1st Tier UK Retail Report

An Overview of the UK Grocery Retail Market 2011 Profiles of 1st Tier Retailers
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1ST TIER RETAILER PROFILES: 2011
Table of Contents
Terminology
Executive Summary
Chapter One
UK Grocery Market Overview 2011
Chapter Two
Tesco
21
Chapter Three
Asda Sainsburys
45
Chapter Four
64
Chapter Five
Morrisons
81
Chapter Six
The Co-operative Group
95
Chapter Seven
Waitrose
108
Chapter Eight
Marks & Spencer
127
Chapter Nine
Iceland
140
CHAPTER ONE
Terminology
Abbreviation BOGOF BWS CSR CTN CRTG CPI EDLP EDLC EPOS FSA GDA GPD IGD KVI MSC MPC NDC OFT RDC RFID RPI RRP SRP SKU WRAP
Explanation Buy One Get One Free Beers, Wines and Spirits Corporate Social Responsibility Convenience, Tobacco, News Co-operative Retail Trading Group Consumer Price Index Every Day Low Prices Every Day Low Costs Electronic Point of Sale System Food Standards Agency Guideline Daily Amount Gross Domestic Product Institute of Grocery Distribution Key Value Indicator Marine Stewardship Council Monetary Policy Committee National Distribution Centre Office of Fair Trading Regional Distribution Centre Radio Frequency Identification Technology Retail Price Index Retail Ready Packaging Shelf Ready Packaging Stock Keeping Unit Waste & Resource Advice Programme
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EXECUTIVE SUMMARY
The aim of this report is to give Irish manufacturers and suppliers an insight into the dynamics of the UK grocery market, particularly in respect of developments which have taken place over the past 12 months (to September 2011). Many UK households have seen their spending power squeezed over the last year by a combination of rising prices and static or declining earnings. Rising commodity prices have had an effect in UK stores over the first half of 2011, and an unprecedented eruption of civil unrest in North Africa and the Middle East raised oil prices to record levels. Such is the impact of rising oil prices on the UK shopper that the UK government has introduced a new stabiliser to help moderate the pressure on domestic budgets. This fuel stabiliser means that fuel duty will increase in line with the Retail Price Index (RPI) measure of inflation when oil prices are high. However, in years when crude falls below a set trigger price for a sustained period, the government will increase fuel duty by RPI plus 1p per litre. The current downturn in the UK has resulted in numerous challenges for UK retailers and consumers alike. Consumers are increasingly value focused in their purchase decisions as they try to counteract the effects of rising inflation, food and fuel costs on their disposable income. This has resulted in promotions playing an increasingly important part in retailer strategies as they fight to retain their market share and maintain loyalty among their shoppers. Throughout 2011 UK retailers have been increasing their focus on value with bigger, bolder initiatives in an attempt to drive footfall. In September 2011 Tesco announced a 500m investment in price cuts while Sainsburys has revealed a move away from their six year old Try something new strap-line to the new Live well for less strap-line. This widespread use of price guarantees by UK retailers is further evidence of increasing awareness in the sector that consumers budgets are under more pressure than ever and highlights the effort that the retailers are making to retain customers and build brand loyalty. However despite the tough market conditions of note is Asda, which has enjoyed better momentum against weak comparatives. Helped by its new smaller supermarket format following the acquisition of Netto, in September 2011 Asda had a 17.4% share of the UK grocery market. There has also been good news for discount retailers. Mike Watkins at Neilsen commented: Aldi and Lidl are experiencing stellar performance. They have consistently outperformed all other food retailers this year, and over the 12 weeks to 3 September 2011 recorded +19% growth in sales. Not only are more shoppers visiting these discounters, but theres a doubledigit increase in spend per visit across their FMCG (Fast Moving Consumer Goods) ranges. These trends towards discounters are even stronger than they were during the recession of three years ago. Looking ahead, there are plenty more hurdles to be overcome: possible interest rate rises, currency fluctuations and further food price increases. Further promotions aimed at attracting shoppers in store, as retailers and manufacturers gear up for Christmas trading are expected Chapter one of this report provides an overview of the UK retail market and outlines significant developments which have taken place in the year to date. Key highlights of 2010 and 2011 are examined including an overview of the UK grocery market shares, convenience sector, competition commission, online retailing, private label, local sourcing, food labelling and a focus on the value offering.
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The remainder of the report features a chapter dedicated to each of the first tier retailers outlined below. 1. 2. 3. 4. 5. 6. 7. 8. Tesco Asda Sainsburys Morrisons The Co-operative Group Waitrose Marks & Spencer Iceland
Each chapter is subdivided as follows: 1. Organisational Overview Current Highlights & Challenges Organisational Structure Key Financial Indicators Grocery Trading Strategy Private Label Structure Pricing Strategy Promotional Strategy Key Performance Measures Customer Profile Marketing & Advertising Strategy Store Formats Online Retailing Sourcing, Supply Chain & Distribution Corporate Social Responsibility
2. Trading Strategy
3. Marketing & Advertising
4. Operations
5. Brief History
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UK GROCERY MARKET OVERVIEW 2011

Key Highlights: IGD estimates the value of the total UK Grocery Market in 2011 to be 161.96 billion. Tesco holds the highest share of the grocery market at 30.6%. Asda is the second largest retailer in the UK holding 17.3% market share. Sainsburys comes in a close 1 third with 15.9% of the market. The UK economy is expected to grow by 1.3% in 2011 with a growth forecast of 2.2% 2 for 2012. David Cameron was elected Prime Minister in May 2010, the first Conservative Prime Minister since 1997. The Conservatives did not receive an outright majority of votes, and so formed a coalition government with the Liberal Democrat party. Its leader, Nick Clegg, was elected as Deputy Prime Minister. A key determinant for consumer spending will be the direction of interest rates. The Bank of England (independent from governmental control) has set a target of maintaining inflation below 2%, and uses interest rates as a lever to achieve this. Interest rates are currently standing at an all-time low of 0.5%, however inflation reached 4.5% in September 2011. Consumer confidence in 2011 is low owing to the rise in VAT, increased taxes and public sector job cuts which have inevitably had some impact on retail sales. Inflation in the UK in 2011 remains elevated, due to continuing oil price inflation and a sudden pick-up in food prices. Consumer price inflation was 4.5 per cent in September. Online grocery channel set to be worth 7.2bn by 2014 (+93% on 2009), with retailers continuing to bolster their online propositions. Shopper acceptance of online is growing: 41% of shoppers are anticipated to buy groceries online by 2014. The British food industry has experienced a jump in food inflation in 2011 in the wake of soaring animal feed prices, a shortage of silage and poor harvests. Some analysts have predicted food prices could be at least 10% higher by early next year. UK Population: 62.3 million UK Grocery Market Value: 161.96 billion (IGD 2011 estimate) UK Economic Overview: Measure Consumer Spend GDP Growth (Real) Grocery Retail Market Grocery Retail Mkt/Capita Nominal GDP Nominal GDP/Capita Total Retail Market Unit GBP (bn) % GBP (bn) GBP GBP (bn) GBP GBP (bn) 2006 807.64 2.85 118.44 1954.78 1328.36 21923.75 229.59 2007 849.93 2.56 122.93 2018.89 1404.85 23071.93 237.92 2008 878.91 0.74 128.94 2111.35 1445.58 23670.87 245.67 2009 863.48 -4.39 136.99 2238.4 1392.71 22756.7 254.49 2010 905.2 0.91 139.24 2248.34 1464.72 23651.22 257.52 2011 936.81 2.49 144.41 2304.29 1530.73 24425.24 263.04
Source: Retail Analysis Datacentre, calculated in 2011
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Kantar WorldPanel, till data October 2011 IGD Datacentre 17.10.11
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Economic Policy & Consumer Spending Grocery retail in the UK continues to grow, albeit at a slower pace than previously. However it is likely that consumer confidence will remain somewhat uncertain as plans for a deep reduction in government expenditure will affect the income of millions of households. Under the coalition government, the UK is undergoing the biggest fiscal tightening since the Second World War. The proposed squeeze will see the government make 81 billion in 3 budget cuts by 2015. The sheer scale of the tightening means that consumers will be hit by tax rises, welfare cuts, a public sector pay freeze and public sector job cuts. One of the key determinants of consumer spending is interest rates. The Bank of Englands target is to maintain the rate of central inflation below 2% with interest rate policy being the most important lever. Towards the end of September 2011, consumer confidence rose for the first time in four months according to leading market research company GfK NOP Ltd. Their figures placed households expectation for the economy up four points to minus 27, with further improvements in other criteria for consumer confidence.
Source: GfK Consumer Confidence tracker - September 2010 to September 2011
VAT th The rate of VAT rose from 17.5% to 20% on 4 January 2011, this will account for an extra 13bn in public funds. Firms seemed to pass on just under half of Januarys rise from 15% to 17.5%, taking core inflation to above 3%. The Office for Budget Responsibility has assumed that two thirds will be passed on. With the new 20% VAT rate still just below the European average, the standard rate could yet be raised further. Inflation CPI annual inflation the Governments target measure was 4.9 per cent in September, up 4 from 4.5 per cent in August 2011. Figures from the latest BRC-Nielsen Shop Price Index show that overall shop price inflation remained at 2.7% in September. Meanwhile, food sales were down 1.6% during July 2011, as consumers cut back on spending due to the higher prices. The figures show that inflation in predominantly food stores is running at 5.0%, down from 5.7% in August, compared to 1.3% in predominantly non-food stores, down from 1.4% in August. Stephen Robertson, British Retail Consortium Director General, commented: The pressures on prices from world commodities, import inflation and Januarys VAT rise havent gone away but they havent worsened either.
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World Economic Forum 2011 Office of National Statistics September 2011
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Inflation Annual inflation rates - 12 month percentage change: CPI 4.5%, RPI 5.2%.
Source: Office of National Statistics Septmeber 2011 Notes CPI is the consumer prices index. It is the measure adopted by the Government for its UK inflation target. The Bank of England's Monetary Policy Committee is required to achieve a target of 2 per cent. In the June 2010 Budget, the Chancellor announced the Governments intention to also use the CPI for the price indexation of benefits and tax credits from April 2011. Prior to 10 December 2003, the CPI was published in the UK as the harmonised index of consumer prices (HICP). RPI is the retail prices index - the uses of the RPI and its derivatives include indexation of index-linked gilts. Historically the RPI has also been used for indexation of pensions and state benefits. Inflation is the percentage change in the index compared with the same month one year previously.
UK GROCERY MARKET SHARE

UK Grocery Trade The Annual Till Roll chart below is drawn from the widely-used Worldpanel study by Kantar which measures the market value shares of the leading UK grocery retailers. The Kantar Worldpanel Till Roll measure accounts for all expenditure going through the main till in each retailer, with the exception of Marks & Spencer. Marks & Spencer is not included in this measure because of its large clothing departments, which would distort chart figures. The UK grocery trade is dominated by four large players: Tesco, Asda, Sainsburys and Morrisons. The latest market share data indicates that the top four retailers hold just over 75% of the grocery market as illustrated below. Retailer Market Share
Till Roll 12week 2 Oct 2011 (KWP P11)
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The latest grocery share figures from Kantar Worldpanel, published for the 12 weeks ending nd 2 October 2011 show the grocery market growing at 5.1% per year, below the 5.7% grocery price inflation in this period. The is evidence of clear polarisation between premium and discounter retailers with Aldi and Lidl again posting strong double digit growth of 25.1% and 10.5% respectively. Both retailers now represent 6.0% of the market. Waitrose was the next big winner with growth of 9.4% and increasing its share from 4.2% a year ago to 4.4%. Morrisons was the fastest growing of the big four retailers with growth of 6.0%, increasing its share from 11.5% to 11.6%. It was also the only big four retailer to grow ahead of the market this 12 week period. Edward Garner, Director at Kantar Worldpanel, is of the view that there is evidence shoppers are trying to manage their personal inflation by trading down. This can be done by seeking out lower priced outlets and cheaper alternative products. As a result, those retailers with a low price message are the driving force in the market, with Iceland and Lidl enjoying sales growth of over 10% year-on-year, and Aldi leading the market with 25.1% growth. The sharp decline of 69.6% for Netto is a result of the store conversions to the Asda brand alongside store disposals, as required by the OFT. While there has been an increase in sales and market share for discounters this has not resulted in a shift towards consumers buying more own-label products. In fact, budget ownlabel is showing only muted growth of 2%, while premium own-label is growing at over 8%, confirming that despite economic pressures, low-price is not the only motivation in this market. Edward Garner explains: This is further demonstrated by the continued two nations theme, as Waitrose shrugs off any gloom with sales growth of 8.3% - over double the market growth. This is a challenging market for the big four grocers, which have to appeal to a broad range of consumers, unlike the discount and premium niche players. Only Morrisons has managed to add share this period (11.5% to 11.6%), with year-on-year growth of 6.0% slightly ahead of the market. Kantar Worldpanel Retailer Share Track (RST) As previously mentioned, Marks & Spencer is not included in the Kantar Worldpanel Till Roll measure. However, using Retailer Share Track, which records only food and drink, health and beauty and household items going through the till, we can benchmark Marks & Spencers market share performance like-for-like with other retailers. Retailer Share Track excludes toys, books, clothing and electrical which are all included at a Till Roll level.
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Store Numbers and Store Areas The chart below shows that the number of stores and total sales area of each retailer varies greatly across the board. Tesco continues to dominate with the largest number of stores and the greatest store area. Asdas positioning as a superstore retailer, with no presence yet in the convenience sector, is reflected in the fact that they are number two in the market with only 526 stores, compared with Sainsburys 948, for example. Retailer Tesco Total Asda Sainsburys Morrisons The Co-operative Group Waitrose Aldi Marks & Spencer No. of Grocery Stores 5,380 526 948 474 3,001 242 528 1,078 UK Sales Area (sq m 000s) 9,620.492 1,696.249 1,885.258 2,521 1,297.983 408.179 435.072 1,923.350
Source: IGD Datacentre accessed October 2011
2011 Retail Share 30.60% 17.03% 15.90% 11.60% 7.00% 4.40% 3.5% 3.10%
THE UK CONSUMER
The UK population has increased in 2011 to over 62.3 million people. The current rate of population growth is +0.6%. The UK population is projected by the Office of National Statistics (ONS) to increase by 4.4 million by 2016; this is equivalent to an annual growth rate of 0.7%. 5 If past trends continue, the population will grow to 71 million by 2031. The ageing nature of the population is another point to note. The government estimates that by 2014, the number of people aged 65 and over is expected to exceed those aged under 16 for the first time. This trend is set to continue with 17% of the population estimated to be under 16 and 32% over 65 by 2031. Household size is also expected to continue to shrink over the coming years, from 2.3 in the last census to 2.2 by 2017. As a result of this, household number growth will be close to double overall population growth, averaging 1% per year. The changing population structure has clear implications for the grocery sector in terms of store design and layout, while pack sizes, product formats and packaging design will also need to be considered. The UK society is also expected to be even more multi-ethnic as immigration is forecast to continue, although at a more modest rate. This will create further opportunities on a selective basis for ethnically tailored ranges in the UK.
IGD UK Country presentation 2011
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CONVENIENCE SECTOR OVERVIEW

The last year was another strong period of growth for convenience stores in the UK. Sales in the channel reached 32.4bn in the year to April 2011, a rise of 4.9% on the previous year. Although this represents a slowdown on the growth experienced during 2010 (+5.9%), the 6 sector continues to grow ahead of total grocery (+2.9%) . IGD forecasts that growth will continue at a compound annual growth rate (CAGR) of 5.5% to 2016 with value reaching 42.3bn by that time. Stores in the convenience sector are typically less than 3,000 sq ft, have a broad range of food and grocery lines with a limited range of non-food items and are typically in neighbourhood, high street and forecourt locations. By April 2011, the number of convenience stores in the UK was 48,168 down 0.4% on the same time last year. The decline has stabilised in the last two years following greater reductions in store numbers from around 2005 onwards. A fall in the number of forecourts, down 1.6%, and non-affiliated independents, down 3.4%, was behind this decline, although the latter underwent its smallest reduction in numbers for many years (717 fewer stores compared to a drop of 1,090 the year 7 before). In terms of store numbers, convenience multiples grew faster than any other segment last year demonstrating a 6.4% increase taking the total store count to 2,835. Sales from convenience multiples grew by 8.1% to 5.1bn but they still accounted for less than 16% of total sector sales. Efficiency and consistency of operations helped the segment achieve a greater share of sales than its share of stores (16% of sector sales versus 6% of stores). Stores offering a convenience proposition can be categorised as follows: Convenience multiples: organisation with 10+ company owned stores, non-affiliated Co-operatives: Co-operative society convenience stores Symbol groups: stores affiliating to a symbol group, branded fascia retail club or franchise Independents: organisations with less than 10 stores, non-affiliated Forecourt convenience stores: convenience stores based on a petrol filling station, can be multiple or independent/dealer status Convenience sector value by segment
Source: IGD Convenience Retailing 2011
Symbol group sales increased by 9.2% last year to reach 12.6bn and ensured the segment remained comfortably the largest by value. Consequently in the convenience sector, their share of sales increased to just under 39% of the total convenience market. Store numbers also increased by 2.9% to 16,288; close to one in three convenience stores now operates under a symbol fascia. Symbol groups will remain an attractive option for independent retailers but the rate of switching is likely to slow in the coming years.
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IGD Convenience Retailing Report 2011 IGD Convenience Retailing Report 2011
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Convenience multiples experienced higher levels of growth than any other segment in 2010, while new entrants such as Waitrose and Morrisons are expected to contribute to further estate growth in the future, Tesco Express and Sainsburys Local remain the major contributors to segment growth at present. Development of this segment will intensify competition in the wider convenience sector, but will also drive further improvements in range, promotions and in-store operations across the market.
ONLINE GROCERY RETAILING

Retailers have continued to build their online presence in both grocery and non-food, with new ranges, increased coverage and re-launched websites all supporting the growth. The British Retail Consortium (BRC) and Google launched a quarterly report in April 2011 analysing the rapidly growing online retail sector and shopper behaviour. (http://www.brc.org.uk/). The BRC-Google Online Retail Monitor for Q1 2011 showed that total retail search volumes grew by 29% compared with the same quarter a year earlier. Mobile retail search traffic outpaced overall growth rising by 181% over the same period. Mobile searches accounted for 11% of total retail searches in the first quarter of 2011. The internet accounted for 3.9% of total grocery sales in 2010, increasing from the previous 8 3.3% share. The value of grocery shopping conducted over the internet is predicted to nearly double to 9.5bn in five years compared to its 2010 level of 4.8bn, according to research published by IGD in March 2011. Online shopping will represent 5.2% of the overall UK 9 grocery market by 2015, compared to 3.2% at the moment. The e-Retail Sales Index showed 10 that overall internet retail sales jumped by 19% to 31.5bn in the first six months of 2011. Improved websites, faster technology, more use of mobile technology and a strengthening retailer emphasis on the channel will rank among the key drivers. To succeed in the channel suppliers will need to engage proactively and invest the time now in what is a highly innovative and fast changing sector of the market.
Source: Kantar WorldPanel 2011
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Kantar Worldpanel IGD online shopping report 2011 IMRG Capgemini e-Retail Sales Index 2011
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PROMOTIONS
Promotions have become increasingly important to shoppers during the downturn as they seek value and attempt to manage inflation. As a result promotions have also become much more important for retailers as they try to increase their market share, protect sales volumes and build brand loyalty with consumers. Retailers regularly communicate their latest promotions in leaflets, on their websites and through above the line advertising, particularly in press and on TV. The chart below shows that nearly half of shoppers claim to be comparing prices more between different stores (48%), and looking out for promotions more before going shopping (47%). A similar number claim to be shopping around more to look for the best deals since the start of the year (46%), 11 up from 27% of shoppers who stated this in 2008.
Source: IGD ShopperTrack
Shoppers are using a range of in-store and online comparison tools to compare prices and promotions across different stores as they hunt for value. This is being encouraged by recent activity by the main supermarkets, including: Supermarket websites. Retrospective supermarket websites e.g. Asda Price Guarantee. Comparison websites mySupermarket.co.uk plus various non-food sites. Online discount vouchers and Mobile phone applications.
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IGD ShopperTrack, base: all main shoppers, fieldwork April 11
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PRIVATE LABEL TIERING VALUE VS PREMIUM

