Morrisons makeover

Supermarket brand Morrisons has been rocked by turbulence since it took over Safeway in 2004. Its latest mishap an E.coli outbreak on the eve a 450m brand makeover has done nothing to persuade analysts that the retailers fortunes will turn a corner. By Matthew Gorman

Morrisons%20120The suspected E.coli outbreak at two Morrisons stores in Scotland could not have come at a worse time for the UK’s fourth largest supermarket group. The outbreak, which has so far killed one person and affected eight others, came weeks after the company launched a multi-million pound advertising campaign featuring actress and television presenter Denise Van Outen boasting of the freshness of its produce.

The campaign, which was created by Delaney Lund Knox Warren (DLKW), was part of a £450m investment in new stores and a revamp of the Morrisons brand following a string of disappointing results in recent years.

The Bradford-based retailer was founded as a market stall in 1899 but was expanded into a FTSE 100 company over a 40-year period by Sir Ken Morrison, who joined the family business in 1956. He relinquished the managing director’s role in 1997 and has announced his intention to step down as chairman next March. market share

Morrisons bought Safeway’s 450-plus stores for £3bn in 2004, helping it become the fourth biggest player in the UK market, but has struggled to retain market share since the deal. The move, designed to turn the company from a 120-store chain in its north of England heartland into a national player, has been a costly exercise.

Maureen Johnson, chief executive of WPP-owned retail analyst The Store, says: “Buying Safeway was a bit ambitious and took more out of them than they realised. Safeway was going down fast and so was building up the brand to sell on, but Morrisons were a bit naive. I don’t think they realised what it would take out of them.”

Some observers have seen this year as a turning point for Morrisons with the integration of Safeway finally complete, and chief executive Marc Bolland announcing the £450m brand makeover. As part of the revamp, a new board-level marketing position was created above marketing services director Michael Bates, although it has yet to be filled. The company’s £30m advertising account was moved from Manchester-based BDH/TBWA to DLKW after a review last year.

The rebrand saw the 30-year-old “More Reasons to Shop at Morrisons” strapline replaced with “Fresh Choice For You”. The new strategy concentrates on the quality of the company’s produce and is based around freshness, service and value. Morrisons’ website says it has more fresh food made and prepared in store than any other supermarket and adds that its new advertising campaign is about its “unique freshness”.

Van Outen uses the word “fresh” six times in the new television campaign, which broke at the end of July. Although the ad was not scheduled to run last week – a decision made before the E.coli outbreak – the incident has cast doubt on the future of the campaign (MW last week).

But Johnson believes the rebranding has the right message. “The food market is about freshness and it’s about local,” she says. “It’s what today’s customers look for. The E.coli outbreak will set them back a bit but they will get through it. I think there is a place there for Morrisons to market on farm fresh food.”

Richard Perks, director of retail research at Mintel, says it is “desperately bad luck” that the company has been caught up in the E.coli outbreak but he adds that Morrisons still had a lot of work to do before the incident. “It had a setback with the Safeway acquisition and there has also been a lack of leadership. Ken Morrison should have left years ago.”

Premium ranges
Perks believes Morrisons is the weakest of the big four supermarket groups in the UK and is not as convinced as some by claims of a recovery. “There was always going to be a recovery after the end of the integration programme,” he says. “For that recovery to be successful there [now] has to be some serious work on the ranges.” He thinks Morrisons needs to improve its brands and offer more premium ranges.

Retail analyst at Numis Securities Jose Marco-Tobares agrees that Morrisons needs to offer more products in its high-end “Best” range. But he adds: “It’s been a tough year out there, especially in the past couple of weeks. And last summer we had the really hot weather and the World Cup. But we’re positive on food retailers. It’s one of our preferred stocks.”

The UK grocery market is one of the most developed in the world and the supermarket groups have diversified into non-food and online shopping to increase market share. Both are seen as huge growth areas but Morrisons has failed to make an impact in either. Its non-food offering is minimal and its online presence is virtually non-existent.

Standalone stores
Perks believes it needs to offer more non-food products but should not worry about launching standalone stores, in the way Asda has with its Asda Living shops, until it “gets its own house in order”. He says the same applies to its online offering. “It has got enough to do at the moment. It’s not that important for Tesco, for example, where it accounts for £1bn of its £30bn turnover. It’s still pretty small.”

For Johnson, the biggest problem is the stores themselves. As part of the rebrand, which includes the new slogan, logo and packaging, the company is rolling out a new store format. But Johnson says the stores look “noisy” and come across as “very cluttered”. She adds: “They have the building blocks in place but the stores need attention.”
Over the past three-and-a-half years, Morrisons has more than doubled in size and grown from a regional to a national player, but it has also learned some expensive lessons along the way. Despite its problems, many experts believe it is starting to turn the corner. Morrisons will be hoping the E.coli link will not halt its progress.

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