Morrison CEO Plans ‘Aggressive Pricing’ in Convenience Battle
Stock Chart for WM Morrison Supermarkets PLC (MRW)
William Morrison Supermarkets Plc, the smallest of the four main U.K. grocery chains, said its new convenience stores will offer lower prices and 30 percent more fresh food than the larger rivals it’s aiming to catch.
“This is a challenger brand on price,” Chief Executive Officer Dalton Philips said at the grocer’s first M Local convenience store, which opened in Ilkley, England today. “It’s about making Morrisons different and better than ever.”
The Ilkley outlet is the first of three convenience stores that the Bradford, England-based company plans this year as it seeks to close the gap to rivals Tesco Plc (TSCO), Wal-Mart Stores Inc. (WMT)’s Asda and J Sainsbury Plc. (SBRY) The others, in Cheshire and Lancashire, will open this August. The convenience market will be worth 42 billion pounds ($67 billion) by 2015, the CEO said.
“Convenience is a big market, it’s very fragmented and there are certainly growth characteristics,” said Justin Scarborough, an analyst at Royal Bank of Scotland in London. He has a “buy” recommendation on Morrison. “They’ve shown under Dalton when they get focussed on area they move quickly.”
Tesco, based in Cheshunt, England, has more than 1,285 convenience stores and opened 150 Tesco Express outlets in its last fiscal year, while Sainsbury added 47 stores and Asda spent 778 million pounds on the 147-store Netto discount chain.
Morrison’s Ilkley store covers about 3,000 square feet (279 square meters) and about 40 percent of that space is dedicated to fresh produce such as fruit, vegetables, ready meals and cold meats. There will be a minimum of 100 lines of fresh food delivered to stores daily, Philips said.
About half the products in the store are under Morrison’s own-label brands like a 3.49-pound margherita pizza under “the best” logo. Deals include a 9-pound meal for two with five items such as pasta, sauce, garlic bread and wine and desert.
“What’s going to be interesting is that Morrison have a view that they want to offer convenience and a focus on fresh food,” Scarborough said. “The M Locals are pretty much in residential locations that are quite affluent and the expectation is the fresh food bias should stand out.”
Morrison says a 46-pound basket of goods at the Ilkley store is 9.60 pounds cheaper than the equivalent at the Tesco Express and two other supermarkets in the same neighborhood. To differentiate from competitors, the store offers fresh coffee grinding, 1-pound freshly squeezed orange juice and fresh roast chicken for 4.49 pounds, the executive said.
Philips’s plans include opening 2.5 million square feet of new space in the three years ended January 2014 and investing in e-commerce. Morrison has a stake in New-York based online grocer FreshDirect and owns children’s online retailer Kiddicare.com. The retailer is also re-balancing ranges in store and developing its 6 billion-pound own-brand business.
Philips declined to comment on how many convenience stores may open, saying he’s “very ambitious” about their growth.
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