The economic downturn saw significant changes in consumer purchasing patterns. UK shoppers became significantly more value conscious in 2010/11 as spending came under increased pressure due to limited availability of credit, rising unemployment and high food inflation (5.0% September 2011). Private label quality perceptions have improved considerably over the last number of years. Almost eight in ten (79%) British shoppers believe that the quality of private label products has improved, with virtually nobody (1%) taking the opposing view. This is significantly more than the two thirds (66%) who shared this opinion three years ago, rising particularly among 65+ year olds. This is a very positive endorsement of the initiatives taken by many leading grocery retailers and private label manufacturers to extend and improve the private label 12 offer. While strengthening value credentials was important in the depths of the downturn, recently retailers have renewed focus on premium own label lines to reflect the improving economy. With predicted growth of 14% over 2010-2014 and only 4% of people planning to buy less own-label food once the economy recovers, it is vital that grocers continue to challenge brands in new areas and with new product launches to maintain the pace of the market. In 2011 a notable development has been the launch of Tescos first 'venture brands' providing the retailer with a private label alternative to premium own label products in categories where consumers are particularly drawn to brands. Products are characterised by a lack of Tesco branding, high quality ingredients, design and merchandising, and even their own brand websites. Product launches to date include Yoo yoghurts and ChokaBlok ice cream. UK Private Label Market The UK private label market is segmented into the following tiers: Economy/Value Standard Premium Premium Plus/ Super premium Health Organic Kids Designer These tiers are examined in more detail within the Private Label Structure section of each retailer profile in this report. Private Label Over the last few years, all the major UK retailers have made significant moves to strengthen their private label credentials: Tesco arguably the most developed private range of any of the UK retailers. The numbers are impressive, with around 8,000 SKUs (Stock Keeping Units) under the 'standard' Tesco brand alone. Then there are another 3,000 SKUs across the Value entry-level and Finest ranges. In 2010 Tesco launched a new healthy eating labelling system across its three health focussed ranges. In July 2011 Tesco launched a new Italian food brand called Parioli, marking the fourth launch in its line-up of venture brands that do not carry any references to the retailer. Asda bolstered its own value range by cutting the price of every single Smart Price product. Smart Price was a significant growth area for the retailer in 2009, growing 22% year-on-year. Asda re-launched its core private label range as Chosen by you in September 2010, including 500 new and over 1,000 reformulated products.
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IGD ShopperTrack, March 2011
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Sainsburys have extended the Basics range off the back of 50% year-on-year growth, mainly due to their Feed your Family for a Fiver promotion. During the past year more than 5,000 private label products are new or improved, as the company continues to invest in raising the quality of its food. Sainsburys re-launched its Freefrom range in 2009, Be Good to Yourself range in January 2010 and Taste the Difference range in September 2010, and launched a new entry level range of wine in May 2010, called Sainsburys House. In May 2011 Sainsburys launched its Feed your family for 50 campaign - which gives families week-long menus and tells them all the ingredients they will need for seven days. Morrisons In 2011 Morrisons announced the launch of its new M Kitchen Convenience range, has led to 11,000 new or improved products in Morrisons stores. The range consisting of 150 completely new lines including a bistro range and a diverse array of Pan-Asian and tapas-style dishes was launched early in October 2011. In 2010 Morrisons extended its range of Value lines from 300 SKUs to 450, resulting in year-onyear growth of 345%. In 2010, Morrisons also introduced a new range of healthy eating products called 'Wholefoods', thus expanding its overall private label offer. Morrisons relaunched its Eat Smart range in 2009/2010, and introduced a new range of healthy foods under the Wholefoods banner in July 2010. M&S In 2011 Marks & Spencer has introduced a 'step change in innovation' with 1,900 new lines launched, as well as a significant increase in product communication through advertising, promotions and in-store cafes. Waitrose launched its essential Waitrose range in March 2009. In 2011 the range now consists of 1,600 SKUs and was instrumental in maintaining the retailers performance over the tough economic period. Waitrose launched its Menu From range of ready meals in February 2010, following the successful introduction of essential Waitrose and the development of the Duchy Originals from Waitrose brand the previous year. In October 2010 Heston Blumenthal launched his Heston from Waitrose food range. Blumenthal created a Christmas pudding for Waitrose in 2010 containing a whole candied orange which quickly sold out. In July 2011 Waitrose unveiled its festive range which included a brining kit under the Heston range. The Co-operative - rebranded its healthy eating range to Healthier Choice between June and October 2010, completed its conversion to The Co-operative private label in all exSomerfield stores by October 2010, and introduced a new Eat In range of prepared meal solutions in September 2010. Premium IGD has defined the premium sector to include products and brands which appeal to consumers on aspirational ethical and quality grounds and have included the following in this segment: The organic market Fairtrade products Local and regionally sourced products Specialist and fine foods As mentioned, there has been a certain return to premium in recent months as consumers trade up. Retailers are conscious of the need to innovate as their private label offer can no longer be defined by competitive prices. The development of premium plus and super premium own label products by retailers has been a trend over the last few years, as demonstrated by Heston Blumenthals Heston from Waitrose food range which was launched in Waitrose in October 2010.
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Organic st Sales of organic products fell 5.9% to 1.73bn in the 52 weeks to January 1 2011 as shoppers opted for cheaper produce in the economic downturn, according to the Soil 13 Association. Despite fragile consumer confidence in the wider economy, the report shows positive signs of resilience and recovery for the organic sector overall. The biggest success stories were sales of organic beef (up 18%), organic baby food (up 10.3%) and organic textiles (up 7.8%) over the same 52 week period. The definitive guide to organic trade in the UK, the Organic Market Report shows that shoppers spent more than 33m a week on all things organic in 2010, and that 86% of households now buy organic products. Dairy products and fresh fruit and vegetables are the most popular categories, accounting for 30.5% and 23.2% of sales respectively. Although sales through multiple retailers fell by 7.7%, to 1.25bn in 2010, Waitrose and Marks & Spencer anticipate modest growth for 2011, while Tesco, Sainsburys, Morrisons and the Cooperative predict level sales year on year. Multiple retailers accounted for 72.3% of the 14 organic market in 2010.
ETHICAL & SUSTAINABLE ISSUES

Sustainability is still firmly part of the commercial agenda of every retailer in the UK and is also increasingly rising in the consumer agenda despite the current economic climate. The growing consumer interest in environmentally friendly and ethically sourced products is turning into a sizeable trend that retailers cannot ignore. Understanding shopper awareness and involvement with ethical issues and how these affect product choice in different markets has become essential to target specific segments of shoppers and develop successful products and services. Retailers seeking to differentiate on sustainability are increasingly engaging with their suppliers to share and develop best practice in this area. Plans to address sustainability issues can highlight short-, medium- and long-term priorities. Addressing the short term issues can result in quick wins in the form of cost savings, particularly appealing in the current economic environment. However it is the more challenging, long-term changes to business practices that are likely to make a greater impact. Many shoppers are very committed to becoming waste free. IGD research found that almost seven in ten shoppers want to become a zero waste household, with half of them already claiming to be recycling, composting or reusing all the food leftovers and packaging that they 15 can. Industry is also demonstrating a strong commitment to waste reduction. Phase 1 of the Courtauld Commitment, a responsibility deal aimed at improving resource efficiency and reducing the carbon and wider environmental impact of the grocery retail sector, has successfully reduced food waste by 270,000 tonnes per year, far exceeding the 155,000 16 tonne target. Despite this progress, big challenges remain. The total amount of packaging waste has not reduced, remaining at approximately 2.9 million tonnes per year. The proportion of shoppers that feel able to positively influence the environment through their grocery shopping decisions has increased considerably from 23% in 2009 to 42% in 2010, reversing the decline over the preceding two years. Likewise, more feel able to positively influence sustainable fishing and global warming concerns than two years ago, rising from 17% to 35%, and 11% to 22% respectively. 84% of shoppers are regularly recycling packaging, 77% regularly take reusable bags to the supermarket, and 67% are committed to reducing their food waste. A quarter (26%) of shoppers identify local products as having the single, most positive impact on the environment, almost three times as many as any other product type. This rises to 58% when including all those who regard local products as having 17 a significantly positive impact on the environment.
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Namnews April 2011 http://www.soilassociation.org/Businesses/Marketinformation/tabid/116/Default.aspx IGDs Shopping Trends for the Future Learning from Trailblazers, Sept 2011 16 WRAP (Waste and resources action programme), 23 Sep 2010 17 IGD ShopperTrack Hot Topic Private Label and Brands April 2011
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This is followed by five other product types, namely: products with sustainably sourced paper, those not transported by air, those that help reduce shoppers energy use, sustainably sourced fish, and products that help protect wildlife, the countryside or habitats. Following increased prominence over recent years, just over a third (36%) of shoppers regard Rainforest Alliance certified products as making a significant contribution towards environmental sustainability. Shoppers appear particularly attracted to environmentally friendly products that involve a new packaging format with additional functional benefits, include multiple environmental improvements, or demonstrate how they have gone the extra mile in tackling environmental concerns. The subsequent individual retailer sections in this report outline the current ethical trading strategies of each retailer and the different approaches being taken towards sustainability issues.
REGIONAL/LOCAL SOURCING
As consumers are continuing to take more of an interest in what they are eating and product origin, retailers are using this as a point of differentiation between themselves and their competitors. Most leading retailers now have regional/local sourcing teams on a region-byregion basis. Following four years of significant growth, the penetration of shoppers specifically buying locally sourced foods has plateaued. Tracking ethical purchasing
Source: IGD ShopperTrack Shopper Trends 2011
Over recent years, the economic downturn appeared to accelerate the trend for locally sourced food and drinks, as shoppers sought to support the economy through their purchase decisions. The nature of this type of food patriotism appears to have now evolved, as revealed by the main reasons shoppers give for buying locally sourced products.
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Tracking reasons to buy local food top six
Source: IGD ShopperTrack Shopper Trends 2011
Shoppers are still motivated to support local producers as they were a year ago, however, the desire to buy locally sourced products in order to support local retailers or keep jobs in the area has waned somewhat. The distinction between local producers and retailers may reflect perceptions regarding the size of the business rather than the stage within the supply chain. Local retail franchise outlets may not always be perceived as local businesses, whereas farmers and local producers are often perceived as sole traders or small local firms. The public have been braced for dramatic increases in unemployment since the recession began. While unemployment has increased, it has not yet reached levels originally anticipated, at least within the private sector. The key initiatives in this area are outlined below by retailer:
Tesco has a long term promise to stock more local lines than any other retailer. Tesco has five dedicated regional buying offices throughout the UK. In 2010 sales of local products increased to 1bn, up from 850m the year before.
Sainsbury's stated aim is to increase the number of local/regional products available in its stores and has established local and regional sourcing teams dedicated to finding these products and bringing them to market. In some cases, these products will be truly "local", sold in a small cluster of stores close to the point of origin. However in other cases, the products may be "locally renowned" products, but with a much wider, even nationwide distribution. Sainsbury's has also launched "Supply Something New." The scheme is run in partnership with Food From Britain, and involves top representatives from the supermarket taking to the road every two months in a search for new, innovative, large and small UK suppliers.
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Asda has a supplier hub network which provides an opportunity for small suppliers to supply the retailer outside its UK-wide depot infrastructure. Asda sources over 7,000 lines, including world foods, from over 500 specialist suppliers, with a goal of developing a catalogue of 15,000 local lines.
Morrisons has over 230 locally sourced fresh and frozen products in stores in Wales and over 500 dedicated Scottish products in their Scottish stores. Morrisons supports a number of local suppliers from other regions ranging from Saffron Cakes and Buns in Cornwall, Onion and Chive cheese in Northumbria to Stapleton Farm yoghurts in the South West.
Waitrose has publicised the fact that it seeks to source goods from Britain wherever possible and actively champions the interests of British suppliers. This has been taken a step further by employing regional buyers, tasked with finding smaller suppliers. Waitrose run meet the buyer road-shows for producers to present their proposals and successful products receive a listing for a cluster of local stores.
The Co-operative Group has a strong commitment to sourcing goods from British suppliers and British farmers especially. In November 2010, The Cooperative announced that it would move to a dedicated UK milk supply scheme from August 2011 when its existing contracts expire. Over the coming months, the retailer will be finalising plans with milk processors which will result in up to 350 British dairy farmers receiving a premium for supplying around 360m litres of milk to more than 4,000 Co-operative stores.
COMPETITION COMMISSION UPDATE

The Competition Commission is an independent public body which conducts in-depth inquiries into mergers, markets and the regulation of the major regulated industries. In May 2006 the Office of Fair Trading (OFT) confirmed its earlier draft decision to instruct the Competition Commission (CC) to carry out an investigation of the UKs Grocery Retailing Market. This has been the third investigation in this sector within the last 8 years. The investigation broadly focused on: The planning system. Land holding policies of the supermarkets. The buying power of the biggest supermarkets. Below cost selling and price competition.
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th
The groceries final report was published on 30 April 2008. The recommendations made in 18 the final report include: A recommendation for the inclusion of a competition test in planning decisions on larger grocery stores. Action to prevent land agreements which can restrict entry by competitors. The creation of a new strengthened and extended Groceries Supply Code of Practice. A recommendation to establish an Independent Ombudsman to oversee and enforce the Code. The Commission published a stronger code of practice in August 2009 aimed at better protecting suppliers. The new code applies to all grocery retailers with annual turnover in excess of 1bn and prohibits them from making retrospective changes to terms and conditions of supply. It will also require them to enter into binding arbitration to resolve dispute with suppliers. While the heads of the UKs major supermarkets supported proposals to improve local competition and improve relationships between retailers and suppliers, they hit out at the proposed introduction of an ombudsman to oversee and enforce the Groceries Supply Code of Practice. In August 2010, the Department for Business published plans to establish a Groceries Code Adjudicator (GCA) rather than the much disputed ombudsman. The GCA will have the power to receive complaints about the way supermarkets interact with their primary suppliers from anyone in the supply chain at home or overseas, and deal with them anonymously. This includes farmers who may not directly supply the large supermarkets. A government statement said although non-governmental organisations, trade associations and other organisations cannot lodge complaints directly, they still have a useful role to play in 19 offering advice and assistance to their stakeholders. The Grocery Codes Adjudicator (GCA) in brief The adjudicator will be introduced in 2012. The offices will be at the OFT but it will be entirely independent fuelling retailer accusations it is a quango. It will be funded by the 10 UK grocers with a turnover of more than 1bn. Government estimates the regulator will cost 1.2m a year 120,000 per retailer although costs will vary depending on the complaint and investigation numbers. It will be able to receive complaints from all primary suppliers in the UK supply chain or overseas. This includes farmers not directly supplying supermarkets even though these contracts are not covered by GSCOP. In July 2011 a parliamentary committee made a statement saying that they felt that the proposed supermarket adjudicator should be given the power to fine the supermarket giants for unfair treatment of suppliers. The Government is committed to introducing legislation to create an adjudicator to investigate alleged breaches of the Groceries Supply Code of Practice (GSCOP), which came into force last year. But the only sanction in the watchdog's armoury will initially be the power to require stores to publish the results of his investigations. Only if this proves an insufficient deterrent will ministers consider granting the adjudicator the power to impose fines. The report by the cross-party released by the Business, Innovation and Skills (BIS) committee of the House of Commons said financial penalties should be available from day one. The BIS committee also said the bill to empower the adjudicator should also include provision for trade associations and other third parties such as farmers to put forward complaints for investigation, because individual suppliers may fear losing contracts if identified as whistleblowers.
18 19
http://www.competition-commission.org.uk/ http://www.kamcity.com/namnews/asp/newsarticle.asp?newsid=55162
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1ST TIER RETAILER PROFILES: October 2011
TESCO
Tesco Head Office (UK & International), New Tesco House, Delamare Road, Cheshunt, Waltham Cross, Hertfordshire. EN8 9SL Tel: 0044 (0) 1992 632 222 www.tesco.com
ORGANISATIONAL OVERVIEW
Domestic Market: United Kingdom No of Formats: 10 No. of Stores: 2,715 (UK) Turnover: GBP 61,610.95m Operating Countries: 14 Sales area: 9,620,492 sq.m
Tescos Mission Statement Creating value for customers, to earn their lifetime loyalty. Corporate Strategy Maintain a strong UK core business Become as strong in non-food as in food Extend operations into retailing services Develop Tescos international operation To put the community at the heart of what it does 2011 Key Highlights: Tesco has the largest market share in the UK grocery retail market. In October 2011, 20 their market share stood at 30.6%. Despite difficult market conditions in its core market, Tesco's progress over the year has been strong, with trading profits up 7.8% to 3.7bn. UK business delivered a solid overall performance but growth fell short of corporate expectations. In part this can be explained by the rising cost of fuel deterring shoppers from visiting out-of-town Extra stores and soft demand for discretionary non-food items. Record results were achieved in rest of Europe, with the strongest growth in sales, profits and margins for several years. The performance at its US concern Fresh & Easy is improving, with trading picking up markedly through the year, and Tesco now broadly satisfied with the format. However losses increased, reflecting costs associated with the acquisition of two suppliers. Total global space increased by 8.4 m sq ft to 103.6m sq ft, a net gain of 8.8%, with more space added in Asia than in any other region. Store numbers increased by 544 to 5,380, including 22 new Extras in the UK. Strong growth in online sales. In UK, 15% growth was reported for grocery and a 30% rise in sales at Tesco Direct.
20
Kantar WorldPanel Till Roll data October 2011
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A growing focus on services, with solid growth achieved in Telecoms, lifted by a 24% rise in Tesco Mobile subscribers. Growth from both pre-pay and contract customers. Tesco Venture Brands. Tesco has been developing its strategy with the launch of its first 'venture brands'; private label products designed to compete with premium brands but which do not feature any direct links to Tesco on their packaging. In 2011 Tesco is focusing on delivering intrinsic product quality through benchmarking its products against the best in market, investing 35m in food quality, improving 500 lines, launching 2000 new lines, launching 20 exclusive Tesco brands, investing in NPD and improving team expertise. In September 2011 Tesco announced details of a 500m investment in the Big Price Drop which will see it cutting the price of thousands of essential items. 2010/11 Key Challenges: Maintaining focus on specific markets with increased geographical spread. Low consumer confidence. Lower consumer disposable income. Record levels of promotions. Higher fuel prices. Increasing inflation. Decreasing brand loyalty.
Organisational Structure
In June 2010, Sir Terry Leahy announced that he was retiring as CEO in March 2011. He was replaced by Philip Clarke who was previously responsible for the Groups international operations. Richard Brasher assumed the new role of CEO of UK and Republic of Ireland. Richards key priorities include: Driving like-for-like sales in a low growth and competitive environment. Ensuring a strong pipeline of new space (Tesco plans to open 2.3m sq ft of space in 2010/11 in the UK and Ireland). Continued development of Tescos strong multi-format strategy from Express to Extra as well as the potential roll out of the Home-plus non-food format. Use of Club-card as a differentiator in the market. In March 2011, additional changes were made to the board: Tim Mason, CEO of the group's US Fresh and Easy business will become Tesco Deputy Chief Executive, based in America with responsibilities including 'branding, our values and climate change' Commercial Director Richard Brasher will assume the role of Chief Executive of the UK business, a newly created position, also taking responsibility for the Republic of Ireland. David Potts will take responsibility for the growing Asian division as CEO of Asia.
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Key Financial Indicators

