MORRISONS’ forecast-smashing 17% profit growth, announced in its results yesterday demonstrates, says the analyst community, that the supermarkets are having to find new ways of growing their businesses – and that wholesaling plays a key role in at the least two of the Big Four’s plans.
After a difficult period, chief executive David Potts has successfully got the Morrisons business back on track with his focus on ‘fixing, building and growing’. On the shop floor that means more local products, more coherent pricing; and behind the scenes, a supply chain less reliant on imports – regarded in most quarters as a savvy move given the ongoing weakness of the pound.
Tesco and Morrisons have looked to the wholesale sector and the tens of thousands of shops, small businesses and hospitality operators they service.
Tesco is now the largest food group in the UK after its acquisition of/merger with Booker, and while Morrisons’ move into wholesale has not been on nearly the same scale, its deal to distribute to McColl’s opens up another revenue stream – one which when other contracts are included will add £1bn to the group’s revenue (currently £17.3bn, up 5.8% y-o-y), according to analysts.
Morrisons has also revived the Safeway brand (hugely popular in Scotland, and much missed by Scots since it disappeared from the high street in 2005). Potts said he expected to sell about £700m Safeway brand products next year.
Laith Khalaf, senior analyst at Hargreaves Lansdown said yesterday: “The retail sector is polarising into winners and losers, as a result of tough trading conditions and changing consumer behaviour. The creation of a viable wholesale business which uses the larger group’s buying power and logistical might is helping position Morrisons very much on the side of the winners.”