These past two months we’ve been treated to the spectacle of our top grocers performing a stately version of musical chairs.
The most unexpected round was, of course, last week’s announcement by long-reigning Tesco supremo Sir Terry Leahy that he would be standing down next spring in favour of Phil Clarke, currently international director. To this add Asda chief Andy Bond earlier making way for another Andy (and, rather confusingly, another Clarke), the company’s head of operations. Then there’s Morrisons CEO Marc Bolland defecting to Marks & Spencer, where he takes over from executive chairman Sir Stuart Rose. Let’s not forget Bolland’s replacement, ex-Asda man Dalton Philips, nor his spectacular poaching of Waitrose commercial director Richard Hodgson (another ex-Asda man) last week to fill the same job at Morrisons. Waitrose, in turn, has promoted supply chain director Mark Williamson to Hodgson’s role.
There may be a further round of chair shuffling. Sainsbury’s has remained eerily detached from the fun so far. Last year its much-feted chief executive Justin King looked a shoo-in for the Rose job, but after minimal hesitation, he loyally elected to stay on. We might ask for how long?
The timing of these events, taken as a whole, cannot be coincidence. What does it tell us? And who are the winners likely to be when the music finally stops.
Let’s start by considering the big one – Tesco’s Leahy. Though the suddenness of his announcement may have rocked the City, the succession arrangements have all the hallmarks of a carefully matured plan, marked by a discretion that must be the envy of outgoing top brass at M&S.
Leahy’s actions imply that leadership is not about the cult of individuals, it’s about hitting on the right strategy and executing it meticulously. The strategy in question, of course, is his own – honed over nearly 14 years at the top. So it’s no surprise to find his anointed successor is a chip off the old block, inured to the ways of a company where he has worked his way up from graduate trainee. The biggest difference between Leahy and Clarke, according to the wags, is that one supports Everton and the other is a fan of city rivals Liverpool.
Such machine-like consistency must be admired when the formula behind it is one as successful as Tesco’s. Even so, we’re entitled to ask why Leahy is leaving now? At 54 years old, he is still young, he has just steered the retail juggernaut through our worst recession in living memory and the terms of his pension and long-term investment plan suggest he would be better placed to remain until 2013/14 – hence the City’s surprise.
Tesco says that Leahy is leaving now to give his successor, already 50, a longer run. That may be so, but successful businessmen, like successful politicians, are very mindful of how their record will be viewed in the future. There’s plenty of extra mileage in Leahy’s strategy, particularly in the area of international expansion, but it’s also possible to argue the best years of spectacular, transformational growth are coming to an end. In the US and Japan, there are big questions to be answered in the next few years.
Moreover, the brand is in danger of becoming a victim of its own success. Tim Mason, now reinstated as brand meister, will need all his wits about him to convey a more caring image and eradicate “Tescopoly”, “Tesco towns” and “juggernaut” from the lexicon.
If times are going to get tougher, however, it won’t be Tesco alone that feels the pinch. Retail analyst David McCarthy, of Evolution Securities, thinks “the sector is heading for the most difficult time in many years” and cites robust competition (all four of the major supermarket chains are performing well for the first time in 15 years), the doubling of opening programmes, diminished like-for-like sales and falling discretionary consumer spending.
There’s plenty of extra mileage in Leahy’s strategy, particularly in the area of international expansion, but it’s also possible to argue the best years of spectacular, transformational growth are coming to an end.
Coming out of the recession is going to require a lot of fresh thinking and new drive. It seems likely that something of the sort was playing on Bond’s mind when he moved upstairs at Asda (MW 12 April). It may even have influenced Bolland, as he weighed up the executive challenge and paypacket at M&S, after three years of top-flight performance at Morrisons.
But where exactly is this new thinking going to come from? Some commentators believe that sustainability is going to be back on the agenda next year, and that the battle for success among the supermarkets will be determined by who best communicates the “green” message to consumers (MW 10 June). Indeed, there are already signs this has taken root. One of Bolland’s first acts at M&S has been to warmly endorse his predecessor’s “Plan A” ethical policy, despite the mounting economic “headwinds”.
Nevertheless, sustainability seems to me in the category of best collective practice rather than individual competitive advantage. The supermarkets and M&S may well be able to mould consumer behaviour through the power of their superbrands. But that will do little to help them carve up share among themselves.
On present showing, it is likely the biggest challenge will come from a brand outside the magic circle – Waitrose. Like Morrisons, but for a different reason, it has had a good recession and is also demonstrating plenty of initiative coming out of it. Essential Waitrose will have lasting brand value, having demonstrated that quality produce is not necessarily exorbitantly expensive. Waitrose is at the centre of a web of deals – with for instance Shell, Boots, Asos and City Sandwich and coffee chain Eat – which suggest it is poised for significant growth. It is still of a size where talk of doubling its sales within ten years has the smack of credibility.
For the full blog, including Stuart Smith’s insight into Leahy’s succession, go to: http://stuart smithsblog.wordpress.com