Tesco's full year results for the 52 weeks ended 26th February 2011 revealed a strong overall performance across the group, with revenue (ex-VAT, ex IFRIC13) increasing by 7.2% to 61.7bn. Trading profit increased by 7.8% to 3.7bn with group profit before tax growing 11.3% to 3.5bn.The key highlights from the results were: 8.4m sq ft of space was opened over the year, with 72% outside the UK. UK sales growth was ahead of industry averages at 7.19%. Market share gains were made with encouraging like for like trends seen internationally.
For the 26 weeks to 27 August 2011, group turnover rose by 7.8% to 31.8bn (+7.3% excl. fuel) with pre-tax profits up 12.1% to 1.9bn. Underlying trading profit was up 8.2% (+3.7% on a reported basis). However, as expected, performance in its home market remained weak with UK turnover up just 5.8% to 21.2bn and like-for-like sales down 0.6% (excl. VAT). This was slightly less than the decline predicted by analysts, although the chains performance weakened during the six month period with the fall in like-for-like sales accelerating to 0.7% in the second quarter having fallen 0.4% in first. UK trading profit was up 4.5% to 1.27bn, impacted by the effects of its sale and leaseback programme. Trading margin slipped 7 base points to 6.01%.
STRATEGY
Company Strategy
Tesco is the UKs largest grocery retailer, operating in the UK and internationally through a range of different store formats. Tesco has long based its development on a simple four part strategy, which has been in place since 1997 and has formed the bedrock of much of the retailer's success over recent years. In 2006, Tesco added a fifth pillar - Community. In April 2011, Group CEO Philip Clarke outlined six new immediate corporate objectives for Tesco, which build on Tesco's long standing five pillars of growth. Keeping the UK strong and growing. To be outstanding internationally not just successful. To become a multi-channel retailer. To deliver on the potential of retailing. Applying group skill and scale. To deliver a higher return on capital employed.
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Maintain Strong UK Core Business Tesco has reaffirmed its commitment to driving its UK business, worth over 40bn in 2010/11, and still delivering 66% of sales and 68% of trading profits. Tescos core UK business accounted for 68% of group sales and 68% of group trading profit in the 2010/11 financial year. Tesco has added significantly to its UK store estate over recent years, and new store development remains a priority. Another priority has been the expansion of the Tesco Extra hypermarket format. The development of these larger stores has provided a strong platform for Tesco to grow its non-food sales, but has also provided scope for Tesco to offer fuller food ranges in more stores. Tesco Extra now accounts for c. 42% of total UK selling space. The retailer has also focused on developing its smaller format stores with the expansion of Tesco Express convenience stores a recent priority. Tesco has up-weighted its focus on Express new store development, with 180 new Express stores planned for the current year. Total Express store count reached 1,310 by February 2011. In recent times, Tesco has introduced more tailoring to individual store offers, to reflect local demographics. This has come in tandem with a thrust towards developing more local sourcing, and this remains an important development area. In response to the shift in consumer attitudes as shoppers have tightened their belts, Tesco has made a series of adjustments to its offer to reflect changing consumer priorities, including a new promotional focus, price reduction initiatives, launching of "discount brands" range and the re-launch of Tesco's Club-card loyalty scheme. This is very much in line with the Tesco ethos of following the customer. A key tool in Tesco's consumer armory is Club-card, Tesco's loyalty card scheme which provides insight into customer shopping patterns and help shape product and range development strategies. More information on Club-card, and is provided in the Direct Marketing section of this profile. International Growth Tesco now operates more space outside the UK than in its domestic market. At February 2010, 64% of Tesco's total sales area was outside the UK. 8.5m of the 11.3m sq ft of new space planned for 2010/11 will be outside the UK, and as a result international stores will account for 66% of total space by February 2011. Central Europe is the main focus of Tescos international activity and Poland, its largest market in the region. Having built up a nationwide network of hypermarkets, Tesco is now focusing more on opening up new catchments in the country with smaller formats. Having introduced Club-card in 2009, Tesco is now preparing for a dotcom launch in Warsaw in early 2012. A dotcom launch is also in the offing in the Czech Republic with the service set to debut in Prague in the next few months. As in Poland, Tesco is actively pursuing a multi-format strategy; its presence in the convenience market was greatly strengthened in January 2011 when it announced the acquisition of 128 Zabka and Koruna outlets. Perhaps Tescos greatest opportunity for long term growth in Europe lies in Turkey, where it has been steadily increasing its estate of Kipa hypermarkets. A large population and economic liberalisation makes Turkey a market with considerable potential. Having invested in modern distribution centres, Tesco has a solid foundation for expansion in the country and plans to increase its space by almost a quarter over 2011 and 2012. Over half of Tescos international revenues are generated in Asia, with the retailers presence concentrated in the most dynamic South and East Asian economies. Tescos most significant operation is in South Korea where it now achieves annual turnover of 5.0bn through a combination of formats. Within the next year Tesco plans a substantial non-food online launch, its first outside the UK, which will build on the proven success of its online groceries service and extend the reach of the comprehensive non-food offer of its hypermarkets.
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One of Tescos highest profile international operations is Fresh & Easy, its US start up which in July 2011 was operating 164 stores in the western United States. Having invested substantial resources into launching and building the business, Tesco is eager to realise a return on its investment. In 2010/11 Fresh & Easys like-for-like sales grew robustly as the format grew in popularity, but losses increased, reflecting the purchase of two fresh food suppliers. Tesco believes it can breakeven with only 300 stores instead of the 400 previously anticipated. With the format receiving positive feedback from customers and 50 further stores set to open this year, Tesco is confident of reaching breakeven before the end of 2012/13.
Source: IGD Research *Sales excluding VAT and impact of IFRIC 13 (customer loyalty schemes)
Non-Food Tescos long-term goal is to be as strong in non-food as it is in food. This strategy is being developed across a number of fronts, but the key vehicle for selling non-food at present is through its stores, the Extra hypermarket format in particular, alongside its dedicated Home-plus non-food stores. Catalogue and online activities represent the other channels through which Tesco sells non-food. Retailing Services Tescos strategy of "following the customer" into new areas of expenditure allows the company to sell more products to existing customers as well as gaining new customers. The main services which fall under this division are: Tesco.com and Tesco Direct Tesco Bank Tesco Telecoms Dunnhumby
21
Tesco's Retailing Services customers are also its most valuable and most loyal . Customers who use two retailing services spend four times as much in stores as those who do not use any services. Customers with a Tesco credit card spend c.30% more with Tesco than similar customers who do not have a Tesco credit card, and customers with two retailing services are 25% less likely to lapse over a 12-month period than similar customers without services.
21
IGD, Tesco Retail Profile. 20.04.2011
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To put the community at the heart of what we do The adoption of a fifth pillar for Tesco is significant and reinforces the importance that the retailer is placing on developing in this area. This move was announced in 2007 and builds on a number of well-established practices within Tesco in this area. These include Sir Terrys 10-point community plan introduced in 2006 and, more recently, the introduction of programmes covering climate change, carbon reduction and packaging reduction. Recent progress has been made in developing "Environmental Stores". A number of these stores in different formats have been developed including the world's first zero carbon supermarket in Ramsey, Cambridgeshire. Other recent initiatives include the launch of a Sustainable Consumption Institute with The University of Manchester, together with a programme to introduce wind turbines on around 30 Tesco sites across the UK. Property In recent years, there has been a growing willingness among all UK grocery retailers to release capital from property. This is linked to the premium that potential investors have been attaching to UK grocery retailers off the back of their property assets. In December 2009 British Land initiated its fifth joint venture with Tesco when it acquired Segro's stake in two shopping centres, Surrey Quays in London and Clifton Moor in Yorkshire, both of which have Tesco as the anchor tenant. Segro invested in the centres 20 years ago in a joint venture with Tesco. Tesco laid out plans in its 2010 annual report to plough 1.6bn of capital into the UK economy through new store openings. Tesco added 188 new stores to its portfolio in 2010, expanding its estate by 6.3%. Nearly all of Tescos growth came from its convenience estate, which grew by 10% in the past 22 year. As of May 2011 Tesco had opened a further 50 stores in the UK.
Trading Strategy
Tesco's focus is on delivering value and simplicity for customers, and this is reflected across how the retailer does business. The retailer's view is that if customers like what it offers, they are more likely to come back and shop with Tesco again. This translates into a key ethos of Tesco, namely "No-one tries harder for customers." Linked to this is a separate ambition for staff to "Treat people as we like to be treated". Tesco's focus on continual improvement is epitomised in the retailer's "Every little helps" strategy: Every Little Helps - key elements Five main elements: clear aisles, being able to get what they want, good The shopping trip prices, no queues and great staff. Constantly measures progress against these goals. Four components: to be treated with respect, to have a manager who A great place to work helps them, to have an interesting job and to have an opportunity to get on. Focus on delivering consistently every day, trying to get it right first The way we work time, making jobs easier to do, ensuring individuals appreciate how vital their jobs are and having a continual focus on saving time and money. EDLP Plus Tesco uses its scale advantages to pursue a volume-led strategy in which profit from sales is rolled back into the business in order to reduce operating costs, improve the offer to customers and cut prices. Tesco has demonstrated an ability to continuously drive cost out of its business by seeking to carry out everyday retailing activities "better, simpler and cheaper" with its "stepchange" programme a key part of this. Tesco has developed the scale and the systems required to give it real traction here, and this continues to build.
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IGD, Tesco raises the bar internationally 10.05.11
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Category Teams Category teams, each headed by a Category Director, are responsible for the execution of commercial strategy at an operational level. Category directors typically manage four streams of strategy within their areas including customer, NPD, technical and buying. Tesco has sought to engage suppliers in more meaningful relationships as the business develops its approach to the management of categories. It seeks to work with suppliers that: Understand the Tesco strategy Are innovative and receptive to change, responding quickly to consumer trends Are willing to build long-term relationships Meet all necessary technical requirements When dealing with large suppliers, Tesco encourages interaction with suppliers through "business units" - a multifunctional team that combines a variety of resources from both companies. Business units exist on a number of levels, depending on the size and scale of the category and the capabilities and approach of the supplier. These include: Category Business Unit - A good operational understanding exists between the supplier and retailer, facilitating a joint planning process that helps to develop the category. Strategic Business Unit - Both businesses share knowledge, participate in collaborative business planning and forecasting and enjoy an active trading relationship across several categories. This level of interaction requires a significant amount of commitment and resource from both parties. Commercial Team The commercial team follows a strategy that takes a broad, inclusive approach to customer requirements, embracing the following principles: 1. 2. 3. 4. To be the right price To lead on range To lead on quality To drive innovation
1. To Be the Right Price Tesco has long had strong value credentials, which it supports through a combination of EDLP and promotions. Price Check is a key part of this, with a commitment to be cheaper than Asda or refund the difference. Over 10,000 price checks are conducted on a weekly basis and buyers are able to react immediately to any competitor pricing activity on both a local and national level. Tescos and their key rivals prices can be viewed at www.tesco.com/todayattesco/pricecheck and at mysupermarket.co.uk. Tesco launched a double the difference price guarantee in 2011 in a bid to prove it was cheaper than Asda after it promised to be 10% cheaper than its rivals. Tesco responded by promising shoppers that it if they found exactly the same item at a rival supermarket it would pay out twice the difference, in the form of vouchers. However in May 2011 Tesco cut back its offer to refund double the difference on products bought for less in Asda, blaming savvy shoppers. The supermarket group said that it would now only refund the difference in price - rather than double the difference as part of its Price Check scheme. 2. To Lead on Range Tesco aims to meet the everyday needs of all customers. The retailer's appeal is broad with well constructed private label tiering giving the retailer wide appeal. Current priorities include more closely matching store format to the characteristics of the local population, for instance with relevant ethnic food ranges and greater investment in premium ranges. Tesco offer a range of price and quality alternatives in every major food and grocery category through the Value, Tesco, Finest and the new Discounter ranges. Tescos research indicates that customers view this broad ranging as one of its core strengths.
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TESCO
During the economic downturn, Tesco made a number of changes to its range and positioning, including the introduction of the discount brand range and the more prominent positioning of Tesco value products within store. However, as the economic environment eases slightly in 2011/2012 Tesco plans on launching +1000 new lines , significantly improve +500 lines and launching 20 Tesco exclusive brands. In 2011 Tesco launched its first venture brands: private label products designed to compete with premium brands but which do not feature any direct links to Tesco on their packaging. 3. To Lead on Quality Tesco aims to offer better value for money than equivalent competitor private label or branded products by offering lower prices or superior quality. There will be greater focus going forward on enhancing product quality at the premium end of the private label spectrum. For example: Value ranges - Fit for purpose products equal to, or lower in price, than the cheapest available at rivals' stores. Tesco brand - Market-leading quality priced cheaper than the market leader or any price rival achieving the same quality levels. Finest - Positioned as the best quality products available in supermarkets at comparable prices. For example, in March 2011, Tesco announced a roll out of a new private label range of yogurts under its venture brands initiative. The products have been launched under the Yoo brand name and will cover 21 products with sub-branding of 'fruity thing', 'tasty thing', 'light thing' and 'yummy thing'. The packaging of these products highlights their British credentials, with the yoghurts made from 100% British milk and Tesco stating that they will be priced at 20% cheaper than other popular yoghurt brands. 4. To Drive Innovation Innovation will be a higher priority for Tesco going forward, with greater emphasis on new product development and the harnessing new technological platforms to increase digital presence. There are a number of additional trading priorities that suppliers should be aware of: Fresh produce (with emphasis on quality and appearance of fruit and vegetables). Getting the best out of new products. Delivering great seasonal events. Strengthening "pillar" brands - (The established Value, Healthy Living and Finest ranges, and niche ranges such as Whole-foods and Organics). Serving the local community better (by delivering more local and ethnic foods in-store). Tesco has signalled that it is particularly keen to work with suppliers that: Understand the Tesco strategy, and recognise its multi-format and multi-channel focus in how they manage their business with Tesco. Are innovative and receptive to change, responding quickly to consumer trends through use of Dunnhumby insights as well as wider category expertise. Are willing to build long-term relationships (with Joint Business Plans a growing priority for Tesco). Meet all necessary technical requirements.
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In-store Ranging and Merchandising Optimising ranges will be an increased focus for Tesco going forward as it seeks to maximise category opportunities and to enhance individual store performances, Tesco is more closely tailoring ranges according to local catchment characteristics: Tesco is increasingly able to deliver store-specific ranging across its stores. The planogram for each store is driven by its individual sales, specific space, product cubing and "level run down" criteria (i.e. merchandising products in such a way as to equalise the rate of shelf-stock run down - therefore making replenishment of any given category more efficient, as the entire category will, theoretically need to be replenished at the same time). Having placed greater emphasis on its value offer to help customers cope with challenging economic times (with, for instance, the more prominent positioning of the Tesco Value range, introduction of Discount brands and stronger promotional agenda), Tesco will focus more on nurturing demand for premium products and driving innovation. Tesco recognises the opportunity for ethnic ranges and has appointed ranging managers to ensure that ranges of local stores better meet the demand of the local consumers.
Pricing & Promotions Strategy

As shoppers have become more cautious in their spending the role of pricing and promotions has risen fast across the sector. Tesco has reacted with a stronger focus on price, price communication, and rounded price points evident in-store. Similarly there has been a stronger emphasis on promotions with promoted products increasingly contributing to sales. The shift in type of promotional offer has been towards price reduction rather than multi-buy deals. However, Tesco has also moved into new promotional mechanics where these tie in with prevailing consumer sentiment, for instance with a variety of meal deals being introduced. Pricing Strategy Tesco is essentially an EDLP+ operator (referred to by Tesco as value-led), supporting an Every Day Low Price proposition with a programme of promotional activity. Typically, the EDLP approach is used for staple grocery lines whilst promotions are used for impulse categories, product launches and one-off (or "wow") lines. Tesco's uses its scale advantages to pursue a volume-led strategy in which profit from sales is rolled back into the business in order to reduce operating costs, improve the offer to customers and cut prices. This in turn generates increased sales and profits allowing a further cycle of investment. Tesco has demonstrated an ability to continuously drive cost out of its business by seeking to improve its everyday retailing activities with its "step-change" programme a key part of this. The savings generated from this programme have multiplied over time to reach 550m in the UK in 2010/11, and are crucial to Tesco's ability to maintain margins while still competing strongly on price. Since the onset of the global financial crisis, Tesco has strengthened its value focus with a sharper price message. Initiatives such as the introduction of 'discount brands', more varied promotions; greater use of events and the new price match guarantee have helped sharpen Tesco's price position. In September 2011 Tesco announced details of price offensive aimed at revitalising its UK business. The group said it is investing more than 500m in the Big Price Drop which will see it cutting the price of thousands of essential items - from milk to pasta, fresh fruit and vegetables and simplifying promotions, whilst reducing the number of multi-buys, particularly in fresh foods.
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UK Chief Executive Richard Brasher said it was the biggest investment he had made in lowering prices in 25 years at the business. To fund the move Tesco will end the practice, introduced two years ago, of offering customers double Club-card points. It will revert, towards the end of October, to one Club-card point for every 1 spent from two points for every 1 spent, a move that Nomura, joint broker to Tesco, estimated would free up more than 300m. Promotion Strategy Tesco customers prefer simple offers and as a result current promotions are focused on four key mechanics: 1. 2. 3. 4. BOGOF X for Y Price cuts with a consistent message Extra free
Source: Tesco Trade Briefing Presentation, May 2011
In line with the broader sector, there has been a stronger emphasis on promotions, and in turn the proportion of sales that products on promotion contribute has also increased. A notable recent shift has been more focus on price reductions (including round price points) rather than multi-buy deals. New promotional mechanics have been developed, for instance with a variety of meal deals being introduced. Indeed, Tesco has pushed ahead strongly here in recent months with wider use of Buy One Get Two Free deals and better than half price offers designed to attract shopper attention and drive value credentials. Tesco is also keen to use Club-card more strongly as a promotional driver. Double Club-card points is being complemented with offers such as extra points on certain products, or wider initiatives such as the periodic Big Club-card Voucher Exchange, making Clubcard points worth more when spent on specified categories (e.g. beauty, clothing or garden products in Spring 2011). In February 2011 Tesco launched a new 200m price campaign with price reductions on 1,000 everyday items (brands and own label products) with a promise to pay double the difference if the same items could be found cheaper at Asda. Soon after the launch of the offer websites, particularly the MoneySavingExpert.com forums were full of consumers informing fellow shoppers about which items were cheaper in which store, spreading the news via Facebook and Twitter. Tesco has since refined the offer to close loopholes and this remains an important tool through which Tesco demonstrates its price competitiveness.
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Going forward Tescos promotional activity will be designed to encourage shopper loyalty. This activity will include but is not limited to round pound pricing, meal deals, Club-card related promotions and events such as foyer killer deals.
Private Label Strategy

Tesco has an extremely strong private label strategy stretching from value, through the core Tesco brand to Finest. In September 2008, a fourth tier was added with the introduction of Discount Brands, which sits between Value and the core Tesco brand. The private label structure is being rolled out to non-food categories, with the core Tesco brand and Value brand increasingly in evidence across the non-food product portfolio and even in place across services, for example in Tesco's broadband, mobile phone tariff and car insurance structure. Tesco also operates a range of niche brands targeting specific customer groups or demands. Key lines include Organics, Healthy Living, Kids, Free From and Healthier Choices in food together with the clothing sub-brands F&F and Cherokee. Having expanded and promoted its value offering during the downturn, Tesco has now signalled that it wants to focus more on developing its premium own label and intends to invest in quality more going forward.
Tesco Value The Tesco Value range was launched in 1993, and now consists of more than 1,200 lines .Value lines are benchmarked against the cheapest branded competitor in terms of quality and the cheapest supermarket or discounter in terms of price. About 75% of customers buy into the Value range.
Discount Brands at Tesco In September 2008, Tesco launched a new own label tier in response to strong performance in the discount market, with Aldi and Lidl in particular showing impressive double-digit growth. The launch was accompanied by extensive POS in-store; highlighting Tesco as "Britain's Biggest Discounter", while shelf-edge labelling focused on two key messages: "discounter price, Tesco quality" and "discount brands". On average, the discounter range is sold at 23% below Tesco Standard price and around twice the relative price of the Value Range. In the past two years Tesco has successfully used its discounter brand to stem the tide of buyers moving to discounters as a result of the recession.
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Tesco Brand The standard Tesco brand has an extensive range comprising more than 8,000 lines. Product specifications are positioned to achieve market leading quality at a price lower than the market leader. The brand is positioned to sit between Tescos Value and Finest offers in the multi-tier approach, and slightly above the discounter range.
Tesco Finest Finest was launched on a nationwide basis in 1998. With cash-strapped consumers dining in more, its Finest range has been one of Tescos strongest performers with sales up 6.3% in 2010, outpacing growth in other areas of its food range. Its Finest and Value are now the two largest food brands in the UK bigger than Coca-Cola each with sales of 1.1bn per year.
Tesco Healthy Living Tesco Healthy Living is a lifestyle oriented brand, comprising over 400 products that are typically low in sodium and fat. The range includes products with added health benefits such as those which offer at least two nutritional benefits such as being a good source of Omega-3, providing wholegrain or one of the recommended five portions of fruit and vegetables.
Additionally a new Light Choices sub-brand was launched at the same time, targeted at shoppers seeking to lose weight, to offer products which meet strict criteria for sugar, saturates, salt and calories and are either less than 3% fat or half the fat of a comparable product.
Two further healthier ranges in the Tesco portfolio are Free From and Wholefoods. Tesco holds a 40% share of the free-from food market which aims to serve the needs of customers with food allergies. There are around 150 products in Tescos Free From range.
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The Wholefoods range comprises natural snack and cupboard lines, including nuts and pulses.
Tesco Kids The Kids range has been in operation since 2002 and comprises approximately 40 products designed for children between the age of 5 and 10. The range is positioned to help deliver the nutritional requirements of children, specifically in the areas of fibre, wholegrain and five-a-day. As such, the range covers a variety of products such as fruit, dairy products and breakfast cereals. The range also stretches across non-food to include selected health & beauty products.
Organics Tesco has traditionally had eight specific areas in store where consumers can purchase organic products: produce, dairy, bakery, meat, frozen, ambient, baby and BWS. However, as the organic category has become more widespread and achieved greater consumer penetration, organic products have become increasingly commonplace across the store. These products are integrated into product categories, rather than merchandised together as an organics section. The range consists of approximately 1,600 SKUs. City Kitchen
In July 2009, Tesco began a trial introduction of a new ready meal range into a number of Express convenience stores. The range is aimed at providing a healthy alternative for timepressed shoppers, and positioned more towards the premium end of the market. The new range, called 'City Kitchen' contains six different meals, including Chorizo Paella and King Prawn Linguine, aimed at the premium end of the market.
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Venture brands In 2011 a notable development has been the introduction of so called venture brands providing Tesco with a private label alternative to premium own label products in categories where consumers are particularly drawn to brands. Product launches to date include Yoo yoghurts, ChokaBlok ice cream and Lathams and Nutricat pet food. Products are characterised by a lack of Tesco branding, high quality ingredients, design and merchandising, and even their own brand websites. With multilingual packaging, venture brands have potential to be introduced to all Tesco markets, developed as global brands in a similar manner to F&F and Technika. In addition to the above ranges, Tesco stocks a range of own-label Fairtrade products including fruit. The Fairtrade range now includes over 60 products.
Tesco launched new labelling in August 2010 across hundreds of its private label products which will make it easier for its customers to choose healthy products from its product ranges. In this new initiative, Tesco is to introduce a simple roundel label to communicate health messages, such as: 'A good source of fibre'; '1 of 5 a day'; 'Low salt'; or 'Contains wholegrain'. The new circular symbols will be silver or black on Tesco Finest range, green on Tesco Standard and blue on the retailer's Value ranges. This new label will be extended to over 700 of Tesco's private label products.
MARKETING & ADVERTISING OVERVIEW Customer Profile

