK retailing.

In 1999 Asda agreed a merger with Kingfisher, the company which owned Woolworths, B&Q, Comet and Superdrug. The deal was on the brink of completion when Wal-Mart, the largest retailer in the world, strode in with a £6.7bn cash offer. Asda accepted it and the company has been increasing its share of the market.

Safeway was created from a hotchpotch of deals and only started to motor under the trio of buccaneering managers, Jimmy Gulliver, Sir Alistair Grant and current chairman, David Webster. Safeway tried to merge with Asda in 1997 but the deal foundered. A similar deal with Marks & Spencer also failed. Now it has bagged a buyer, but City speculation suggests other bidders may enter the fray.

Nigel Cope

Ken Morrison's words of wisdom

* "If you want to measure a store, you don't look at the things they're good at, you look at the things they are bad at."

* "They say there's never an idea somebody else can't spoil."

* "If in doubt, have a cup of tea."

* "If you bring someone in that knows better than you do, that doesn't say much, does it?"

* "There's a novelty because we are Northerners, but it's useful to be seen as a novelty."