Reporter Bronya Smolen considers the road ahead for supermarket retailers in the wake of this week’s headlines.
It appears 2015 poses as much of a torrid time for the big-4 retailers as it did in 2014. In the past week alone, Tesco has seen the cull of its in-store restaurant and coffee shop boss, while Morrisons announced a profit loss of nearly £800m for its year-end results.
As Andrew Higginson, chairman of Morrisons, so rightly put it, it has been a “painful” time for the retailer, a statement that could be applied to each of the four as they battle competitive prices, growing discounters and record lows in food inflation.
With the fate of Harris + Hoole and Euphorium, two of Tesco’s in-supermarket businesses, hanging in the balance of the retailer’s finances, analysts have pondered whether the operation might be spun off. Michael Holmes, now ex-chief executive of new food experiences, was director of Harris + Hoole, Euphorium, Giraffe and Dobbies at the retailer –all businesses which were introduced to bring more shoppers into stores.
Whatever the outcome, it is clear that in-store bakery still remains a key battleground for any retailer. Morrisons itself stated in its trading update this week, that its strongest marketing point was its fresh food offering including the bakery sector.
It seems to have lost sight of its identity; perhaps the best proof of this was the introduction of the infamous and over-extravagant mist machines, which were ultimately a shambles and were scrapped this year. The retailer needs to return to its roots, with a uniquely fresh offering through its ‘Market Street’ model where it employs qualified bakers and craftsmen to do a job that others leave up to any average Joe.
Incoming boss David Potts does indeed have his work cut out, but that’s not to say he cannot swing an outstanding turnaround, as proved by Tesco, which this time last year had hit its lowest share of the market in over a decade. After a major overhaul and a new boss (sound familiar?), the retailer has now seen a 13% rise in share value, and, this month, posted its strongest performance in 18 months, with sales up 1.1% compared with a difficult 2014.
As for Tesco, it seems the shake-ups are continuing. The departure of Holmes, along with a number of other directors, means fresh faces and fresh approaches are soon to fill the Tesco board room. The supermarket war is back on, but it could be about to get more exciting.