In line with their mainstream market position, Tescos shopper spend profile is close to the average for the total UK market. There is a slight trend towards upper socio-economic bands, yet a broad appeal across different social classes is clearly still retained. Tesco strives to achieve this wide appeal through the innovative nature of their ranges whilst also maintaining a strong emphasis on value for money and lifetime loyalty through tools such as their Every Little Helps marketing and the Tesco Club-cards. There is more evidence of the breadth of Tescos customer base in the age profile of customers which again closely matches the total market. There is however a skew towards younger customers which could be because of the appeal of Tescos price position to students and young families, and the greater readiness of the younger age brackets to shop in larger superstore and hypermarket formats. A slight bias exists among Tesco consumers towards households with children.
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Along with the popularity of Tesco amongst young families with children, Tescos household size profile shows a definite skew towards larger households. However, Tesco still scores well amongst single and two-person households. Popularity with these groups will have been aided by the roll-out of the Tesco convenience formats. The average spend per trip of a Tesco customer is the lowest amongst the Top 4 UK retailers. The main reason for this is likely to be the emphasis Tesco has placed in recent years on the expansion of its convenience formats, which is bringing down the overall average. Customer frequency of purchase in Tesco stores remains well above the average for the Top 4 UK grocery retailers, again as a result of Tescos success in the convenience sector, which caters towards smaller yet more frequent transactions. Over two-thirds (69%) of UK households visit a Tesco store within a four week period. The average score on this measure across the Top 4 UK grocery retailers is 44.1%.
Marketing & Advertising Strategy

Tescos marketing strategy supports the company mission of increasing market share by winning the lifetime loyalty of customers. Tesco markets itself as the consumers champion, an approach expressed in the long-established slogan Every Little Helps. A wide range of programmes help support this, including initiatives designed to improve the customer shopping experience such as the one-in-front strategy, where Tesco aims to open new till points where customers find they are in a queue with more than one other customer ahead of them.
This positioning is closely linked with the overall business model which is volume-led and relies on high consumer footfall and increasing sales in order to be successful. The role of marketing therefore is to communicate Tescos positioning in order to provide a general reassurance of value for money and to draw attention to specific activities. E.g. in April 2010 Tesco became the official supermarket of the England football team enabling it to capitalise on marketing opportunities in the run up to, and during, the 2010 FIFA World Cup. In January 2011 Tesco announced that it was going to sponsor Great Britain Olympic canoeing team for the next two years. To support the surge in public interest in the sport in the run up to the 2012 Olympics Tesco have added canoes and kayaks to their sales catalogue - Tesco Direct the range is due to be expanded in the Summer 2011. In May 2011 Tesco announced that it is planning on launching its first ad-funded TV series, called The Tesco Real Food Cook-Off, on both Channel 5 and the UKTV channel Good Food in September. The eight-episode series, under its Real Food magazine brand, will launch off the back of a Tesco advertising campaign that will include a competition to find eight of the UK's best cooks. An online and print campaign will encourage people to enter the competition with their favourite recipes. The people behind the eight best recipes will be chosen to take part in the cook-off programmes in a contest to find the "People's Cook". Tesco markets itself as the consumer's champion, an approach expressed in the long-established slogan "every little helps". This is supported by a range of initiatives, driven by Tesco's customer plan focused across a number of key areas: 1. Helpfulness: Tesco aims to provide in-store services which help consumers with their shopping, including one in front till opening, bag packing, price scanners and carry to car services. The retailer uses its catchphrase Every Little Helps to convey its service philosophy to customers.
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2. Innovation: Tesco aims to capture the largest possible proportion of customers everyday spend across a wide range of sectors, through the provision of innovative services. Examples include Tesco.com and Tesco Personal Finance. 3. Value for Money: A key focus at Tesco - in common with major rivals and the prevailing consumer sentiment - has been to demonstrate its value credentials. In May 2011, Philip Clarke, the new chief executive of Tesco, announced a new goal to create "highly valued brands." Clarke said this partly referred to the group's own brand foods ranges, from "Value" at the cheapest end to "Finest" at the most expensive. But it was also about developing new brands for shoppers who do not necessarily want to have the name of a supermarket emblazoned across the products they buy. 4. Inclusivity: This is a term often used to describe Tescos approach to customers. The retailer aims to attract as many customers as possible by creating a proposition with very broad appeal through its breadth and depth of product range. This is reflected by the strength of both its Value and Finest sub brands at either end of the spectrum. According to TNS, 69% of UK households shop at Tesco every four weeks 25% ahead of Tescos nearest rival. 5. Lifetime Loyalty: Tesco aims to encourage lifetime loyalty from its customers through the provision of a wide range of products and services that offer true value for money. Helping to support this aim is the Tesco Club-card. Advertising Tesco has a very broad advertising strategy, making use of a full mix of media to communicate a variety of messages to both existing and potential customers. Advertising activity can be divided into a number of types, including: Pricing: In view of Tescos price-led stance, this is perhaps the most important strand of activity and a large number of executions are dedicated to communicating either a general price message or a specific message regarding the price of particular items. Product awareness: With Tesco now offering a wider range of goods and services than ever before, some activity is also intended to raise consumer awareness of what is available. Event awareness: These adverts support occasional tactical activity, such as the annual Summer Sale, which features promotions across a wide range of goods, as well as events such as Mothers Day and Easter. In February 2011 Tesco signed British marathon runner and Olympian Paula Radcliffe to star in its first TV ad campaign to support its partnership with Cancer Research UKs Race for Life. The advertising campaign features the Tesco family played by Fay Ripley and Mark Addy, and aims to recruit more than 1 million women to sign up to the 5K fundraising event, and raise 80m for the charity. The TV ad, funded by Tesco, is the first time the supermarket has run TV spots to support Race for Life in its 10-year partnership with the event. Brand building: Tesco aims to build awareness of the Tesco brand and develop its credentials as a good corporate citizen through its sports and computers schemes for schools.
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Advertising may also be sub-divided into three types, according to the intended recipient: 1. General: advertising intended for a broad audience, boosting awareness of Tesco and its brand values amongst both current customers and non-customers. 2. Customer Specific: advertising directed at specific customers, based upon customer lifestyle and purchasing data collected via the Club-card loyalty scheme. This method is highly accurate and efficient and is an area in which Tesco is well ahead of most of its UK rivals. Tesco utilises this information in both print and television advertisements aimed at customers. 3. Store Specific: the development of in-store TV has allowed Tesco and its suppliers to target customers in specific stores with advertising and informational features at the point of purchase. Tescos in-store TV has now been re-launched as Tesco Screens and is now managed by Dunnhumby. In July 2010 Tesco launched an advertising campaign placing focus on the quality, provenance and value of its private label ranges. The campaign features a select number of Tesco's private label products including strawberries, Tesco Finest beef and cherries. In March 2011 Tesco launched its Price Check campaign in order to demonstrate that its products were cheaper than Asdas. According to analysts at IGD, the advertisements are specifically highlighting the quality and sourcing of some of its private label ranges. Its advertisements for strawberries states: "Our British strawberries go from farm to store in 48 hours". The beef advertisement says: "Our Finest beef is specifically selected by expert butchers". Also included in the recent advertisements is the retailer's strap-line: "Every little helps", reinforcing its value message In-Store Marketing Tesco utilises all the typical in-store marketing methods employed by UK supermarkets, such as sampling and hanging POS material in-store. The approach includes a combination of product and price-led communication.
Suppliers have always been able to purchase advertising space in-store along with sampling activity, promotional space or in-store radio. The network of Tesco Screens comprises 5,000 LCD and plasma screens. There is some flexibility over how the screens are used advertising spots can be designed to fit with the stores own in-store promotional format or can be more brand/product specific in a new brand sting format. Key initiatives, such as the double Club-card points scheme, and event-related promotions instore stand out as key areas of focus for 2011, while another important priority is promoting Tesco's wider range of products and services, particularly its new venture brands range. In 2011 Tesco plans to introduce its Club-card to new markets, such as in its Fresh & Easy stores in the US, and to have a greater focus on leveraging Dunnhumby insight internationally.
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Direct Marketing The Club-card loyalty scheme represents a key element of Tescos direct marketing strategy. The scheme is treated like a Thank You to customers and is where the vast majority of Tescos marketing budget is spent. Launched in 1995, over the past 15 years Club-card has played a key role in helping Tesco to better understand its customers. It is firmly established as a key element of Tescos marketing strategy and it fulfils a variety of functions for the retailer. Club-card helps to support Tescos position of shoppers champion. A range of couponing techniques are in use, with the well-established mail-outs supplemented by coupons issued at the till. Depending on the strategic requirement, coupons can be used to revive lapsed customers for a certain product, boost weight of purchase for existing buyers or to drive trial.
One key usage of the card is as a means of market research on customer shopping patterns, with data analysis being carried out by Dunnhumby Retail of which Tesco is a majority shareholder. Dunnhumby also manage Club-card data from a number of Tescos key international markets. Tesco uses Club-card data to target specific groups of shoppers, tapping into data from customers buying patterns to provide tailored offers. It has also developed sub-groups within the Club-card scheme for shoppers with particular interests. These include Tesco Food Club, Tesco Wine Club Tesco, Healthy Living Club and Tesco Baby & Toddler Club. Club-card Re-launch In May 2009, Tesco announced a re-launch to its Club-card scheme, in a move that cost around 150m and was aimed to attract 1m new customers. This allowed customers to double the value of vouchers received, if they were spent within certain categories, such as baby, toys, clothing and cosmetics. Tesco also offered double the value when vouchers were spent within elements of its services arm, such as Tesco Mobile and travel insurance. The re-launch was supported by a new television campaign, starring actors Fay Ripley and Mark Addy as a new 'Tesco family'. Within stores, marketing activity and specific merchandising was stepped up to drive the message of the new scheme, with Club-card desks set up in store where customers can exchange vouchers. The next stage of the Club-card re-launch was unveiled in August 2009. Tesco outlined plans to offer customers two points for every pound spent in stores and online, meaning that customers receive double the value and the vast majority of products in store would qualify. This 'Double Points' investment has strengthened Club-card further, with an 18% increase in voucher 23 redemptions and strong growth in customers signing up for a Club-card. In March 2011 Tesco announced that it plans to re-launch its Club-card scheme as an online rewards programme as it gears up to reach customers in the digital age. Developing a secure, multichannel smart card, the UK retailer will move the scheme to digital channels in an effort to simplify its rewards programme and cut down on direct-mail costs. According to Tesco, the move will offer easier access and more choice for its customers. Club-card has also developed technologically, with its launch as an iPhone application. This has seen over 13,000 people per day using the app, as it further improves customer accessibility.
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Tesco Trade Briefing notes 2011
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In September 2011 Tesco announced details of price offensive aimed at revitalising its UK business. To fund the move Tesco will end the practice, introduced two years ago, of offering customers double Club-card points. It will revert, towards the end of October 2011, to one Clubcard point for every 1 spent from two points for every 1 spent, a move that Nomura, joint broker to Tesco, estimated would free up more than 300m. Online Direct Marketing Tesco is increasingly developing online and email as a method through which to reach customers. Much of this works in tandem with Club-card, with customers who have signed up to some of Tescos more specific clubs mentioned above receiving regular email communication highlighting special offers. Customers can subscribe to an offer of the day email, highlighting one special product that is on offer for a limited period of 24 hours. M-Commerce Tesco is increasingly making use of app and mobile phone technology in its marketing campaigns. Tesco offers both a transactional smart-phone app and a mobile site. It operates 2,715 UK stores, including 1,285 Express stores, 186 Metro stores and 521 OneStop convenience stores.
OPERATIONS Store Formats

(1) Convenience
Express Express is Tescos main convenience format. The average store size is a little over 2,000 sq ft and ranges are broad but shallow, focusing on fresh food and impulse lines. The Express format is subdivided into four location clusters neighbourhood, one-the-move, high street and alliance (forecourt sites) as well as three affluence clusters up-market, standard and price sensitive. As of August 2011, there were a total of 1,285 Express stores, delivering an estimated average turnover in the region of 50,000 per week. Typically, Express stores carry 2,500 lines and attract in the region of 10,000 customers per week with the average customers using an Express store between two and four times per week. This format accounts for a little over 5% of total UK sales and drives more than 1.5m extra shopping trips per year to the Tesco brand. Tesco has up weighted its focus on Express expansion for 2011, with a net total of 180 stores planned. This will take the total number of Express stores to 1,310 in the UK. Oct 2009 saw Tesco open its first U.K. express store that is entirely self service. The store, in Northampton, features 5 self scan checkouts in place of traditional checkouts.
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Metro This format is a pocket supermarket intended to cater primarily for top-up shopping in prime town and city centre locations. The offer focuses on fresh produce, convenience foods, takeaways and lunchtime items. The average store size is 11,500 sq ft. While this format is only viable in locations with high footfall, the relatively high cost of some town and city centre sites makes the site selection process extremely important. Store numbers for the Metro format have been relatively stable over recent years at around 160. While it is not a priority for development, Tesco continues to add Metro stores on a selective basis where opportunities arise.
One Stop One Stop is a convenience store fascia inherited by Tesco from T&S Stores, a business it acquired in 2003. Many of these stores have been converted to the Express format although about 500 remain and these will be retained as a semi-independent business, with its own Head Office in Brownhills, West Midlands. Tesco continues to open One Stop stores on a selective basis where the opportunity arises. The One Stop fascia is positioned part-way between that of a CTN (confectionery, tobacco & newspaper) and a full Tesco Express and is similar to other multiple convenience stores, though the offer has benefited from Tescos additional buying power and expertise. (2) Superstores/Supermarkets
Superstore The core Tesco format has an average size of c. 30,000 sq ft. with the offer including a full food range, supplementary services and a limited non-food offer. Most are located on out-of-town sites, enabling stores to offer good parking facilities. Superstore numbers have remained relatively stable over recent years. New store development has continued, while Tesco has also embarked on a significant programme of expanding many of its superstores to its Extra hypermarket format. In February 2009, Tesco launched a new fascia in Liverpool named 'Superstore'. The store uses the same pricing file as a traditional Tesco superstore, despite being in a city centre location.
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Compact Compact stores are smaller versions of the Superstores, they are usually situated in market towns or edge-of-town sites and range from 15 25,000 sq ft. Tescos ordering and distribution systems mean that space can be used very efficiently, and so a broad range of food items can be carried as well as a representative non-food range. This type of store is often cheaper to develop than the smaller Metro since the cost of sites away from the High Street is lower. (3) Hypermarkets
Extra Extra is Tescos hypermarket format in the UK, and combines a full food range with a broad range of non-food products and supplementary services. Stores operate under the Tesco Extra banner and typically list up to 50,000 SKUs. This format is the main vehicle for growing Tesco sales of non-food products and therefore is the most strategically important format at present. The average store size is around 70,000 sq ft, of which at least 20,000 sq ft is allocated to non-food. The Extra format is a significant part of Tescos UK trading estate accounting for 10.3m sq ft or 40% of total UK selling space.
International Hypermarket Development Much of Tescos international business has focused on hypermarkets. The strong value credentials that Tesco seeks to cultivate stand the retailer in good stead in developing a non-food offer as well as in the food and grocery offer, particularly in markets with modest levels of disposable income. In some cases learnings from operating these stores have fed back into the development of large stores in the UK.
(4) General Merchandise In September 2005 Tesco opened its first standalone non-food store in the UK in Greater Manchester. This is a 30,000 sq ft store under the Tesco Homeplus fascia with the name imported from Tescos operations in Thailand. As of August 2011, the store count stood at 13. The Homeplus concept aims to offer a broad assortment of health & beauty, clothing, electrical goods and DIY.
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Stores to visit: Watford Extra Watford Hertfordshire WD17 2BD Tel: 0044 (0) 8456 779 702 Islington Metro Islington Green London N1 8DU Tel: 0044 (0) 8456 779 864
Tesco Kensington West Cromwell Road London W14 8PB Tel: 0044 (0) 8456 799 388
Tesco Express Camden London NW1 9HG Tel: 0044 (0) 8456 779 118
Online Retailing
Tesco.com A key ongoing goal for Tesco is to continually improve the way in which is serves its customers and tesco.com, the companys e-commerce division, is an important vehicle for this. Tesco.com is a key driver of sales growth. The significance of Tesco.com to any given supplier will depend on the category in which they operate, but with Tesco.com being a 2.7bn business as of August 2011, the additional sales can be significant. For Tesco, it is also increasingly profitable, with margins now comparable with the levels of the broader UK business.
In just under a decade, Tesco has established itself as the leading online grocery operator in the UK by a substantial margin. Its website, tesco.com, remains one of the most widely visited home shopping websites in the UK. In 2010/11 Tesco generated total online sales of 2.4bn (Tesco.com together with non-food site Tesco Direct), an increase of 15% compared to the previous year. Tesco.com also encompasses a range of targeted online operations specialising in areas such as wine, entertainment, healthy living, optician services and photo developing. Together with Tesco Bank, Telecoms and Dunnhumby, Tesco.com is part of the groups 'Retailing Services' arm. Tesco.com has a customer base of 1.2m shoppers and 350,000 grocery transactions conducted every week. The average transaction size in 2011 is 100. In September 2010, Tesco launched its first transactional shopping app for the iPhone and iPad. The ability to scan products with an iPhone and add them directly to a tesco.com order has proved popular. In August 2010, Tesco trialled a 'Click & Collect' drive through supermarket in Baldock, Hertfordshire. The concept allows customers to order online, choose a collection time and later collect the order from a designated area outside the store. The initiative builds on recent developments by retailers in France. Tesco now plans to extend its click & collect network and by the end of 2011 shoppers will be able to collect orders placed through Tesco Direct from 600 stores, double the existing number. In July 2011 it started selling clothing for the first time through click & collect and is planning to expand the service to include food shopping.
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Tesco plans to expand the number of dotcom only stores to boost capacity in areas of heavy demand. Three dotcom only stores now serve the London area - Croydon, Greenford and Aylesford (Kent), and an additional depot is set to open in Enfield. By 2014, c.15% of all grocery orders placed online will be served by a dotcom store. Tesco.com is trialling one hour delivery slots in the London area, matching the narrower delivery windows offered by Ocado. A new priority for Tesco is to accelerate the introduction of online operations to international markets. Tesco.com already operates in South Korea and Ireland. A market entry in Prague is planned for 2011 with Warsaw following in 2012. Tesco is also keen to build its online presence with additional digital content. In February 2010, www.tescorealfood.com was launched to provide advice on healthy eating, recipes, seasonal inspiration and to highlight new ranges in store.
Non-Food
Tesco Direct Tesco.com is also the web portal for the retailers remote shopping non-food operation, Tesco Direct, which operates both online and through a catalogue. Tesco Direct represents a way for Tesco to reach customers and as a route to market to help it boost penetration in product categories, such as furniture, which are less suited to its core store format as well as helping the retailer to develop its range depth in other product categories, such as electrical goods, where it already has a presence. In 2010 Tesco Direct sales were up 30% and represent a significant volume of sales in a number of categories. Tesco Real Food In February 2010 Tesco launched a new website to support its food credentials and offer its customers cooking tips, recipes and the opportunity to comment on its ranges through its blog. The site, tescorealfood.com, also provides advice on healthy eating and highlights new ranges in store and was launched to complement its new quarterly magazine, Real Food. The site is designed to showcase Tesco's food ranges and to provide culinary inspiration to its customers. Each week the site is updated with new recipes, the seasonal availability of ingredients and cooking advice. The site is also integrated into its online home shopping service, with users having the ability to add all the ingredients from a particular recipe to their shopping trolley.
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Sourcing, Supply Chain & Distribution

