The proof is in the pudding
While Bigger Supermarkets Report Disappointing Sales, Ken Morrison's Northern Chain Thrives, Thanks In No Small Part To A Certain Yorkshire Delicacy (Which Southerners like too)
This might not sound like sharp-end retail talk, but before dismissing the puddings as the fond obsession of a 67-year-old executive chairman, take a closer look at their sales. They are Morrisons' biggest growth product, with purchases up 15 per cent last year. They are also evidence that Morrisons' products, historically confined to outlets in the north of England, can sell just as well in the south: his new Erith store in Kent is the chain's second biggest seller of Yorkshire puds (only Tynemouth in the North-east sells more). Mr Morrison is so pleased that he is about to introduce flavoured Yorkshire puddings - sage and onion or rosemary and mint.
It remains the daily preoccupation of Ken Morrison "to do what you are good at and not what everyone else does ... We are grocers at heart and know our business well. Get the goods that people need available to them at the right prices and you're on the way. That's what I've always believed". Growing good people within the business is "the most rewarding part of it all", he adds.
Mr Morrison is going to need all the talent he can find. The food retail sector is bracing itself for the full impact of the giant US retailer Wal-Mart's pounds 6.7bn bid for Asda, with fierce discounting already under way. Morrisons knows Asda only too well. It is an old Yorkshire rival, formed in the county in 1965 at the time Ken Morrison was building up his own chain. There are 20 Asda stores in Yorkshire against just eight in Greater London. And Morrisons now finds itself in the sights of the Wal-Mart fire. Its modest size and position means it is vulnerable.
All of which has Mr Morrison still searching for bright ideas. "I don't have any day-to-day responsibilities," he claims at first, and seems part- way to confessing that he's putting his feet up these days. But then he admits that he works "five days a week and Saturday mornings". This will come as little surprise to Mr Morrison's competitors. His preference for the traditional "market street" format, which tries to replicate high street shopping patterns inside his supermarkets, has proved more than resilient against the Big Four chains. Those competitors have learnt not to underestimate the homespun nature of a man whose pearls of management wisdom includes the business edict: "If in doubt, have a cup of tea."
Mr Morrison's profit figures do most of his talking for him. Morrisons, where the family owns a 40 per cent stake worth pounds 900m, has just reported results that others players in the sector just dream of. Two weeks after the KwikSave division of Safeway reported a 15 per cent decline in profits and while J Sainsbury and Safeway have suffered disappointing sales, Morrisons reported a 11.6 per cent jump in half-year pre-tax profits to pounds 76.2m for the six months to 1 August. Trade at its 100 stores is booming, with the six-monthly sales up 18 per cent at pounds 1.43bn. The shares have nearly doubled in three years, and the company is valued at pounds 2.25bn.
The Yorkshire pudding story is something of a metaphor for this success because it exemplifies the company's well-rehearsed creed about keeping things simple and not overlooking the obvious. Just give them food at good value and don't be sidetracked by fancy indulgences, the philosophy goes. As Mr Morrison puts it, "just stick to your knitting". This means you will find no in-store loyalty cards. The closest Morrisons gets to a gimmick are multisaves, (three for the price of two offers etc) which doubled in value for the customer in the financial year to 31 January, 1999, saving customers pounds 100m.
Mr Morrison's air of bon esprit as he talks puddings may have something to do with the surroundings. He is reclining in the busy cafeteria at the 100th Morrisons supermarket which he has just opened in the former Lancashire mill town of Nelson. This is the classic northern territory the firm has thrived on since his father William Morrison, an egg and butter merchant, established Wm Morrison (Provisions) Ltd in 1899. The 100th supermarket opening neatly coincides with the centenary of Mr Morrison Snr opening his first stall in Bradford market, and the marketing people have been getting rather excited. Ken Morrison is not entirely comfortable with the fuss, it should be said. "I don't usually wear these," he explains, fingering a stiff shirt collar and blue tie he says he has just got back from the dry cleaners. "I wear short sleeves in the stores. I only wore this because I was having breakfast with the mayor [who had officiated at the opening]." An arrangement of artificial flowers has been delicately positioned at his table in the cafeteria, next to a bottle of Morrison's 32p-a-bottle Chip Shop vinegar. "These can't be for me," he says, and the fake blooms are removed. His staff should have known better. He declines a cappucino, in favour of a cup of tea.
The new store is of the same classic format which Mr Morrison has preserved since he opened his first large supermarket in a disused Bradford cinema in 1962. A fishmonger in pork pie hat and apron, standing before a tiled wall which depicts ocean-going trawlers and fish, holds up the largest trout in the house for two boys to marvel at. The butcher's "shop" next door is festooned with union jacks and exhortations to buy British bacon and pork. The multi-coloured fascia of the salad store divides the two. There is also a baker's and a pizzeria.
This is the "market street" concept and it is as close you'll come to old, high street shopping in an out-of-town setting. In fact, Mr Morrison concentrates on out-of-town locations these days, because city-centre sites no longer offer enough parking.
For decades, Mr Morrison stuck to his home territory in the north of England. But last September the company acquired a property in Chingford, Essex. A month later Morrisons opened in Erith, Kent, with its first purpose-built store in the South-east. The formula seems to travel well. Erith was the company's most successful opening ever, judging by early sales. Mr Morrison is convinced that the more prosperous southerners will welcome his offerings. "They like to think they are sophisticated don't they" he says gently, "but they're not. There's not so much difference down there. There's a novelty because we're northerners but it's useful to be seen as a novelty." Inevitably, there's another favourite Morrison adage for this. "They say poor people need a bargain, wealthy people appreciate one," he says.
