Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.


Waitrose stages counter attack

Cautious yes, pricey perhaps. But the upmarket grocer is defying critic s who wrote it off as it surges back into growth. Patrick Hosking finds out how
THE newly opened Waitrose supermarket in the north London suburb of Finchley is unashamedly upmarket. The display nearest the check-outs, an area conventionally used to tempt shoppers into impulse buys, is stocked with Moet & Chandon champagne at£18.35 a bottle. The more budget-conscious can opt for Waitrose's own-label bubbly at £11.75. The fruit and veg department is laden with exotica: Cape gooseberry, pomegranates and kumquats. The salmon and spinach torte on the deli counter looks mouthwatering. There is a home delivery service for fine wines and flowers. Elsewhere in the 20,000 sq ft store you can buy lobster, quails' eggs and that essential for a pink gin, angostura bitters.

These are not products available in the typical supermarket. But Waitrose has never pretended to be typical. The 111-store chain has ploughed a singular furrow, catering to the well-heeled of the home counties who are more concerned about convenience andquality than price.

Unlike its competitors, Waitrose has no shareholders to worry about. It is part of the John Lewis Partnership, the department stores group and worker co-operative. While Waitrose has kept the goodwill of most of its customers over the last few years, itsimage within the grocery trade has taken a battering.

For rivals, its reluctance to invest, expand and innovate was an industry joke. In the 1980s, when Sainsbury, Tesco and Safeway were installing scanning at every check-out, Waitrose held back. When other supermarket groups started opening on Sundays in 1993, Waitrose hung back on the grounds it was illegal.

And while its rivals were busy diversifying into petrol stations and newspapers and magazines, Waitrose always seemed to be the one dragging its feet. Conservative Waitrose was the chain that for years refused to stock proletarian pot noodles. It still refuses to give shelf space to condoms.

The result was a steady decline in market share to more aggressive competitors. Profits have fallen for the last three years. In 1993 the John Lewis group staff bonus, a key measure of the health of the group, fell to a 33-year low, partly because of Waitrose's problems. City analysts were then confidently forecasting that Waitrose could not survive as an independent chain and saying the John Lewis Partnership should sell it while it still had some value.

But in recent months there have been signs that reports of its impending death were premature. Competitors have been first amazed, and latterly alarmed, at the strength of Waitrose's sales growth - its progress published each week in the staff magazine. As the head of one rival chain explains it: "Waitrose were once a superb company, but they appeared to go to sleep for 20 years. Now they are coming to life again and beginning to move forward.''

According to Paul Smiddy, an analyst with Nomura, Waitrose's resurgence has crept up on the industry almost unobserved.. It has started to rectify its deficiencies and in some catchment areas its shops are now posing a threat to Sainsbury and Argyll-owned Safeway, he says.

The good news is not lost on David Felwick, the Waitrose managing director of the past four years, who strode to the podium at his annual branch managers' conference last month to the sound of the theme tune from The Empire Strikes Back.

Underlying sales (that is, after stripping out the benefit of new store openings) are running "certainly better" than Sainsbury, whose most recent published growth figure is 2.2 per cent and "very close to'' Tesco at 3.8 per cent. Waitrose turns over around £1.2bn and has about 1.5 per cent of the British groceries market.

Operating profits for the year just ended, says Mr Felwick, will be up on last year's £34.1m and hugely ahead of plan: the group had been expecting another decline.

That is good news, not just for Waitrose staff, but for all the 38,000 employees or "partners" in John Lewis. Mr Felwick, who is also a director of the group board,forecasts: "The bonus will go up again this year, I'm pretty confident it will at least match last year, if not improve." Last year partners received a bonus of 10 per cent on top of their basic pay.

Mr Felwick, a former RAF officer, admits Waitrose fell behind when its rivals were rolling out huge shop-opening programmes. "Probably we should have invested more in our existing shops a little earlier.'' But he denies the late move to scanning was harmful. "There was a conscious decision to wait,'' he says, enabling Waitrose to leap to the next generation of technology.

Scanning (known as Epos) equipment shortens the wait at the till. It also helps on stock control and automatic re-ordering and replenishment of shelves. To date 97 stores have installed scanning and all 111 are scheduled to have it by the end of next month.

Waitrose is also pressing ahead with Sunday opening. At present 23 stores open on a Sunday, although more will probably follow after the arrangement is evaluated next month. Waitrose claimed to be losing more than £1m a week in sales when its competitorswere opening illegally on Sundays.

New Waitrose openings have also helped boost sales. As well as the new Finchley store, the group has opened a "Food & Home'' outlet at Southend, Essex, a combination department store and supermarket. There is also a petrol station, Waitrose's first, withfuel supplied by Shell. More such hybrids may follow.

This year new openings are planned for Reading, Berkshire, Monmouth, Gwent, and South Harrow in north-west London. Moves out of tatty, smaller shops are planned for Cirencester, Gloucestershire, and Wokingham, Berkshire.

So far the Waitrose franchise only extends as far north as Peterborough. But Mr Smiddy says the chain has tried for sites as far north as Wetherby in North Yorkshire.

The popular perception of Waitrose remains that it is expensive. As the leading chains have responded to the arrival of the no-frills discounters with more price promotion, Waitrose has looked even more out on a limb.

David Shriver of NatWest Securities comments: "Waitrose is a very strong brand with a very loyal customer base. But you'd have to be a very strong brand to charge the prices they do."

Which? magazine last month featured the chain as one of the dearest in a survey, a rating challenged by Mr Felwick, who says Waitrose has cut prices on staples where competition is fiercest. "We believe we are still competitive, but we won't lower the quality which our customers expect from us.''

On Friday Waitrose published figures for the final week of its financial year. Sales in that week were12.7 per cent ahead of a year ago, and 9.9 per cent ahead for the entire six months. Pricey or not, Waitrose is starting to move ahead again.