Sourcing As a global operator, Tesco sources at a variety of levels, across local, national, regional and global levels, on a product grouping or even product category basis. Tesco takes care to recognise and appreciate the opportunities presented by the differences between countries as well as the similarities. Besides developing local, regional and global opportunities, Tesco is increasingly developing sourcing at a European level, initially across a range of non-food, but also increasingly across food lines where appropriate. Tesco UK Warehouse Locations
Location Name Antrim Belfast Brackmills Chepstow Chesterfield Coventry Crick Daventry 1 Daventry 2 Didcot Doncaster Fastway Fenny Lock Harlow Livingston Magor Middleton 2 Middlewich Petersborough Snodland Southhampton Thurrock Unity Welham Green Weybridge Postcode BT42 4NN BT12 6HP nn4 7pn NP6 UD S43 4XA CV6 4BX NN6 7SE NN6 7EA NN11 8LR OX11 7PN DN4 5JJ NN6 7GW MK1 1QA CM19 5TJ EH54 8AS NP26 3TS M24 2SJ CW10 0TE PE1 4YT ME6 5TQ SO16 0YA RM19 1ND NN6 7FT AL10 8XF KT13 0YU Operator Tesco Tesco Tesco Tesco Tesco Tesco Tesco Tesco Wincanton Tesco Tesco DHL-Exel Tesco Tesco Tesco Tesco Wincanton Tesco Tesco Wincanton Tesco Tesco DHL-Excel Tesco Tesco Warehouse Type RDC TDC TDC TDC NDC NDC NDC NDC NDC TDC CDC NDC NDC TDC CDC RDC TDC RDC TDC TDC TDC RDC TDC RDC RDC
Source: Tesco.com October 201124
Note:
RDC Regional Distribution Centre TDC Temperature Controlled Distribution Centre NDC National Distribution Centre
Global Sourcing As Tesco aims to develop its global sourcing capability, it has established an International Sourcing Office. Based in the UK, this team is responsible for co-ordinating food and non-food sourcing globally and is designed to help local teams buy better. The key functions of the team are: Buying Better, Developing Multinational Supplier Relationships and Commercial Capability Development. In addition to the Global Sourcing Office, there are two key functions that contribute to the development of global sourcing at Tesco: 1. Sourcing Support manages the supply chain, controls technical policy and determines the customer route. Sourcing support is located in the UK, Central Europe and Asia.
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http://www.tesco-careers.com/home/you/distribution/picking-team/pickers, accessed 17.10.11
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2. Sourcing Hub determines where the product is sourced, negotiates price, presents ranges, places orders, tracks production, audits factories, and monitors quality and invoices country buying teams. There are hubs in Hong Kong, China, Thailand, India, Bangladesh, Sri Lanka, Madagascar, South Africa and outsourcing from Turkey, Greece and Romania. In October 2009, Tesco revealed it would be establishing 'Produce Group Sourcing' (PGS) which will allow the retailer to source all of its fresh produce globally through nine regional hubs. In September 2010 Tesco announced plans to rationalise its supply base and source more fresh produce directly as part of plans to become a more vertically integrated business throughout 2011. Regional Sourcing Regional Sourcing has traditionally taken place on three levels: 1) UK & Ireland, 2) Central Europe and 3) Asia. This provides Tesco with an interface between its national and international sourcing teams and is often used for food products. For example, selected private label goods are sourced regionally for Tesco in Central Europe, while there is much commonality between the private label range in the UK and in Ireland. An increasing focus at Tesco is European level sourcing. Within food, produce and grocery are the current areas of focus. Tesco sees one benefit of this as enabling it to boost private label penetration in its Central Europe operations, which is currently a long way behind that of the UK. Within Central Europe, Tesco has been growing the number of centrally sourced grocery lines to approximately 1,500. Local Sourcing Tesco is keen to source products regionally where it is possible and economic to do so. Tesco stocks approximately 7,000 regional lines from all over the UK, and as part of its 10 point community plan outlined in May 2006 is making itself more accessible to small, local producers. Tesco has a nationwide network of local buying offices and a local sourcing website www.tesco.com/regionalsourcing which provides background information about Tescos local sourcing strategy and a number of supplier case studies from across the country. It also offers suppliers a medium through which to get in touch with Tesco, and offers consumers the opportunity to recommend local suppliers. Six new buying offices opened in 2009, building on existing buying offices in Northern Ireland and Scotland. These regional offices give local suppliers a point of contact with buyers, helping them secure distribution for their products. At the start of 2011 Tesco outlined plans to open a further five new buying offices in the UK. These offices will increase the number of local suppliers and make it easier for smaller companies to sell their products through Tesco. The result of this will be hundreds of new lines being stocked in Tesco stores and more business for small suppliers. Tesco are also introducing regional counters in some of their stores to promote British food in season. And we will make our locally produced products easier to find with clearer labelling. Tescos network of regional offices resulted in the retailer selling more home grown apples and strawberries than any other supermarket in the UK in 2010. 90% of the fresh chickens Tesco sell are British, and the same is true for 95% of the fresh beef, 92% of the fresh pork, 80% of the fresh lamb and 100% fresh eggs & milk that Tesco 25 sells. At present Tesco are selling c. 500m of locally sourced product per year with a target of 1bn by the end of 2011. Crucially demand for local products remains strong, even in a more challenging economic environment. Moves to tailor ranges more by catchment open up new opportunities for suppliers, large and small, that are able to demonstrate an excellent understanding of their consumers' demographic and purchasing behaviour and align this with Tesco's approach.
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Tesco.com, talking Tesco August 2011
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Supply Chain Strategy Supply chain remains an important area of strategic focus for Tesco as the retailer aims to deliver lower prices for customers, to drive energy efficiency initiatives in response to environmental impacts and rising energy costs, and to carry out its ambitious sales growth strategy. Over recent years Tesco has undertaken a substantial programme of network restructuring in order to leverage its supply chain infrastructure and deliver greater efficiencies. In January 2011 Tesco announced that is planning on opening a new 152,000sq ft ecommerce distribution centre in North London later this year. The warehouse will handle home deliveries as well as supplying Tesco Express stores. On the environmental agenda, Tesco has been driving a variety of supply chain initiatives and business practices across fuel management, recycling and the use of intermodal transport solutions, reverse logistics and collaborative transport options with suppliers. In conjunction with haulage partner Eddie Stobart, Tesco has also shifted some of its North-South freight traffic from road to rail and continues to use the Manchester Ship canal to transport bulk wine from the docks at Liverpool to a bottling plant in Manchester. At the 2011 Tesco Trade Briefing, David North, Tescos UK Corporate Affairs Director, proposed that Tesco could make substantial savings per annum by cutting supply chain emissions. He set a goal that Tesco is to decrease carbon emissions by 30% by 2020. In his presentation A sustainable future David North outlined his priorities for 2011 which included the following: Build knowledge Develop knowledge hub via collaboration with suppliers Build carbon reductions into way of working
Corporate Social Responsibility

Community Being environmentally responsible represents a core element of the corporate agenda at Tesco. The importance of Corporate Social Responsibility is highlighted by the fact that it is a core pillar of the long-standing Tesco strategy. The key themes running through Tescos community plan are about doing more to help the environment, encouraging healthier eating and healthier lifestyles and becoming more involved in the local communities in which it trades. The scope of the programme has pointed to opportunities for suppliers, as Tesco aims to work more with smaller suppliers and boost the proportion of local products it lists in-store. Local supplier road shows, the opening of more environmentally-friendly stores (e.g. Shrewsbury, Swansea and Wick) and the roll out of more automated recycling centres represent just some of the progress made in this area. Mitigating Climate Change At the beginning of 2007 Tesco pledged to invest 500m between 2007 and 2012 in a wideranging environmental plan designed to cut carbon emissions and help its customers to better understand the environmental footprints of the products they buy. Sir Terry Leahy promised a revolution in green consumption, explaining his desire to bring the green movement to the mass market. The plan involves a number of facets including labelling, reducing air imports, cutting emissions and offering more efficient electrical products at lower prices. In April 2008, Tesco launched a trial labelling scheme to demonstrate how many grams of CO2 have been used in the production, packaging distribution and disposal of certain products. Tesco has worked with the Carbon Trust to produce the Carbon Reduction label which was launched on 20 private label products in four categories: laundry detergent, orange juice, potatoes and light bulbs. In April 2009, Tesco announced that this initiative now extends to over 100 products.
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As part of its five-pillar operating strategy, Tesco has been working towards implementing new environmental and sustainable initiatives throughout each segment of its business. A number of initiatives have been trialled in selected stores, such as rainwater recycling, the use of natural lighting, and refrigeration doors. The retailer has also trialled a number of sustainably-constructed stores, most notably in Wick, Shrewsbury, Hinckley and Cheetham Hill. Tesco has pledged to become a zero carbon business by 2050. To achieve this they have set the following interim targets: To halve the carbon emissions from all new stores we build worldwide between now and 2020 compared with an equivalent store built in 2006. To halve emissions from our existing stores and distribution centres worldwide by 2020. To halve the CO2e created per case of goods delivered worldwide by 2012, compared with 2006. In October 2010 the Carbon Trust announced that the total annual retail value of consumer goods sold in the UK bearing the Carbon Reduction Label has reached 2 billion, as research revealed that 9 out of 10 households in the UK had bought a carbon labeled product in the previous 12 months. The milestone figure came as Tesco confirmed it had added the Carbon Reduction Label to its own brand dried egg and dried Finest pasta, which became available in stores nationwide from November 2010. However, perhaps the most striking example of Tesco's commitment to a new eco-friendly format is its new superstore at Ramsey, in Cambridgeshire. The store features all of Tesco's energyefficient measures in one store, and is also constructed from sustainable timber, reducing the embodied carbon of the structure considerably. Indeed Tesco has stated that this is the world's first zero-carbon supermarket. Since 2006, Tesco has encouraged customers to reduce their plastic bag usage by 55%. This was done mainly using the Tesco Club-card, whereby customers receive 1 Club-card point for every bag they reuse.
BRIEF HISTORY
Sir Jack Cohen founded the company in 1924 in Londons East End. Initially, trading was from market stalls and the Tesco brand first appeared on packets of tea in the late 1920s. In 1929, the first Tesco store opened in Edgware and in 1947, Tesco Stores (Holdings) Ltd was floated on the Stock Exchange. In 1948, the first Tesco self-service store opened in St. Albans. The first Tesco self-service supermarket opened in 1956 in Maldon, selling fresh food, clothing and household goods. Throughout its history, Tesco has often been at the forefront of customer developments, introducing the first superstore to the UK in 1967. Since then, Tesco has continued to develop its store portfolio and in 1995 over took Sainsburys to become the UKs leading grocery retailer. A key development for Tesco in recent years has been its launch in the US market. The Fresh & Easy format was developed especially for the US market. Stores are 10,000 sq ft and are a hybrid between convenience and supermarket retailing. As of May 2011, Tesco had opened 214 Fresh and Easy stores on the West Coast. Tesco chief executive Sir Terry Leahy stepped down in March 2010 and was replaced by International and IT director Philip Clarke. Additionally, Tim Mason became deputy CEO, Richard Brasher became Chief Executive of UK and Ireland and David Potts took on the role of chief executive of Asia.
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ASDA
Asda Group Ltd, Asda House, Southbank, Great Wilson Street, Leeds. LS11 5AD Tel: 0044 (0) 1132 435 435 www.asda.co.uk
Domestic Market: United Kingdom No of Formats: 3 No. of Stores: 526 Turnover: GBP 20,612 m Operating Countries: 1 Sales area: 22,684.34sq.m
Company Mission: To be Britains best retailer exceeding customer needs everyday Corporate Strategy: Grow its supermarket operation to 100 outlets by 2015. Open 120 new Living stores by 2015 to develop a nationwide chain. To build up a world class dotcom business. 2011 Key Highlights: As of October 2011 Asda was the second biggest grocery retailer in the UK market with a 26 17.3% market share. In 2011 Asda is converting the 147 stores it purchased from Netto following clearance for Asda's takeover from the Office of Fair Trading. Forty seven others are being sold off to satisfy the regulator. With an average size of 8,000 sq ft, the stores will greatly build Asda's portfolio of smaller stores. The conversion will be complete by the end of 2011. Asda expects to open twenty one other new stores in 2011, adding 550,000 sq ft seven superstores, four Asda Livings, and ten Asda supermarkets. There will also be five extensions to existing stores. Asda plans on putting further focus on driving the Asda Price Guarantee (APG), referred to by Andy Clarke as a "game changer". Asdas core brand Chosen By You, which represents 80 per cent of its own label food sales, has gone from strength-to-strength since it was launched in late September 2010. By March 2011 Asda had introduced 5,000 products into the range, including 250 nonedible groceries. In August 2011 Asda announced that it had launched a mobile optimised transactional grocery shopping site, allowing its customers to shop its online range from a smart-phone for the first time. In September 2011 Asda launched a new food range under the brand Chosen by You Scotland that brings together products tried, tasted and approved by Scottish shoppers and is available at all stores in Scotland.
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2010/2011 Key Challenges: Asda lacks presence in smaller, convenience store formats, although the retailer has promised to rectify this with the addition of 100 new sub-25,000 sq ft stores. The acquisition of Netto should address this issue but a lot of work remains to be done for Asda to realistically compete in this market. As of Q2 2011 Asda had converted 60 of the former Netto stores to the Asda supermarket format. Asdas avoidance of loyalty card schemes has come into question, particularly when Tesco and Sainsburys both credited such schemes for their solid performance. Tesco's market strength restricts market leadership opportunity. Asda cannot realistically gain market leadership in the grocery sector from Tesco, which boasts a share of close to double that of Asda.
Executive Board

Asdas 2011 Q2 earnings release has revealed a like-for-sales increase at Asda of 0.5% (excluding VAT) for the trading period from 1st April 2011 to 30th June 2011. Asda's enhanced Asda Price Guarantee (APG), which re-launched in Q1 2011, continues to underpin the retailer's value credentials, with over 250,000 baskets a week now being checked online by shoppers. The retailer believes that its focus on delivering every-day low prices will stand it in good stead as the UK economy remains unsettled going in to the second half of the year. While sales excluding fuel grew ahead of 2010, underlying income was reported to have fallen in the last quarter because of costs incurred through the Netto acquisition. Adjusting for fuel and the impact of the acquisition, operating income grew ahead of sales. The conversion of Netto stores progressed during Q2 2011, with some 60 stores now rebranded as Asda Supermarkets. The converted stores hold four times the number of lines than when they were trading as Netto, and also have more employees working in-store. Speaking in April 2011 CEO Andy Clarke confirmed that the programme was running on budget and delivering to both the top and bottom line.' The business is confident that it is developing a strong estate of smaller stores that will extend its reach considerably by meeting the demand for a full weekly shopping option in more suburban locations. On top of its strong value message, the retailer's latest statement also highlights its ongoing commitment to product quality. By June 2011 Asda had received over 300 product awards in categories such as cheese, meat, fish and wine.
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STRATEGY Company Strategy

Asda competes closely with Sainsburys for position as the UKs second largest grocery retailer by market share. Primarily Asda is an operator of large format stores, with traditional strengths in superstores and hypermarkets. Smaller supermarkets are a growing focus. Delivering excellent value to its shoppers, based on its core Every Day Low Cost (EDLC) and Every Day Low Price (EDLP) platform, is a key goal for Asda. Asda's strategy for developing and growing the business was based in the past on the three horizons model, incorporating Always Better, Always Different, and Always Bold. However, in April 2010 Asda announced a new strategy for future growth.
Source: IGD Asda company presentation, March 2011
Format development and new store growth is an integral element of this plan, with an emphasis on two key formats, namely smaller format supermarkets, of around 17,000 sq ft, and the Asda Living format. Non-food sales will also be driven through innovation in its core estate. In April 2010 the retailer launched a new format non-food area where shoppers can choose products on a screen in store, fill in an order form and collect at a desk, allowing the retailer to compress 31 bays into 7 with the highest volume lines immediately available and the remainder collectable from a desk. The initiative, called 'Take Home Today', will allow Asda to maximise constrained store space. At the same time Asda reiterated a return to its EDLP roots, removing complex promotions that only serve to confuse shoppers on value for money, including 'two for' deals. Asda acknowledged that it had become too promotionally driven and that its key point of differentiation, low prices, had not been as clear. The retailer also announced that it would seek to better leverage Wal-Mart's global scale and increase the proportion of goods which are sourced directly. Within Home & Leisure, the proportion of products which are sourced in this way is forecast to increase from 22% in 2009 to more than 40% by 2013.
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Trading Strategy
Asda adopts Wal-Mart's eight trading principles: Serve customers: Asda states it is a customer-led business. Deliver EDLP (Every Day Low Price): Asda is never 'undersold'. The business states that EDLP builds customers trust which in turn shapes long-term buying behaviours and drives sales over time. Practice EDLC (Every Day Low Cost): Asda strives to remove unnecessary costs from every point in the supply chain. Create compelling ranges: Best-in-class stock and compelling ranges are essential for Asda to drive customer loyalty.
Source: IGD Asda Profile 2011
Be traders: Asda encourages its traders to be innovative and take 'intelligent' risks. Have fun! : Drive excitement through the business. Build collaborative relationships: Trust and transparency is essential with its supplier relationships, as it is with its customers. Lead on social issues locally and globally: Investing in communities from both a social and environmental perspective is important to Asda. Asda customer pledges In addition to the retailer's formula for growth and key trading principles, Asda also has a set of five customer pledges which form an important part of the way it interacts with its customers. These pledges are an essential way for Asda to build customer trust and loyalty. 1. EDLP: Asda is lowering prices to ensure it offers the lowest priced products for its customers. 2. Quality you can trust: Asda is investing heavily in improving the quality of its ranges to build customer trust in its products. 3. Always available: Driving competitive leading availability at industry leading cost is a key priority throughout Asda's supply chain. 4. Best for new and events: Asda is aiming to differentiate its offer by driving newness in its ranges and events in-store. 5. Happy to help: recruiting and training staff to deliver optimum customer service.
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Key messages for suppliers In addition to playing their part in forming mutually-beneficially relationships based on trust, Asda requests the following of suppliers: Flow of goods - the best possible service levels into depots (and stores where applicable). Retail Ready Packaging - to work with Asda to find lowest-cost solutions wherever possible. Packaging reduction. On private label lines, Asda has significantly reduced packaging since December 2007. It is also encouraging branded suppliers to embark on similar packaging reduction initiatives. Crucially Asda's view is that less packaging should mean less cost, and based on this principle announced the introduction of a number of green rollbacks on products where packaging had been reduced. Source tagging - in appropriate categories / ranges Asda invites suppliers to discuss the opportunities for security tagging items at the point of production / packaging to create a synergy for both parties in reduced shrinkage. Delivering on availability. War on waste. Asda has a commitment to send zero waste to landfill. Given the category opportunities arising from the push towards quality and inspiring new product development, suppliers who can demonstrate a product offer that aligns with Asdas priorities and five customer pledges are well placed to capitalise on the Asda strategy. Key strategy issues Drive core business growth become the clear number 2 in food in the UK. Refocus the customer offer on EDLP. Become clear number 1 in non-food retail in the UK. Develop greater product and service differentiation. Develop a world class dotcom operation.
Pricing & Promotion Strategy

