Specialist
Former executive at WM Morrison Supermarkets Ltd (Morrisons)
Agenda
- Key UK grocery industry trends – food inflation and subsequent pricing and margin strategies
- Morrisons performance review across channels amid market share struggles and inflationary pressures
- Competitive and price positioning vs Tesco (LON: TSCO), Asda, Sainsbury’s (LON: SBRY) and the discounters
- Strategic direction review and cost-reduction programme analysis
Questions
1.
Food inflation has accelerated. I believe it’s 19.2%, the highest in about 45 years. What are the drivers behind this? How did we get here after so many forecasts told us that this should be a year where it eases?
2.
Have your comments around food inflation been specific to the UK, with a perfect storm of Brexit, the Russia-Ukraine conflict and this inflationary period, or are we seeing this also across Europe?
3.
Do you see any potential reversal in the changes in the basket mix that we have been witnessing so far, so the increase in private label penetration, for example?
4.
Are there any particular areas where you think there might be a reversal of downtrading trends?
5.
It sounds as if the combination of the things you’re mentioning, and consumers holding on to certain private label products while upgrading in fresh, would be margin-accretive overall for retailers. Is that correct?
6.
It seems as if Morrisons has struggled to deal with inflation more than other UK grocers. What do you think are the reasons behind this?
7.
Perhaps there’s not much that can be done about interest rates, but when it comes to the farm-to-fork model and the vertical integration, how do you think Morrisons can adapt this model to deal with inflation more effectively, if possible?
8.
You mentioned labour has been a challenge in the UK more than in other places. What are the implications of the labour cost inflation for Morrisons? Particularly with the company having lower pay than some of its competitors, do you think it would experience staff shortages due to that?
9.
You spoke about market share losses over the last 10 years almost consistently for Morrisons. What would have been the drivers of that?
10.
It seems there’s a mismatch between what Morrisons is trying to do vs what its customer base wants. You mentioned Morrisons and Asda have a lower socioeconomic demographic than perhaps the other two traditional grocers – Tesco and Sainsbury’s – but at the same time, Morrisons is trying to provide this premium experience of having butchers and food stalls in the store. What are your thoughts there?
11.
You referenced one of the reasons for Morrisons’ market share losses is the rise of the discounters. What makes the company so much more vulnerable to discounters than some of the other retailers?
12.
It was reported in April 2023 that Morrisons is looking to replicate Tesco’s Clubcard prices in launching its own loyalty card prices. Do you think this will help ease the churn that you mentioned? Could it potentially help get some customers back?
13.
Do you think Morrisons’ exposure to the discounters should perhaps encourage the company to focus more on the EDLP [everyday low price] strategy rather than the promotional loyalty scheme?
14.
A recent Sunday Times article reported the potential for further sales of Morrisons supermarkets and then lease-backs, of course. What’s your outlook for this? Do you think there are further sales coming? What are the pros and cons of such a move?
15.
Do you think sales and lease-backs could help improve Morrisons’ sales per square metre? You mentioned the company had the worst among the big four.
16.
What do you think is a healthy level of freehold, percentage-wise?
17.
How do you assess the quality of Morrisons’ current estate, or the significant investments required in refurbishment?
18.
There’s also the Morrisons Daily format, which management has been quite vocal about wanting to expand. How big an opportunity or growth driver can Morrisons Daily be, particularly post the acquisition of McColl’s?
19.
What do you think are the pros and cons of a potential merger between Morrisons and MFG [Motor Fuel Group]? You mentioned some of the concerns around the logistics. It probably would help the debt situation, but is it something that saddles MFG with unwarranted debt perhaps?
20.
We’re often told that private ownership will allow a business to think longer term. This doesn’t seem to have been the case for Morrisons, as it perhaps struggles with debt in the short term. What are the reasons behind this? What do you think are the drivers?
21.
Would you like to make any final comments or remarks around Morrisons?
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