Morrisons is arguably a stronger proposition in Chingford than Bradford. It is the only UK supermarket to offer the same prices in all its stores, which makes it all the more competitive in the south. It is a brave policy because the firm feels the pinch of higher labour costs outside the north. Store Number 101 opens in Norwich next Monday. As ever, there will be little sophistication to the brand awareness campaigns."We give them a free chicken and ask them to try it out," says Mr Morrison. Next year, stores will be opened in Crewe, Kettering, Wellingborough and Leeds creating 2,000 jobs. Stores in Newcastle, Bradford and St Helens will be replaced.
Research by The Grocer in March confirmed the chain's claim to offer the cheapest basket of shopping in the UK. So how can this be, when the company lacks the buying power of the sector's Big Four? In part, its small size helps. A largely tight geographical coverage makes distribution cheaper and more manageable, while the opening of a 57-acre distribution centre in Cheshire two years ago has made product availability an increasingly strong suit.
Clive Beddell, the editor of The Grocer also attributes Morrisons' performance on price to the firm's reputation for employing excellent buyers. "The company has always had a reputation for good operators on the negotiating side. When you talk about the quality of British retailing overseas, the Morrisons name always crops up," he says.
It was at the Second World War family dining table in Bradford that Ken Morrison first learnt that there would always be takers for good value. "My father would say `Right, we're all here, let's count ration coupons'. The luxuries in life were not available and waste was not a good thing. We learnt the value of money. You are never rid of that if you're bought up that way," he says. At the end of the war he helped his father with the stores. His deep affection for his late father is obvious. "It was just fun sorting out the warehouse dad had at the back of the house," he says. But his father wanted better for him. "It was, `Don't you want to be one of the professionals lad?'" In 1950, he left school at 18 and joined the Army for two years' National Service. Who needed a career path? "Jobs were no problem," he recalls. He was in Germany when the letter arrived, telling him his father's health was deteriorating. "He said `If you want the business I'll keep it going for you. If not
I'll sell it in 12 months' time'." The younger Morrison opted to join the family firm. "I decided to make a go of it," he says.
Forget about filial obligation, Ken Morrison had his own ideas about selling goods and small shops in the streets of Bradford, where his father had traded, were not a part of them. He fancied the self-service supermarkets which were beginning to take off amid the growing affluence and increased mobility of the post-war years. "Packaging was also developing," he recalls. "It meant produce could be made to look better than it actually was."
In 1958, his first town-centre store was the only one in Bradford to have checkouts (three of them) and prices on its products. Then he opened the much bigger Victoria store in a converted Bradford cinema in 1962. "We did cheese, eggs, a bit of non-food." But at the time it was a big adventure, exposing Mr Morrison to his first architect, the one he needed to level the cinema's dreadful slope and create 5,000sq ft of retail space with free parking available.
Despite being the son who built up the family-controlled empire, Ken Morrison maintains that no one had it tougher than his father. "It was always hard to take money off the poor. He lived with that most," he says. But even his father would have shuddered at the current retail climate. Since the agreed bid by Wal-Mart for Asda three months ago, Britain's supermarkets have been gearing up for an onslaught of price-competition. Wal-Mart's size gives it unparalleled buying power, allowing Asda to announce it will cut prices by up to 10 per cent over 18 months, bringing them in line with its new owners.
Mr Morrison confesses that Asda/Wal-Mart is "in his thoughts" but betrays little evidence of being rattled. "We'll be doing things the same as we always have," he says. "We'll be paying them due deference but we think the extreme competition will be on hard goods and that Asda's reputation for strong management will be brought to bear on the Continent."
But a mark down on food products - taking two litres of Coca-Cola from pounds 1.25 to Wal-Mart's equivalent price of 63p, and 220ml of Pantene shampoo from pounds 1.95 to pounds 1.22 - will send shivers through Morrisons' executives at Thornton Road, Bradford. "The true test is going to be the next six months," says Clive Beddell. "There is going to be something to prove."
Morrisons will be making the most of its reputation for distinctive customer service (such as the car-park lollipop men and women). It has also established a name for quality control, helped by minimal use of those Mr Morrison considers to be "outsiders". Sub-contractors, he believes, are in business to profit from him and are not to be trusted. This philosophy fits with Mr Morrison's reputation for a fiercely independent streak and explains why the firm manufactures, processes, packs and transports many of its own goods.
It has invested heavily in Farmers Boy - its own fresh food manufacturing subsidiary which produces pizzas, pies, cooked meats and sausages and packs cheese and bacon. All fresh fruit and vegetables are packed, stored and distributed by another Morrisons subsidiary.
With the sector in flux, the City is watching for any sign that Mr Morrison might actually retire. His daughter is a poultry buyer with the company, one of four family members who work for the group, though it is to John Dowd, who took over as chief executive in April 1997, that the Morrison mantle is most likely to be passed, though not any time soon.
"It changes as you get older," Mr Morrison says. "You don't have the same physical energy but you still get a lot of bright ideas, or rather new applications of old ideas. I've just got myself a driver for the first time. It means I can reflect. I have the luxury of focusing on a particular idea which is important. They say there's never an idea somebody else can't spoil."
And he recalls to mind the scallywag he found standing in one of Bradford's main streets years ago, selling produce which looked rather familiar from a tray around his neck. Mr Morrison went up for a closer look. Sure enough, these were Morrisons' goods which had been pinched from a nearby store. He smiles at the thought now, as if he cannot begrudge the thief his spirit of enterprise. Of course it was all quality stuff - and at a price even better than his own.
Diving in at the deep end is no excuse for shirking the style stakes
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