Price is still at the forefront of the Asda offer and remains an essential component of Asda's 'winning formula'. Combined with high quality products and service standards, allows Asda deliver 'Real Value' to its customers. Asda's EDLP (Every Day Low Prices) strategy is the bedrock of its competitive positioning within the market and through the Asda Price Guarantee (APG) it seeks to reinforce an already strong price perception. A simplified promotional programme gives more exposure to offers, but also makes rigorous planning and forecasting a necessity. Events in-store will be a crucial part of the retailer's strategy going forward, and is a key element of its 'Best for new' customer pledge. Rollbacks In line with the core focus on EDLP - and hence EDLC (Every Day Low Cost) - strategy, Asda has a well-established programme of Rollbacks, an ongoing series of permanent price reductions driven by the benefits of the retailer's core EDLP trading strategy. Rollback prices are generally highlighted in-store with shelf edge POS labels and on gondola ends.
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Key messages for suppliers Suppliers will need to constantly assess their sourcing policy and supply chain structure to ensure the best value is achieved and that Asda's 'Buy for Less' policy is integrated into suppliers' own sourcing strategies. Promotional Programme With a renewed focus on its EDLP credentials, Asda has stripped back the number of promotions it runs in-store. However, 'simple' promotions will still play a part in the retailer's overall pricing regime. It is currently focusing on two main promotional mechanics: Round pound pricing This promotional mechanic is particularly important for Asda and is one which is a good way at demonstrating the retailer's value credentials.
N-For's Asda also uses a number of 'N-For' deals which also feature round pound price points. This helps Asda to communicate clarity in its pricing, something that has become increasingly important as value has risen up the shopper agenda. These multi-buy offers are an important component of Asda's temporary price reduction campaign. Many of these deals are on branded lines; there are also a number on Asda private label products. Many of the deals are of the y for x variety, for instance, 2 for 3 or 3 for 10, rather than 3 for 2 or 4 for 3.
Events Events feature an essential component of Asdas 'Best for New' agenda. Asda has stated that events will be customer and not category focused. In fact, events will be increasingly cross category and represented throughout the store. Asda's aim is that events will not just feature existing ranges, but that every event will include at least 20% new and exclusive products. Innovation will be essential - events will be a key component of differentiation for Asda. Newly launched in 2011, Asda is also providing the opportunity for branded suppliers to brand POS within Asda's corporate messaging.
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Key messages for suppliers An innovative approach to developing events and promotions is a priority for Asda. The call is for suppliers to think 'outside the box', applying new ideas to a category or proposing cross-category activity, but always ensuring that entry, execution, excitement and exit are clearly thought through and communicated.
Asda Price Guarantee (APG) In April 2010, Asda announced a new online price guarantee system which allows the retailer's customers to check their grocery receipts against its competitors. The APG pledges to be 10% cheaper compared with its major competitors on a weekly shop. In the instances where customers have paid less elsewhere, Asda will issue them with a printable voucher for the difference. The retailer is aiming to reinforce its EDLP credentials, saying it will refund any of its customers who find their groceries cheaper elsewhere. The website, Asda Price Guarantee covers over 13,000 branded and private label products, including items on promotion. Using the website is a simple three-step process: Customers do their grocery shop at Asda buying at least 8 items or more and retain their receipt. After 9am the next day shoppers go to www.asdapriceguarantee.co.uk to enter their receipt details which allows them to check prices against its three biggest competitors, Tesco, Sainsbury's and Morrisons. In the instances where customers have paid less elsewhere on their whole shop, then Asda will give them a printable voucher for the difference, plus one penny that can be redeemed against their next Asda shop. The website has been built and will be operated by mysupermarket.co.uk, which according to Asda, guarantees its independence. Customers can also access Asda Price Guarantee through Asda.com. To embed this guarantee further, in January 2011, Asda pledged that it will be at least 10% cheaper on a weekly shop compared to its major competitors. The retailer is significantly extending its guarantee, and if it is not cheaper than its rivals, customers will be entitled to a voucher to make up the difference. In March 2011 the retailer stated that one million shoppers had used the guarantee and 200,000 had downloaded the smart phone app since January. This is a significant initiative introduced by the retailer which aims to embed its up-weighted focus on EDLP. In June 2011 Andy Clarke, Asda Chief Executive announced that Asda may broaden its guarantee to sell grocery items 10% cheaper than rivals to non-food products such as electronics and toys. In September 2011 the Advertising Standards Authority (ASA) rejected a call from Tesco to ban an advert for a deal under which Asda promises it will be 10% cheaper than its rivals. The ASA concluded that Asdas Price Guaranteed ad was not misleading. In its defence, Asda said they did not believe the claim 10% cheaper or we'll give you the difference. Guaranteed was a lowest price claim. They said the advertisement did not imply that Asda guaranteed to be 10% cheaper, but that they guaranteed to give customers the difference on comparable grocery shopping if they were not 10% cheaper. They said the inclusion of guaranteed in this context clarified rather than contradicted the meaning of the price promise. Asda added that they had received copy advice on the use of the word "guaranteed" before publishing the advertisement.
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Asda seeks to offer customers a choice of "Good, Better, Best" in its private label structure within key categories, and has created range architecture to support this. Approximately 50% of total food sales at Asda are private label. In September 2010, Asda announced the re-launch of its entire core private label range, with a further 2,000 SKUs to be added later on this year. This will 27 include a rollout into new categories such as non-edible and core grocery.
Source: IGD Asda Profile, 2011
Key Messages Asda's new 'Chosen by You' range replaces its core private label tier across key food and some non-edible categories. Although low prices and EDLP form the cornerstone of its broader strategy, private label will increasingly be used to drive its quality perception. Additional focus on premium tiers; e.g. further development of Extra Special and its new Elegant Living range. Smart Price is its value range and Extra Special is its premium range, with the core Chosen by You brand fulfilling the role of standard private label in the food offer. It has also developed its private label structure beyond this, with Healthy Living, Great Stuff (children's) and Organics sub brands present in the food and grocery offer. Asda uses a number of sub brands in non-food but the George clothing brand is by far the most prominent. Indeed the George brand is also used on many home-wares lines. Chosen by you The new Chosen by You range is made up of more than 5,000 own brand food products, 500 of which are entirely new and another 1,000 of which have been reformulated. Asda states that the range continues to be up to 20% cheaper than the equivalent leading brand. The re-launch, in September 2010, followed nine months of benchmarking and independent taste-testing, which involved more than 50,000 people in 45 locations across the UK. In September 2011 Asda launched a new food range - Chosen by You Scotland. This range brings together products tried, tasted and approved by Scottish shoppers and is available at all stores in Scotland.
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IGD Asda profile 2011
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Key message for suppliers With the ongoing developments with the Chosen by You range, there is significant opportunity for private label suppliers to engage with Asda. Suppliers should ensure they understand the brand's values, private label tiering approach and its strict benchmarking guidelines in place. Premium Asda is seeking to position Extra Special as an indulgent range, and is planning a review of the range in 2011; however this will not be on the scale of the Chosen By You range launch. Extra Special is Asda's premium range, aimed at offering the best quality food on the market. The current range in 2011 has 650 products. Extra Special enables Asda to create the upper tier of the "Good, Better, Best" proposition. The focus of the range is on food and grocery, with the brand most prominent in fresh and ambient food categories. Crucially, this is supported with a strong price focus, which helps reinforce its value positioning. Around 50 lines have been made available to other Wal-Mart country operations, with British products including marmalades and fudge proving highly successful in countries such as Mexico.
Entry Level The standard entry-level products in each category are sold under the Smart Price label. Smart Price covers a large range of items in both food and non-food categories, with key roles to play in both grocery and home-wares categories. These products are positioned against the value/economy offerings of competitors and Asda claims that this range will never be beaten on price, even by the hard discounters. Internal Asda research shows that Smart Price creates a strong combination of quality and value perceptions among customers, with all products having to meet strict quality guidelines. As of 2011 Smart Price covers 580 products across a wide range of food and non food categories.
Sub-brands Great Stuff Asda's Great Stuff range covers a range of 100 products for children and covers a number of categories including: Ready Meals Dairy Frozen Fruit and Vegetables Canned Meals Biscuits & Cereals Soft Drinks Toiletries
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The range is aimed at children of ages 1-7. Great Stuff is promoted at parents as being products that children will love but are also healthy too at great value for money. Great Stuff packaging carries the strap-line 'Taste-tested by kids, endorsed by Asda nutritionists', and features in-depth information about the products' ingredients. This is clearly intended to convey health messages so that parents can feel good about buying these products for their offspring. Great Stuff is promoted on a micro-site on Asda.com.
Organics The Organics own label was created to cater for a key growth segment in the UK grocery sector. Though Asda was initially a little slower than key rivals in developing its organic ranges, it has since placed significant focus on developing ranges. In 2011 the range consisted of 140 products. Dedicated organic sections in-store help to highlight the strength of the range. The aims of the range are as follows: To provide a complete range of organic foods. To complement the range with a selection of organic manufacturers' branded lines. To suit all needs and occasions, at a price affordable to the everyday shopper. All private label organic packaging is now compostable. Organic private label food and drink must meet UK Register of Organic Food Standards (UKROFS) standards as a minimum with on-going focus to achieve International Federation of Organic Agriculture Movements (IFOAM) standards. The aim is to source from Britain wherever viable.
Good For You Good For You is present in a number of categories to meet the needs of customers who are looking for healthy, lower fat options. Calorie, fat and salt levels are clearly indicated on the packaging, which carries a standard logo and branding across the range. All Good For You products have been developed to meet strict criteria on fat, salt and sugar for a truly healthier offer with no taste compromise. The range now extends to 110 products. Non-Food Asda uses a number of sub brands in non-grocery but the George clothing brand is by far the most prominent, also being used on a number of home-ware lines. Another notable sub-brand in non-food is 'Elegant Living', a premium assortment of approximately 200 SKUs across homewares categories which was launched in March 2011.
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Customer Profile
A higher proportion of Asdas customers come from the mid-lower social groupings compared to the total market. The customer profile is made up of predominantly C2 and D socio-economic groupings. Asdas emphasis on value for money is likely to be a key factor with the bias towards these socio-economic groupings reflecting Asdas traditional growth and popularity in northern towns amongst blue-collar families. Asda continues to under-trade in both the AB and E brackets. In E, the most price-constrained group, low car-ownership means that Asdas large stores are often difficult to reach. While Asda under-trades in AB consumers compared to the total market, AB shopper numbers have been 28 rising and in 2010 represented 20% of all Asda customers. Asda traditionally attracts a much younger customer than the total market average, for a number of reasons: 1. The appeal of Asdas price proposition to younger, less-affluent customers such as students, 2. The quality and affordability of Asdas contemporary fashion-led ranges such as clothing and jewellery, 3. The trend amongst older generations to shop in local neighbourhood outlets due to distance and ease of shop. Most significant to Asda in cash terms is the variance from the local market in the 28-34 age band where couples are more likely to have young children, meaning higher grocery shopping requirements. This presence of children is a significant feature of Asdas shopper profile. Asda has responded to the importance of this demographic by having bulk packs of commodity lines, providing specialist customer services and events aimed at families with children, rolling out the Asda Wal-Mart Supercentre format to offer families the convenience of an under-one-roof shop, and by developing targeted ranges e.g. the Great Stuff food range, to capitalise on the market for healthy food for children. The significant presence of children is also reflected in the relatively large household size that Asda shoppers belong to compared to the total market. Asda undertrades in 1 and 2 member households, but overtrades in households with 3, 4 and 5+ members.
Marketing Strategy
Asda's marketing strategy is designed to reinforce its price positioning and maximise its exposure to key customer groups. Value communication remains a strong feature throughout the retailer's marketing plan, and is supported at various levels by campaigns targeting quality and customer engagement e.g. Chosen by You. Digital advertising will also play an important role in Asda's marketing strategy going forward. At a corporate level, Asda's marketing strategy is well defined within its core principles of EDLP and other customer pledges. At a category level however, some tailoring to meet competitive conditions or shopper trends will almost certainly be required. Hence the value of incorporating category level marketing and targeted shopping activities into the business plan with Asda at as early a stage as possible. Asda has a set of pledges which provide a basis for much of the retailer's marketing and advertising strategy. These are: Every Day Low Price (EDLP) The groups uses its EDLP policy to ensure it delivers quality products at 'market-beating' prices. Asda's EDLP credentials are well demonstrated in-store through the use of rollback devices on gondola ends and shelf edge barkers to demonstrate the value of the Asda proposition. APG is also a major feature which is advertised in-store to raise shoppers' awareness of low prices in comparison to its competitors. Recent TV and press adverts have focused on the retailer's Price Guarantee, particularly following its expansion in January 2011.
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Quality you can trust Continuous focus on improving product quality. Asda supported the launch of its Chosen by You range with a number of marketing activities in order to demonstrate the new and improved quality of its standard lines. An advertising campaign covering print media, TV and in-store tastings were implemented to promote the range. Best for new and events Asda is committed to making the customer offer new and relevant. The retailer supports the launch of new products in-store with POS material to draw shoppers' attention to new lines. Events play a key role in Asda's in-store marketing, particularly around the launch of new products and key dates in the calendar. These are an important driver of footfall and creating 'retail-tainment'. Recent examples include 'The Big Clean' event, 'Asda Baby Event' and 'The Big Night In'. Asda is also looking at developing its partnerships with branded suppliers. There will be more opportunities for these suppliers to get involved in joint branding POS activities. Always available Asda has invested heavily in improving its availability which it states is an important driver of customer loyalty. This remains an important focus for its trading relationships with suppliers going forward. Happy to help The group is investing in recruiting and training to ensure high levels of customer service. This helps Asda build trust and loyalty in the brand as a whole. This pledge builds on previous initiatives that have really cemented the importance of people in Asda. Asda Pulse of the Nation Asda is always seeking to get closer to its customers and to better understand their issues and concerns. This resulted in the 2008 development of Asda Pulse of the Nation, a nationwide panel of Asda shoppers designed to represent the voice of the Asda shopper nationwide. In 2009, Asda expanded its Pulse of the Nation shopper panel to allow customers to get involved in choosing products. In 2011 following feedback from their female panellists that many are between sizes, George at Asda developed jeans in sizes 11, 13 and 15. In-store Marketing The focus in-store is not just about price. Enhancements in areas such as counter displays, fresh and chilled ranges and premium ranges have helped to build Asda's broader credentials and have helped to attract more affluent shoppers to Asda stores.
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Asda has been active in recent years in launching high-profile initiatives and supporting campaigns which: Raise awareness of the business. Increase customer perceptions of Asda's value offer. Attract target customers to the business. Support family/community causes. Supplier involvement is core to many activities. Asda provides a number of channels through which suppliers can promote brands/lines and can offer a package approach to those wishing to harness a number of different media. Demonstrating Value - Rollback The main mechanism for promoting Asda's value proposition in-store is rollbacks. This has become a strong feature in-store in particular, and is a well established feature of the broader advertising programme. The most obvious manifestation of rollbacks in-store is the use of the device on the majority of gondola ends both in the power aisle (the first prominent shopping aisle of each store), facing the back of the store, and less so at the front facing the checkouts. It is also used extensively in hanging signage, and more recently has also been used on shelf-edge labels, overlaying the price and also standing out from the shelf to ensure high visibility up and down the aisles. This is featured extensively across the store. Asda Magazine Asda Magazine is a free monthly publication distributed primarily in-store. It is aimed at the women's market and is designed to: Be an interesting, relevant read to its target. Communicate Asda brand values in more depth. Provide sponsorship/advertorial opportunities for suppliers. Asda's offline monthly magazine is the leading retail magazine in the UK with a circulation of 5,351,000 for March 2010 to February 2011. The retailer uses its magazine to focus on quality rather than just communicating messages surrounding affordability, as it does with some of its other marketing initiatives. The magazine aims to compete with grocery competitors such as Sainsbury's and Waitrose. Asda FM Asda FM is the retailer's in-store radio channel carrying music, news and targeted marketing messages. The station is positioned to have the feel of a contemporary commercial radio station with an up-tempo and bright mix of music to entertain and 'lift the atmosphere' for shoppers. Advertising on Asda FM provides many benefits to suppliers, including reaching a wide range of customers and delivering marketing messages at the point of purchase. It can also be accessed through the retailer's www.asda.com site. Digital marketing Supporting Asda's digital development are two initiatives: SYM TV: (Saving You Money TV), a YouTube channel launched in March 2009, offering customers tips on how to be more economical both with food and at home. In 2011 Asda used SYM TV to highlight Alex Jamess newly launched cheese range. iPhone app: Launched in November 2010, the app plays a key role in validating the Asda Price Guarantee. Powered by independent price checker mysupermarket.co.uk it compares Asda's prices with around 14,000 like-for-like branded and own label grocery products at Tesco, Sainsbury's, Morrisons and Waitrose.
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Key messages for suppliers Asda operates a media centre which gives a central point of contact for suppliers wishing to take advantage of any media opportunities. In 2011 Asda has planned and implemented campaigns in over 15 channels with over 300 suppliers and agencies. These campaigns were implemented to help suppliers to find media that works best with their brands to provide strong returns, while also driving sales for Asda.
Advertising Strategy
National Advertising and Promotion More recently, Asda has been advertising its Price Guarantee campaign through a number of different advertising media with renewed activity following the strengthening of the Guarantee in January 2011 to be at least 10% cheaper than key competitors. Local Marketing Asda supports the launch of new stores via locally-targeted press advertised via a dedicated Local Marketing team at Asda House working with a third party PR agency. This team assesses the needs of individual stores in their catchments and determines what other above-the-line activity might be appropriate, for example billboard, local radio advertisements. Such support can continue for a time after the opening of a store if considered necessary. The Local Marketing team also supports the marketing of Asda's local sourcing activities. Asda is becoming recognised for stocking well-known local products in its stores and continues to develop in this area. The team is charged with communicating this around the wider local catchment.
Communicating Online - The Asda Website The Asda website remains a key vehicle for communicating the retailers offer. Customers can view details of their own store using a post code search. This gives them the store managers name, opening times and a list of facilities for the store. This area of the site also includes details of special events that will be happening in store.

Traditionally Asda was very much focused on a single large superstore format (average 4550,000 sq ft) which account for 90% of sales, eschewing smaller format opportunities. In more 29 recent years however, there has been a more flexible approach. Smaller supermarkets are the key format targeted for growth, and have been bolstered by the Netto acquisition. By the end of 2011 Asda is aiming to add a further 550,000 sq ft with 21 new stores set to open, in addition to 147 (1.75m sq ft) that will be added by the Netto acquisition. As of August 2011 Asda was halfway through the conversion process and had converted 61 Netto stores to an Asda Supermarket the smallest stores in the Asda family. Asda's portfolio strategy has developed significantly over the past years. In the below image, Asda has set out its strategy for how it will engage with customers going forward across a number of channels.
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Source: IGD Asda profile 2011
The Netto acquisition provided Asda with 147 stores and added 1.2m sq ft, with stores averaging 8,000 sq ft. All are in the process of being converted to the Asda supermarkets banner with the number of products stocked increasing five-fold compared to a Netto store. The store conversion process will involve capital expenditure of 100m and the first three converted stores opened in May 2011. Asda has not provided a time frame for when the conversion process is due to be complete. A further 550,000 sq ft to open by year end from organic growth including: 4 Asda Livings 10 Asda supermarkets 5 extensions to existing Asda supermarkets 7 Asda superstores A contract was also signed in March 2011 to buy six stores from Focus DIY which will be converted into Asda supermarkets. These stores are located in Aberystwyth, Clevedon, Gillingham, Stamford, Torquay and Woking.
Superstores The majority of Asda stores fall into this broad category, and indeed the superstore format accounts for almost 90% of Asda's total UK sales. Typically these stores have traded off a sales area of between 20,000 70,000 sq. ft. However the average has reduced slightly in recent years through the conversion of larger hypermarkets to superstores and the opening of new smaller stores. The key footfall driver within the range is the food and grocery offer, though non-food plays an important role in the composition of the mix. Asda supermarkets currently stock approximately 30,000 products in-store. In August 2011, Asda announced it plans to open 250 smaller format supermarkets. The smaller stores will use the same price file as the wider Asda store estate. In November 2009 Asda opened its first World Food store in Hounslow, Middlesex. The existing store has been re-formatted to accommodate specialist foods for Mediterranean, Irish, Asian, Afro-Caribbean and Polish nationalities across chilled and frozen food, ambient, clothing, homewares and health & beauty. The store also features a Polish deli counter and a Halal meat counter. Asda achieved sales in excess of 1bn in local and ethnic foods between 2001 and 2011.
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Asda Wal-Mart Hypermarkets The Asda Wal-Mart Hypermarkets represent Asda's largest store format, trading off a sales area that is typically an average size of 85,000 sq ft. Hypermarkets account for approximately 10% of sales and is an important channel, although recent strategy has focused on expanding supermarkets. There are currently 29 Asda Wal-Mart Hypermarkets and they carry approximately 40,000 products in-store. The key point of differentiation against the superstore format is in the strength of the non-food offer, with the greater floor space enabling wider and deeper coverage. Stores typically carry a fuller food range than in Superstores.
Asda Living Asda's Living stores will be one driver of non-food growth for the retailer as it plans to become the clear number one in non-food retailing, together with growth in other formats and online. The Asda Living stores, initially developed in 2004, currently deliver the strongest return on investment for the retailer of all its formats. Average store sizes are about 28,000 sq ft and the stores stock approximately 23,000 products in-store. There are currently 29 Asda Living stores trading. Asda has set itself a target of opening 150 stores by 2015. Asdas rollout of the format has been slower than originally anticipated due to difficulty of securing sites with the right tenant mix. Category mix has evolved over time in the stores. George has been given more prominence and space while health and beauty has been condensed. Stores to visit Superstore Asda Park Royal, 2-20 Western Road, Ealing, London, NW10 7LW Tel: +44 208 951 9000 Discount Asda Essentials, Halfpenny Lane, Pontefract, WF8 4BW Tel: +44 1977 696 900 Hypermarket (Flagship) Milton Keynes Supercentre Bletcham Way, Milton Keynes, MK1 1QB Tel: +44 1908 362500 Asda Living Unit 4A, Tottenham Hale Retail Park, Broad Lane, N15 4QD Tel: +44 208 493 1600
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Online Retailing
Asda aims to become a world class dotcom business. The retailer now offers nationwide coverage for both food and non-food online. New technologies such as Twitter will help drive innovation and customer engagement. Digital will be a key growth channel in all categories going forward. Asda's wider online strategy involves targeting 1bn of sales in 2011 and across both food and non-food operations. Asda.com Asda.com acts as a portal for Asda's online presence. Significant investment over recent years has improved the appearance and navigation of the site. Asda's home shopping service now has over 97% coverage of the UK population with orders fulfilled from over 160 stores and two dedicated 'online-only' stores. Online orders are delivered within a two hour time slot on the next or following day. Delivery costs vary according to the delivery slot time. The minimum order value is set at 25. Free or cut-price deliveries are often offered to drive traffic.
An important feature of the service is Quick Start Shopping. After a customer has registered, they can enter some details from an Asda till receipt. The next day, the products from the receipt will be automatically stored in the customer's list of Favourite purchases. This feature has been made available by Wal-Mart's IT systems which record transactions at product level. September 2009 saw the introduction of a partnership with web-based 'cash-back co-operative' Quidco. The deal sees Asda's online customers receive 1% cash-back on their transactions made through the Quidco portal, including on delivery charges. As of October 2011 Asda is still in partnership with Quidco. Asda Direct Launched in October 2008 Asda Direct offers store-based, telephone and online ordering for a range of 750,000 general merchandise products. Orders can be home delivered or collected from stores. With orders fulfilled directly from a distribution centre, Asda Direct is able to offer a substantial range of bulky goods that are difficult to accommodate in-store. To broaden access to Asda Direct, Asda is introducing in-store kiosks and introducing a 1,000 page catalogue.
Click and Collect Asda operates a click and collect service which allows its customers to order online from Asda Direct but choose to collect from a local store. It is now available in over 300 stores, including its smaller format supermarkets. As of September 2011 Asda's 'Click and Collect' service saw an increase of 25% year-on-year.
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Take Home Today This is a trial multichannel concept that allows shoppers to order and purchase from the supercentre range and collect the products at their local store. George online Asda launched its clothing offer online as part of the broader Asda Direct launch. The site delivers more than 20,000 George items direct to customers' doors. Saving You Money TV (SYM TV) In March 2009, Asda launched a YouTube channel called 'Saving You Money TV'. The channel is aimed at providing tips for customers on how to be more economical, both with food and at home, and how to eliminate waste. Launching this portal is an example of how Asda are engaging more closely with their customer base, and Asda has set up a dedicated team to run the operation and maintain content. Asda iPhone app In November 2010, Asda announced it had launched an iPhone application for its Asda Price Guarantee initiative which allows Asda shoppers to compare prices with other retailers. Asda Price Guarantee is powered by the independent price checker mysupermarket.co.uk and looks at the prices of around 14,000 like-for-like branded and own label grocery products at Asda with Tesco, Sainsburys, Morrisons and Waitrose. The app also features a store locator so you can quickly find your nearest Asda store and discover opening times, key information and services they offer.
In August 2011 Asda announced that it had launched a mobile optimised transactional grocery shopping site, allowing its customers to shop its online range from a smartphone for the first time. The new mobile-optimised web-site offers all the features currently offered by the main Asda.com grocery web-site; allowing customers to register, shop and amend an existing order or delivery slot up until 10pm the day before delivery. As with the 'static' site the mobile site also offers all the traditional aids to store-based shopping too, such as a store locator function providing maps and directions.
Other Services
Asda offers a wide range of financial services in-store and via its website www.asdafinance.com, including insurance, credit cards, loans and savings. Asda now also has a travel ordering service on its website.
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Asda sources at a variety of different levels within its business, including direct sourcing, global procurement and from south-east Asia. With recent priorities falling on developing its sourcing strategy at either end of the spectrum, there is now a stronger focus on both global and local sourcing. Global procurement The global sourcing team operates from the Wal-Mart head office in Arkansas, USA and acts as a service organisation to support buyers. Wal-Mart operates over 20 offices globally to oversee production and improve efficiency and allow it to form direct relationships with suppliers. In the long term, the global procurement programme is aimed at generating 20% savings in the procurement process alongside improved quality, increased volumes of direct food imports and further supply chain integration. South-east Asia Wal-Mart has a global ordering centre in Shenzhen, China, with a second centre in Shanghai aimed at organising supplier networks in north and east China. This region is a focus for non-food sourcing, with cheap textiles contributing to the development of Asda's George clothing ranges. An Asian sourcing development team is located in the region, which acts as a merchandising function and actively seeks new suppliers. Key messages for suppliers Work with Asda to tailor ranges according to store format and location, and support your category's strategy development process. For new products, genuine differentiation will need to be demonstrated in order to warrant space on shelf. Monitoring post launch will be a vital aspect of the ranging process. Global sourcing Wal-Mart's focus on leveraging its global scale is helping Asda achieve a lower cost to operate model. In return, Asda has assisted its parent company by enhancing its expertise in both fashion and food. Direct sourcing Wal-Mart has a direct sourcing penetration of approximately 33% with around $100bn worth of food, consumables and general merchandise imported directly each year. There are five global merchandising centres aimed at growing its penetration and developing its internal sourcing capabilities. This policy benefits Wal-Mart by leveraging scale, standardising products and improving quality, increasing speed to market and improving supplier relationships. Local sourcing Finding local products which meet local demands will be an important part of Asda's sourcing strategy. Asda has a supplier hub network which provides an opportunity for small suppliers to supply the retailer outside its UK-wide depot infrastructure. Asda sources over 7,000 lines, including world foods, from over 500 specialist suppliers, with a goal of developing a catalogue of 15,000 local lines. Retail Link Retail Link is a core operating tool within Asda and is now the cornerstone of data exchange between suppliers and the Asda network. Accessed online, the system enables both buyers and suppliers to monitor store performance and activity on all products in-store on a daily basis. Asda supplier website In addition to Retail Link, Asda also operates a distinct supplier website (asdasupplier.com), which includes a range of support information for suppliers, including trading guidelines.
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Key messages for suppliers Full exploitation of Retail Link should provide both suppliers and Asda with increased productivity and better cost control through improved and timely availability of data. With Asda further leveraging the global scale of its parent company, there are potential opportunities for suppliers in the UK to take advantage of these global possibilities for growth through Wal-Mart. Ranging Asda is constantly aware of the need to optimise its range, and has put much work into developing this area, with a programme to reduce duplication within its offer. Getting the range right is vital in all categories. Categories differ and in many cases range, quality and value will be flexed depending on what category it is. Each category lends itself to a differentiated offer. The retailer's 'Best for New' agenda is a key component of new ranging strategies - Asda is looking for 50% newness in-store in 2011, including new events and ranges. Asda operates a category strategy process. Its category advisor-ship process is being re-launched in April this year. Regional clustering: Asda's approach to developing ranges involves creating product clusters dependent on different store locations. In range developments in 2011, Asda has overhauled its entire fresh produce range by the end of this year. Asda is focusing on developing its ranging processes and has developed a number of options of how it will achieve the optimum range instore: 1. 2. 3. 4. New offers Space swap - grow/hold/decline Space for impact Even more choice
Key messages Optimisation of ranges in-store is a key priority for Asda given its desire to reduce duplication within its offer. Innovative new products and new bays are a key element of its 'Best for new' pledge. Use of regional clustering insights will be important in ensuring stores merchandise appropriate ranges in different locations. Asda is looking to leverage more strongly its global sourcing via Wal-Mart, as well as at a local level via small suppliers.

