The sound of tills ringing could be heard earlier this month as Morrisons supermarket reported profits of £655m for the year to the end of January 2009 with turnover up 12% to £14.5bn. While most businesses are struggling in a recession, the company announced in January that it would create 5,000 new jobs by the end of the year.
Morrisons also reported the best festive trading results of the major multiple retailers with underlying sales up 8.2% in the six weeks to January 4. But is this boom in the bottom line merely the consequence of market conditions or is it the brand’s three-year turnaround plan getting results? Morrisons marketing director Michael Bates, speaking exclusively at Marketing Week’s Brand Summit, claims it is far more than good luck that has seen his supermarket grow its market share – from 12.1% to 12.3% in the past 12 months, according to TNS.
“We believe there is a unique opportunity to be the food specialist for everyone,” he says. The business has adopted a two-pronged strategy, pushing that fresh food tastes best using its Market Street food areas, while also promoting that there is no need for fresh products to be more expensive.
With sales up 18.6% in London alone, the company is piloting smaller than usual stores in middle-class areas in the South. While Morrisons says these are “not convenience stores” because they are still relatively large and contain fresh food counters – unlike rivals’ town-based offers – it will take the company into new territory.
David Gray, retail analyst at Planet Retail, explains: “The main reason for going into smaller stores is to take advantage of retail space coming onto the market. It’s difficult to get space for hypermarkets so this is a big opportunity for supermarkets to expand.”
Bates says Morrisons can offer fresh food at cheaper prices than would otherwise be possible because the supermarket runs so much of its own supply chain. The bread is baked in stores – more than 90 varieties from scratch, Bates claims – while the supermarket even operates its own abattoirs.
While Morrisons might not want to boast too heavily about abattoirs in its ads, it does aim to get across the message about the economies of controlling production. Its most recent ad campaigns feature celebrities such as TV presenters Denise Van Outen and Richard Hammond being “demanding” about their food. The idea behind the ads is that while Morrisons’ food is up to celebrity standards, the way the supermarket does business means that prices are still reasonable.
Bates says he wants his brand to stand for quality, fresh food without the snobbery that sometimes goes with it: “We don’t accept this. There are a whole host of customers who like good food without putting it on a pedestal.”
This outlook signals a big change in where the supermarket was just a few years ago, when Bates admits that consumer perceptions were that it would have worse quality food than its competitors. Its Yorkshire roots also played into this perception, particularly among people further south. “Morrisons was just a byword for pies… Northern pie eaters,” jokes Bates.
Morrisons also had the problem of integrating two brands into one cohesive unit, after it bought rival supermarket Safeway in 2003. The two retailers had more than 500 stores together, with separate IT and administration systems as well as what Bates calls “two different cultures”.
By far the biggest issue for the company was to find one strategy behind which to relaunch all its outlets that would make sense to all staff. After Morrisons decided on its “fresh food at reasonable prices” angle, it had to tie together its store networks and staff with a new brand identity. It ditched its old logo in 2007, largely yellow and black, for a new identity using green to emphasise its fresh campaign.
To back up its visual look and make sure all staff understand the brand’s values on fresh food, Morrisons launched a behind-the-scenes initiative called Fresh Food Academy last month. The scheme aims to train up to 18,000 employees this year in butcher, baker and fishmonger apprenticeships. Staff can gain NVQ qualifications by taking part in the scheme, with some maths, English and specialist retail courses also on offer.
Outside its own walls, the supermarket is pushing its fresh message through a scheme called Let’s Grow, launched in September 2008, which offers vouchers so that schools can redeem them for free gardening equipment. For each £10 spent in store, parents and teachers can pick up vouchers for their chosen school and then order a range of goods from a special catalogue, from composting bins to watering cans.
“There are over 17,000 schools registered,” claims Bates, who adds that 18 million vouchers have already been handed out. To give the scheme more credibility and tie it up with the supermarket’s mainstream advertising focusing on celebrities, TV gardener Diarmuid Gavin fronts the Let’s Grow marketing. Bates says Gavin will be back on TV screens later this year.
While the schools scheme helps Morrisons put across its message to its target market of families, its real test in 2009 will be to keep growing its business. Will its focus on the affluent south and fresh food at reasonable prices pay off? Bates says he’s not resting on his laurels: “There’s a huge amount to do.”
Planet Retail’s Gray is more forthright: “The outlook for 2009 is that Morrisons will do consistently well. It’s benefited from people downshifting more than the other retailers. It is extremely good at capturing shoppers from more premium supermarkets.”