Asda believes that building a sustainable business means looking at how they impact on the environment and their communities. In this respect Asda has five distinct areas of focus: Recent sustainability initiatives Between 2008 and 2010 Asda reduced its direct carbon emissions output by 83,000 tonnes. According to the retailer, for every 1 million sales in 2009, Asda emitted 66 tonnes of carbon compared to 83 tonnes in 2007, a 20% reduction. A range of energy saving initiatives means Asda stores are now 20% more efficient than in 2008: Asda has reduced its carrier bag usage rate by 53% since 2007 and changed the bags to increase their recycling content. In July 2009, Asda opened the Asda 'eco-depot' in Didcot, Oxfordshire, constructed using eco-friendly sustainable timber and reclaimed brick. It is also built on a brown field site. To meet its target to cut its fleet emissions by 40% by the end of 2009, Asda introduced a range of measures including the introduction of double-decked trailers. In October 2010 Asda was one of thirty European companies who called on the European Union to increase its ambition to cut EU emissions to 30 per cent by 2020 from 1990 levels in the interests of strengthening Europes economic future, boosting jobs and providing greater certainty and predictability for investors. Since 2008, Asda has reduced its private label packaging by 27%.
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Going forward, Asda says it is planning to be at the forefront of savings within Wal-Mart. Asda also focuses on sourcing sustainable products; examples include sustainably caught fish, low carbon free range eggs and the retailer works with organisations such as The Fairtrade Foundation and The Rainforest Alliance. Community Initiatives Asda continually encourages its staff to get involved in community initiatives in their store areas. To foster this activity it has set up the Asda Foundation which donated 1.3m to 93 projects across the UK in 2010. Asda is particularly supportive to Breast Cancer Care, and Moving Forward the charity's new programme of support and information for people living with and beyond breast cancer. Since the launch of its Tickled Pink campaign in 1996, Asda has donated over 25m to breast cancer charities. Asda is also a major supporter of BBC Children in Need with customers and colleagues donating over 1.5m to the 2010 appeal total of 18m. Asda stays committed to physical and social regeneration from engaging in mixed-use schemes incorporating affordable housing and public services, in addition to opening its second eco-store in 2010. The first eco-store was opened in Bootle in Merseyside. Fairtrade Asda has a dedicated team that works closely with the Fairtrade Foundation to promote their licensed products. All products which bear the Fairtrade mark are guaranteed to have been produced by workers in safe, decent working conditions. As Asda continues to improve links with the Fairtrade Foundation the number of Fairtrade products stocked also increases, the range currently includes more than 100 products.
BRIEF HISTORY
Asda was formed in 1965 by a group of farmers from Yorkshire. Britains best value food and clothing superstore became part of the Wal-Mart family in 1999. Following initial success after the Wal-Mart takeover Asda missed sales and profit targets in 2005 and was forced to implement a back to basics recovery strategy which has delivered positive results from late 2006. 2009 and 2010 delivered impressive growth for the retailer with a 10.9% and 6.0% increase in sales respectively. 2010 saw Asda CEO, Andy Bond, step down from his role and replaced by former Chief Operating Officer Andy Clarke. In 2010 Asda announced an agreement with Dansk Supermarked A/S to purchase its fully-owned subsidiary, Netto Foodstores Ltd. The transaction will enable Asda to convert Netto's UK locations into Asda stores, integrating them into its new supermarket division which comprises stores smaller than 25,000 sq ft (2,300 sq m). In May 2011 Asda opened its first two converted Netto stores, located in Worksop and Wakefield. In its 2011 Q1 earnings release, Wal-Mart revealed that like-for-sales at Asda advanced by 0.8% (excluding VAT) during the first three months of the year, after removing the benefit of Easter from the comparable period of 2010, however unadjusted like-for-like growth was marginal (at 0.1%).A charge relating to the closure of Asda's defined benefit pension scheme, and to a lesser extent, costs relating to the acquisition of 147 Netto UK stores caused operating income to decline in Q1. Wal-Mart's Q2 earnings release has revealed a like-for-sales increase at Asda of 0.5% (excluding VAT) for the trading period from 1st April 2011 to 30th June 2011.
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J Sainsbury plc, 33 Holborn, London. EC1N 2HT Tel: 0044 (0) 207 695 6000 www.sainsburys.co.uk
Domestic Market: United Kingdom No. of Formats: 4 No. of Stores: 948 Turnover: GBP 21,400.23m Operating Countries: 1 Sales area: 1,885,258 sq.m
Sainsburys Mission: At Sainsburys we will deliver an ever-improving quality shopping experience for our customers with great products at fair prices. We aim to exceed customer expectations for healthy, fresh, safe and tasty food making their lives easier every day. Sainsburys strategy focuses on five key growth areas: 1. Great food at great prices: to build on and stretch the lead in food. Sainsburys continues to innovate and provide leadership in delivering quality products at fair prices, sourced with integrity. 2. Accelerating the growth of complementary non-food and services: Sainsburys continues to accelerate the development of non-food ranges and services following the principles of quality and value and to provide a broader shopping experience for customers. 3. Reaching more customers through additional channels. Sainsburys continues to extend the reach of Sainsburys brand by opening new convenience stores and developing its online operations. 4. Growing supermarket space: Sainsburys continues to extend its store estate, actively seeking and developing a pipeline of new stores and extending existing stores. 5. Active property management: The ownership of property assets provides operational flexibility and the exploitation of potential development opportunities will maximise value. 2010/2011 Key Highlights: As of October 2011 Sainsburys was the third biggest grocery retailer in the UK market 30 with a 15.9% market share. In May 2011 Sainsbury's launched a new initiative to 'Feed your family for 50', producing meal plans for three meals a day for seven days for four people with the slogan: Four people. One week. Only 50. How good is that? In April 2011 Sainsbury's announced it was investing in a new multi-million pound technology initiative which will help speed up shopping for its customers. In November Sainsbury's announced it is opening six new food colleges across the UK to offer training to Sainsbury's colleagues who work on it supermarkets' serve-over counters and cafes.
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In September Sainsbury's re-launched its premium private label range, Taste the Difference. At this time the retailer also teamed up with London-based restaurant, Cantina Vinopolis, to showcase the retailer's newly re-launched range. In July Sainsbury's was named the UK's Best Volume Supermarket for its industryleading commitment to improving the lives of farmed animals by Compassion in World Farming (CIWF). In July Sainsbury's launched its latest advertising campaign with its food ambassador, celebrity chef Jamie Oliver, demonstrating the retailer's commitment to its quality food agenda. In July Sainsbury's re-affirmed Sainsbury's continued commitment to Scotland, adding that the retailer plans to open a further six supermarkets in Scotland before 2012. In June Sainsbury's announced it has made a substantial investment in new supply chain technology that monitors products sold on a minute by minute basis. 2010/2011 Key Challenges: Non-food is currently a huge area of growth for grocery retailers. This will be a challenge for Sainsburys with a limited number of very large stores, although the 20072010 From Recovery to Growth plan seeks to address this, with half of all new sales space dedicated to non-food and the launch of a non-food website. Due to its heritage in quality, Sainsbury's has been perceived to be more expensive than its main superstore rivals. Sainsburys are highlighting their value message with the expansion of its 'Basics' range of products, its 'Switch & Save' campaign and 7,000 price cuts across branded products. The competitiveness of the UK food and grocery industry has increased significantly, with all of Sainsburys major competitors trading strongly. Waitrose has expanded rapidly over the last three years and has plans to double the size of its business between 2007 and 2017. Through adopting a multi-format strategy, Waitrose has been able to expand into geographical areas where it was previously not represented bringing it into direct competition with Sainsbury's in a greater number of locations.
2010 saw Sainsburys undertake a large top level reshuffle. Chief Financial Officer, Darren Shapland, became group development director, responsible for new business development as well as convenience, Sainsbury bank, property and group strategy. Trading Director, Mike Coup, was made Group Commercial Director with responsibility for marketing, trade, IT and online. John Rogers replaced Shapland as Chief Financial Officer and Helen Buck was named as Convenience Director. Sainsburys operating board is now in the following order:
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During the first quarter of 2011 Sainsbury's opened 193,000 sq ft of new space, comprising three new supermarkets (two of which were replacements), one extension and 21 convenience stores. The new space means that Sainsbury's has grown its gross space by 15.9% over the last two years, exceeding the 15% target set in 2009. In the 12 weeks to 11 June 2011, total sales at Sainsburys grew by 7.3%, with ex-fuel sales rising by 4.3%. Like-for-like sales (ex-fuel) rose by 1.9%.Performance during the quarter was lifted by strong demand for Sainsbury's re-launched and rebranded 'by Sainsbury's' core mid tier private label. Sainsbury's Value brand also experienced gains. Sales of general merchandise and clothing outpaced the food business with particularly strong sales of childrenswear. In its convenience business, Sainsbury's grew sales by 20%, supported by good like for growth. This was matched by its online grocery sales, which also increased 20%. For the 16 weeks ending 1 October, Sainsburys reported a 7.8% rise in overall sales (4.4% excl. fuel), with like-for-like growth of 5.4% (1.9% excl. fuel). The results showed a slight improvement from its first quarter figures, when overall sales rose by 7.3%, with like-for-like growth of 4.8% (+4.3% and 1.9% excl. fuel, respectively). This helped push up overall sales for the first half by 7.6%, and like-for-like sales by 5.1% (+4.3% and 1.9% excl. fuel, respectively).
STRATEGY
Company Strategy
Sainsbury's core strategy is to offer an improving quality shopping experience with great products at fair prices, thereby appealing to a wide range of customers. Sainsbury's is currently in the growth phase of its, 'From Recovery to Growth' strategy, led by Justin King who joined as Chief Executive in March 2004. The recovery plan was set out in October 2004. Sainsbury's strategy is based on five areas of focus which aim to improve the retailer's profitability through universal customer appeal and increased reach throughout the UK: Great food at fair prices - to build on and strengthen its position in food. By sharing customers' passion for healthy, safe, fresh and tasty food Sainsbury's aims to continue to innovate and provide leadership in delivering quality products, at fair prices, sourced with integrity. Accelerating the growth of complementary non-food ranges - to continue to enhance and expand non food ranges following the same principles of quality, value and innovation and to provide a broader shopping experience for customers. Reaching more customers through additional channels - to extend the reach of Sainsbury's brand by opening new convenience stores, developing the online home delivery operation and growing Sainsbury's Bank. Growing supermarket space - to expand the company's store estate, actively seeking and developing a pipeline of new stores and extending the largely under-developed store portfolio to provide an improved food offer while also growing space for non-food ranges. Active property management - the ownership of property assets provides operational flexibility and the exploitation of potential development opportunities will maximise value.
Over recent years, the retailer has renewed its commitment to these priorities by allocating additional capital and resources. Sainsbury's provided an update on its progress at its interim results release in November 2010:
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Great food at fair prices Re-launched its entire Taste the Difference range in September 2010, which now includes over 1,100 products. Sainsbury's is continuing to refresh its fresh food counter offer and is investing heavily in training its staff to service these counters. Backing British and regional sourcing remains a priority. Accelerating growth of complementary non-food ranges and services Non-food continues to grow three times faster than food sales due to range expansion and the increase in store space. The TU (you in French, Italian and Spanish) clothing range continued to be the star performer. Sainsbury's was the 4th largest back to school retailer by volume. Clothing warehouse capacity has doubled to manage the increasing demand for clothing lines. 111 Travel Money bureaux now in stores, serving over 0.5 million customers. Reaching more customers through additional channels 13 new stores were opened in H1, which will be up to 50 in H2. The convenience business is now worth 1bn in annual sales, with strong underlying growth. The groceries online business is growing rapidly with sales up just under 25 per cent in H1, and it is now in reach of nearly 90% of UK households. Click & Collect was rolled out and is now in over 150 stores. Click and collect allows you to order online today and then pick up the purchase at your local Sainsburys store tomorrow. Growing supermarket space Approximately 75% of new supermarket space is being added in the north and west of the UK. Sainsbury's new supermarket space is performing ahead of expectations and it has a strong pipeline established. On track to meet its target of increasing total gross space by 15% over the two years to March 2011. Active property management Market value of freehold property portfolio increased to 9.8 billion. Up 2.3 billion on last year, including 0.7 billion of property value created from investment and development activity. 294 wholly-owned freehold and long leasehold stores, of which 85% have development potential. Two property joint ventures containing 43 supermarkets. Ongoing sales and leaseback programme resulting in total profit of 27m on disposal. Sainsbury's has also identified 'corporate responsibility' as core to the way in which it operates, reflecting its long standing heritage of acting responsibly. In January 2011, Sainsbury's included a review of its corporate sustainability agenda, including updates on its commitments and progress to date. Some of these commitments and progress updates from Sainsbury's include: Best for food & health The retailer opened two new food colleges in London Colney and Oldbury, as part of its plans to open six food colleges across the UK. The colleges will offer training to colleagues working on the meat, fish, deli and hot food counters, as well as cafes. Sainsbury's continues to drive its sourcing policy of seasonal British produce and in January it stated it was the number 1 retailer of British apples and pears during that season.
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Sourcing with integrity Sainsbury's hosted 1,000 farmers at our 'Farming for the Future' conference in October 2010. The conference looked at some of the pressures facing the industry, such as rising demand from emerging markets, the impact of climate change and legislation, and how food security will impact global resources. Sainsbury's was awarded the award for 'Best Retail Initiative' at the BBC Radio 4 Food and Farming Awards. The award recognised the retailer's work it does through its development groups to help farmers reduce their carbon footprint, to achieve financial savings. Respect for our environment Sainsbury's hosted a supplier environment conference for 100 private label suppliers to launch its sustainability scorecard and provided training on how to become more efficient and environmentally sustainable. The group's 'Make the Difference Day' in November 2010 encouraged customers to stop using plastic bags by giving them a free 'Bag for Life' as well as double Nectar points every time they reused a bag during the week. In the last financial year, Sainsbury's gave away over 462 million Nectar points as a result of customers reusing bags. The retailer is on track to exceed this amount by the end of the current financial year. Making a positive difference to our community Sainsbury's has committed a number of its colleagues to work full time helping businesses and the voluntary sector work more closely together. The group is working with the government, the voluntary sector, Business in the Community and other stakeholders to develop the concept of Business Connectors and to look at how they can further contribute to 'Big Society'. A great place to work Sainsbury's is the first food retailer in the UK to be awarded a gold accreditation from 'Investors in People' for its commitment to improve it business through investment in its colleagues. In 2011 the retailer will recruit and train in excess of 500 counter and cafe colleagues who will join more than 10,000 colleagues already working on them. This is to meet increased demand for the fresh food available at its counters, as well as its ambitious store expansion plans. In line with the retailer's principle, 'Best for food and health', Sainsbury's announced in October 2010 that it had launched a new in-store scheme which provides healthy eating advice to its shoppers. In August 2010, Sainsbury's announced the launch of a new recycling initiative to encourage its customers to recycle their redundant mobile phone chargers. In the first campaign of its kind, the supermarket will introduce charger recycling banks at the entrances of all of its stores for a four week period. This initiative is one of Sainsbury's Make the Difference Days, which sees stores nationwide, campaigning over a specific environmental issue.
Trading Strategy Overview

Sainsbury's continues to develop its offer to provide wider choice and helping to offset the rising cost of living. During the last 18 months the retailer has focused on: Refreshing and re-targeting its promotional programme. Growing its Basics range and penetration in-store. Maintaining a competitive price position.
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Customer Offer Sainsburys recognises that the creation of a competitive customer offer (in terms of price, promotions, range and service) lies at the heart of a successful sales-led recovery. The customer offer has undergone a number of changes designed to make it simpler, more effective and more competitive on core items. Sainsburys has invested heavily in its range, improving prices on key lines and significantly upscaling the quality in its own label offering. Private label ranges such as Taste the Difference and Be Good to Yourself are particularly important for Sainsburys as it seeks to differentiate its offer and restore its reputation for delivering excellent quality and innovative products. While product quality is a key differentiator and the retailer is keen to stress its credentials in terms of the use of pure ingredients, health, organics and sourcing with integrity. The solid foundation which has been laid over the last three years has enabled the offer to be developed more recently to perform in the current economic climate as household budgets have become increasingly under pressure. In September 2010, Sainsbury's re-launched its entire premium private label range, Taste the Difference, which includes a number of new lines and improved recipes. To read more about this re-launch, please go to the private label section. Price & Value Over the last four years Sainsbury's has invested significantly in improving its price position and is now much more competitive on price. However, the retailer continues to focus on price and promotions to help customers offset the broader effects of inflation. A key element of communicating a stronger value message has been its investment in its private label ranges, particularly Basics, and the launch of its 'Switch & Save' campaign which encourages shoppers to switch to private-label alternatives. Sainsbury's has built on the success of this latter programme with the launch of 'Shop & Save' and 'Cook & Save'. General Merchandise Strategy Sainsbury's has targeted the accelerated development of its non-food offer as a key part of its growth strategy, and is currently growing at around 3 times the rate of food. General merchandise is expected to account for 40% of all new space, and the retailer continues to build its infrastructure and capability in this area. Going forward, Sainsbury's expects its non-food range to account for 25% of sales growth, given the significant growth potential within the business. Sainsbury's reputation for quality, value and innovation is just as relevant to its non-food ranges as it is to food. In branded areas such as music and entertainment the focus is on offering products at competitive prices and the company has been particularly successful in gaining significant market share of recent DVD and CD releases. In March 2007 the company introduced a premium homeware range under the 'Different by Design' brand which mirrors the premium 'Taste the Difference' food offer, while in a further development to broaden the range and introduce a 'good, better, best' range segmentation strategy, in April 2008 the retailer introduced a range of 2,000 homeware products under the 'TU home' brand, which was later extended across a greater number of categories. This continues to be a focus for Sainsbury's in its new larger extension stores, as the brand performed strongly in 2009/10. Supplier Opportunities Suppliers now have the opportunity to use customer segmentation data in order to execute effective direct marketing campaigns in partnership with Sainsbury's. Suppliers are able to use the data to effectively target likely purchasers of their products, based on their existing purchasing habits. Such campaigns may be carried out on a solo basis or in partnership with other suppliers of complementary products. Sainsbury's runs a number of themed campaigns that suppliers may become involved in, such as mailings to new mothers, birthday mailings, pet owner mailings and BWS campaigns, and are planning to increase the activity in this area.
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Sainsbury's is working with the Loyalty Management Group (LMG) to develop an application to help its trading team and suppliers find out how well products are selling. The 'Self Serve' application provides an analytical reporting system based on goods scanned at the point of sale. The first phase of the system, called Brand Health, takes sales data from Sainsburys stores across the country and provides reports on how well particular brands are selling, and when and where they are selling. The system also shows what other goods consumers are buying alongside a particular product, and if a product declines in sales it will show what other products consumers have switched to. The system also provides information on how well a particular brand has performed before and after a promotion, and monitor how well new products are selling in stores, in addition to how well different types of promotion in different media are working.
Pricing and Promotional Strategy

Sainsbury's invested significantly in pricing as part of the 'Making Sainsbury's Great Again' recovery programme, having noted that a price differential had opened up between itself and its competitors. Sainsbury's aim going forward is as much to restore its reputation for quality and brand heritage as to continue investing in price. Pricing on brands and basic core grocery items is being improved to enable Sainsbury's to compete more effectively. However, own label and fresh categories will be priced according to the quality they deliver, rather than other relative pricing in the market. In total over 450m has been invested in quality and price, with over 20,000 prices cut, and having re-established price competitiveness, the retailer will maintain this price position going forward. More recently, a range of initiatives have been launched to further support the retailer's value for money credentials. These include: Feed your family for a fiver campaign - this was launched in March 2008, which showed customers how affordable, healthy and nutritious meals for a family of four could be prepared within a budget of 5. An extension of its 'Basics' range of products and increased penetration across a greater proportion of stores. Basics' now accounts for 3% of total sales and numbers in excess of 650 SKUs. The launch and continued success of its 'Switch and Save' campaign which encourages shoppers to switch to own-label ranges. New advertising and in-store marketing campaign highlighting 7,000 lower prices across branded food ranges. The trial of a scheme offering "Buy Now, Free Next Time" vouchers on selected products.
Sainsburys offers a range of different promotional mechanics including multi-buys, price promotions, Nectar point promotions and brand sponsored competitions. The retailer recently stated at its Q2 results update in October 2010 that its promotional levels are currently running at about 36% of sales. Sainsburys has reshaped its promotional offer, reducing the number of promotions on offer in store at any one time, and placing more emphasis on deriving maximum value from the promotions it does run, offering stronger, added value promotions with eye catching signage in store. In September 2008 it launched its 'Switch and Save' campaign which highlighted to consumers how they could save at least 20% by switching from a branded product to the equivalent private label alternative. This campaign followed a comprehensive appraisal and development programme of the top 200 products to ensure they continued to offer great quality as well as value. While this campaign has proved successful for Sainsbury's, branded suppliers have responded, serving to make the wider Sainsbury's offer more competitive within the market. Many of Sainsbury's branded promotions are now offered under its 'Shop & Save' campaign. In June 2009, Sainsbury's highlighted the investment that had been made in reducing prices across its branded product ranges with its new 'Over 7,000 Prices Lowered' marketing and advertising initiative, using the "They look the same, they cost the same" strap-line.
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Sainsburys own label is designed to offer an extended choice to the customer, meet customer requirements for value and convenience and increase profitability by driving sales, margin and loyalty. The range mix was been realigned in 2009 with the mid-tier Sainsbury's label shifting from 90% of the whole offer to around 80%, to the benefit of 'Basics', 'Taste The Difference' and 'So Organic'. Sainsbury's 'Wheel of Health' nutritional labelling system is currently featured on around 4,500 products. In December 2010 Sainsburys announced that it would be re-launching its midtier private label range under the new brand 'by Sainsbury's'. The process started in December 2010 and is expected to complete by January 2013, by which time all 6,500 SKUs will have been reviewed and re-launched. The retailer is conducting extensive customer and benchmarking tests throughout 2011/12 and believes that some 65% of products will be new or improved by the end of this process. Own label goods, including the lower-priced Basics and premium Taste the Difference ranges, account for more than 50% of Sainsbury's sales - slightly higher than at Tesco 31 and Asda. The majority of Sainsburys own label products fit into the 3-tier ranging strategy:
1. Good - the 'Basics' range of 700 everyday entry-price products satisfies the consumer demand for basic, good quality products at low prices. In 2009, Sainsbury's expanded this range with 140 new products, bringing the total number to 700. The range continues to deliver strong growth and sales were up 25% in 2009/2010. Sainsburys sees the brand as playing an important part in ensuring Sainsbury's universal appeal and is the company's fastest growing sub-brand. In July 2009, the retailer announced a wave of significant price cuts across the range, lowering the prices of 200 lines to 50p or under; with a further 400 products cut to 1 or under, such price cuts affect the vast majority of the 650-strong range and go some way to further bolstering Sainsbury's value credentials. In August 2011 Sainsburys announced that its Basics own label range was seeing the fastest growth in sales amongst all ranges, highlighting the tough economic climate.
2. Better - the core Sainsburys brand offers customers quality and value for money, and will increasingly be used as a strategic lever and will therefore boast a high level of new line introductions going forward. The foundations of this development have already been laid, with Sainsburys responding to customer desires for healthier foods, ready meals, ethnic and organic foods.
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Namnews: Sainsburys update 29.06.11
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3. Best - the 'Taste the Difference' brand is a range of premium foods designed to compete with Marks & Spencer and Waitrose in the upmarket grocery sector. The range covers a wide range of categories and is used as a key competitive vehicle for Sainsbury's in order to differentiate its fresh and quality food offering. In September 2010, Sainsbury's announced that it re-launched its premium private label range, Taste the Difference, which now features over 1,000 products including many new lines. The retailer has said this is Sainsbury's biggest investment in any of its private label ranges which is being reported as a multi-million pound overhaul. To complement the new food ranges, Sainsbury's has also re-launched a number of beers, wines and spirits. New brand standards have been applied to this range - ingredients used in the range now include only UK sourced meat except where the product is authentically produced in another country (e.g. Parma ham) and free-range eggs. All hydrogenated vegetable oils have also been removed, a process that is currently being replicated across all Sainsbury's products. The range was relaunched in time for the Christmas period which is a particularly strong trading period for any retailer's premium private label ranges. In August 2011 Sainsburys announced that its House range, launched in May 2010, was performing well and that the Taste the Difference selection was the fastest growing part of the wine category, which had experienced growth of 47% year-onyear. In addition to the core ranges above, Sainsburys also offers a number of targeted ranges, designed to meet the needs of specific consumer groups. These ranges offer healthier products, organic products, childrens meals and solutions for particular dietary requirements as outlined below:
Be Good To Yourself This healthy eating range was originally launched in May 1999 and was re-launched in January 2010 featuring new packaging, new products and improved recipes. Sainsburys also reduced the packaging across the range of 230 products as part of the retailers ongoing programme to save more than 39.5 tonnes of packaging waste per annum. Other improvements included the implementation of nutritional standards for fat, saturated fat, sugar and salt to ensure, the products have, 30% less fat than their standard equivalent or contain less than 3% fat overall. 60 new products were introduced in January 2010 bringing the total to around 250 lines.
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Freefrom In response to the 20-30% of UK consumers with food intolerances, Sainsburys developed and launched the Freefrom range in 2002. Following its re-launch at the end of 2006, there are now over 60 products in the range, including breads, pasta, sauces, cakes, margarines, biscuits and frozen foods. During 2009/10 Sainsbury's launched 100 new and improved 'Freefrom' lines making the range 236 in total.
SO Organic Sainsburys organic range was re-launched in September 2005 to coincide with the retailers sponsorship of National Organic Week and it is now the retailers second largest sub-brand. 100 new products were added at this time as well as lower prices across 100 other organic products. Sainsburys now has over 1,000 different organic foods in-store, 450 of which are sold under the SO Organic label, spanning a number of categories including fruit and vegetables, milk, dairy, bread, cereals, pasta, meats and wine. While the overall market for organic products is down, the retailer is maintaining its market share, with sales of organic products topping 4million per week. All of Sainsburys supermarkets feature a minimum core range of 100 organic products, providing the retailer with approximately 30% of the UKs organic market.
Super Naturals Launched in 2007, the range of over 20 Super Naturals meals is Sainsburys healthiest ever range. Super Naturals is an advance on the Be Good To Yourself range and is marketed as being great-tasting while using healthy ingredients. Each of the meals has been devised by restaurant trained chefs.
Sainsburys Kids This range consists of 60 lines that ensure children receive appropriately sized portions with levels of fat and salt in line with healthy eating guidelines. With this range, Sainsburys was the first retailer to provide Guideline Daily Amounts (GDAs) for children aged 5-10 years on packaging.
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House In May 2010, Sainsbury's introduced a new 25-strong entry level private label range priced between 3.50-4.50 which is aimed at less confident shoppers with a clear offer based on grape variety, style and not by country. Product Development Sainsburys has set standards for both product ingredients and nutritional content, with clear standards having been developed for all sub-brand ranges. A new IT system ensures that all standards are adhered to and significant enhancement has been made to the team of inspectors located in the companys depots. The inspectors check the quality of products being delivered before they are accepted into the supply chain. This is particularly relevant for fresh product areas. In addition, Sainsburys has announced that it plans to remove all trans fats and artificial flavour enhancers from its own label range.

Sainsburys takes a high proportion of their customer-spend from upper-middle class groups when compared to the total market - roughly a quarter of its customers come from the AB socioeconomic group. This is due in part to Sainsburys strong heritage as a quality food retailer, established values and the locations of its stores. The development of its own-label and fresh offering serves to further attract these customer groups, but also services to broaden its shopper base. Sainsbury's largely follows the market with respect to household ages, with the exception of under-trading slightly in the youngest age group. The principal reason for this is a low presence of children in well established households, particularly in the 45-64 age brackets, which implies a higher disposable income. Sainsbury's caters to this extra disposable income through premium ranges which focus on food quality, choice and innovation. Although Sainsbury's has improved its pricing position to be more competitive in the market place, a premium is still maintained where it can be justified by the quality of the product. In terms of household size, more Sainsburys customers have a household size of one or two persons when compared to the total market. Sainsburys is however trying to penetrate the family orientated market through initiatives such as Active Kids, Feed Your Family for a Fiver and Feed Your Family for 50. Sainsburys has the second largest trip spend of the big four, but is below the leading four average, due to the skewing created by Asda. The number of people shopping at Sainsburys is also lower than the leading four retailer average. However, the market average is distorted somewhat by Tescos enormous lead in penetration and the gap between Asda and Sainsburys is actually very slight. Sainsburys has achieved growth in its household penetration levels over the last three years.
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Sainsbury's marketing strategy is underpinned by the underlying mission of delivering great products at fair prices, offering food that is healthy, safe, fresh and tasty. Sainsbury's believes that its marketing strategy, in line with its in-store offering, should have universal appeal, focusing on what unites customers, rather than what differentiates them. In the past, the marketing of Sainsbury's offer has tended to focus more on "natural" Sainsbury's shoppers (those interested in fine foods and organic for example). This marketing strategy has now being widened to include all customer profiles, including traditional families, for example, communicating the range and value positioning more strongly. In July 2010, Sainsbury's announced it had launched a paid-membership online diet club. The new website, http://www.sainsburys.co.uk/diets, can also be accessed by members on mobile phone devices.
The Active Kids Campaign In February 2010, Sainsbury's extended its Active Kids campaign following its success with the initiative since its initial launch in 2005. The re-launch was supported by heavyweight in-store activity; including point of sale hop scotch mats front of store, exercise 'Try Something New Today' tips, barkers and shelf talkers, and Active Kids branded carrier bags. In terms of external media, press advertising appeared in educational titles, national newspapers, supplements and consumer magazines. Sainsbury's also supported the launch with radio promotions being aired across 49 stations. In October 2010, the retailer announced it had reached its goal to donate over 100m worth of sports equipment and experiences to schools and sports clubs across the UK.
Advertising Strategy The largest proportion of advertising spend by Sainsburys is invested in TV campaigns, which had been spearheaded by Jamie Oliver. However in July 2011 Jamie Oliver announced that he will no longer advertise for Sainsburys, ending a partnership that has lasted 11 years. Oliver will continue to host adverts for the supermarket until a final Christmas advertising campaign in 2011. Sainsbury's advertisements also feature heavily in the mainstream press, where the advertisements often relate to the TV campaign. Key value messages are largely focused on instore marketing and direct mailing campaigns, which are now being used more aggressively to signal price cuts and promotional deals. In addition to "above-the-line" campaigns, Sainsburys also continues to grow its brand in other ways, including online advertising on sainsburys.co.uk, price investments and Nectar card communications.
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Broadcast Marketing In March 2008 Sainsbury's launched a new TV campaign, fronted by Jamie Oliver. The 'Feed Your Family for a Fiver' campaign focuses on value family meals. The emphasis was placed on encouraging families to cook healthy, affordable meals from scratch. The recipes and prices of featured products were also displayed in-store and online. The campaign was launched in response to tightening economic conditions which had led to increased pressures on household budgets. Non-food Advertising In 2010, Sainsbury's began airing its first television advertisement for its non-food range. The advertisement offers customers free delivery on orders over 50. Advertising Sponsorship In May 2010, Sainsbury's announced it is to become one of the official sponsors of the London 2012 Paralympic Games. Sainsbury's are due to work with LOCOG between now and 2012, utilising its network of over 850 stores to help promote the Paralympic Games. In this endeavour, the retailer will make Paralympic Games and Paralympics GB merchandise available across the UK. In-Store Marketing Stores are used as an effective marketing medium with in-store media carrying a variety of messages for all products and services. The message of price and promotions are emphasised strongly both on the approach to the store and at the entrance, highlighting the strongest and most attractive promotions currently on offer in the store, whilst a strong promotional power aisle is created through the centre of the store. On a regular basis, Sainsburys will bring a number of different categories and advertising media together to create added theatre and excitement. An example of this is the 'Switch and Save' initiative, which has been promoted through the use of external advertising (including print media and TV) and in-store campaigns (POS and leaflets).
Direct Marketing Sainsburys loyalty card Nectar has been in operation since 2002, and is administered by LMG (Loyalty Management Group). Customers are able to collect points from a number of different outlets, thereby increasing the potential rate of points collection. In September 2007, the card was re-launched as a reward scheme rather than a discount programme. In February 2010 Sainsbury's announced it was now the largest loyalty card scheme in the UK, with over 16.8m people using their cards: The benefits of the loyalty card scheme to Sainsburys are as follows: Driving Sales: Sainsbury's actively uses the data from the scheme to both reward its loyal customers and to encourage lapsed shoppers, or those who shop at Sainsbury's infrequently to increase their proportion of spend with the retailer Data and Communication: at the start of the scheme, all existing Reward card users were enrolled again, instantly updating the customer database. With over 12 million active collectors on the database and over 1 billion transactions a year, the scheme is enjoying higher levels of participation than the old Discount scheme, and is providing new communication vehicles, such as regular statements of points collected, including customer-specific couponing. Marketing Spend: the cost of starting a loyalty card venture and the cost of subsequently producing standalone marketing campaigns is much higher than a joint campaign with all sponsors. This means that, for the total loyalty card budget available, a greater proportion can be spent on rewarding shoppers. Participation in the scheme costs Sainsburys approximately 120m each year.
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Customer Marketing The wealth of customer data provided by the Nectar scheme has allowed Sainsbury's to develop a comprehensive tailored communications for its customers. Sainsbury's employs a variety of mechanics to develop deeper relationships that drive long-term changes in shopping behaviour. The range of mechanics includes: Free gifts. Discounts on specific products or categories. Opt-in communications with topical information and exclusive offers. Discounts on total basket spend (either cash or points).
The mechanic employed and the offer tendered are driven by a number of factors, particularly the customer's shopping behaviour previous purchase history in a specific category, channel choice, size and frequency of basket as well as life-stage, demographic and milestone (e.g. birth-date) information. The bulk of activity targets total basket-spend, but there is an increased emphasis on product and category mailings. Results to date demonstrate the effectiveness of tailored communications. Customer response to targeted offers has been dramatic, with upwards of 70% of mailed customers redeeming against a single offer. Targeted offers have also proven to be highly effective in getting customers to try new products, switch brands or expand their repertoire in specific categories.
Convenience Sainsburys opened its first dedicated convenience stores in 1998, with the launch of three sites under the trial Local fascia. This was followed by the introduction of the Sainsburys Central format (which no longer exists) early in 1999 and the acquisition of Bells, Jacksons and JB Beaumont in 2004, and SL Shaw in 2005. Over 2008 and the early part of 2009, the company tested different approaches to the convenience market in five stores. These have since developed into three distinct formats; food on the move, neighbourhood local and 'fresh local'. These formats were driven by the recognition that the convenience market has very varied needs, primarily driven by store location and customer demand. The city worker shopping for lunch has a different priority to a family using their local shop for essential items. These needs extended beyond product range to a number of other criteria, and Sainsbury's established that there were clear enough distinctions across types of stores for it to be able to classify into the three clusters, so set about putting together propositions to meet these distinctions. These new formats are providing insight to help drive the accelerated expansion of the convenience operation. Sainsbury's was operating 337 convenience stores as of August 2011.Sainsbury's currently has plans to open 75 to 100 new stores over 2011, and 100 per year thereafter. The retailer stated that it continues to be creative by using all available space to provide as comprehensive on offer as possible with its convenience stores delivering good underlying growth.
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Superstores/Supermarkets Sainsburys is primarily an operator of superstores which average at 34,330 sq ft. Although Sainsburys previously operated hypermarkets under the SavaCentre fascia, these have now been subsumed into the main superstore portfolio. In addition to Sainsbury's current plans for space growth in convenience and extensions, the retailer also has significant opportunity to grow supermarket space. According to Sainsbury's it is currently under-represented in many areas of the UK and this provides real opportunity for growth. In 2010 Sainsburys opened a total of seventeen new superstores/supermarkets. As of August 2011 Sainsburys had 557 supermarkets in the UK. The in-store environment is heavily focused on the food offer, with fresh departments and counter services playing a key role. Stores feature bakery, fish, delicatessen, butchery and hot-food counters, along with a full-service bakery and patisserie. Going forward, non-food will have a larger role to play in these stores, mainly in the form of homewares and its clothing offer, although Sainsburys will continue to be primarily a food retailer. Sainsbury's opened its latest 'green' store, Sainsbury's Crayford, at the end of September 2010. In a world first, the retailer is using ground-breaking technology that captures natural energy from hundreds of metres below ground, to heat and cool one of its largest stores in Crayford, Kent. The technology is expected to reduce the store's overall energy consumption by approximately 30% compared to a typical store, and has the potential to revolutionise supermarkets' approach to thermal energy use across the world. The newly extended store is now 2.5 times bigger, at 100,000sq ft, but has the same carbon footprint as the smaller store because of the use of onsite renewable technology. Stores to visit: O2 Shopping Centre, 241-279 Finchley Road, Swiss Cottage, London NW3 6LU Tel: +44 (0) 207 433 1493
Sainsbury's Fetter Lane Local, 60 Fetter Lane Holborn London EC1N 2HT Tel: +44 (0) 207 583 4274
Online Retailing
Sainsbury's internet based home shopping service is the second largest national on-line grocer, with a 90% national coverage, operating from 169 stores. The service delivers around 100,000 orders per week, and plans are in place to increase, to 200, the number of stores from which this service operates. While this will not significantly increase the reach and spread of the service, it will increase capacity in areas where there is already significant demand. Over 2010, sales grew by almost 20%, reaching an estimated annualised value of 747m. Sainsburys has forecast sales of 896m for 2011 with sales expected to reach 1bn over the next three years.
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Sainsburys currently operate a number of non-food websites including: www.sainsburyskitchenappliances.co.uk, which offers a range of white goods for sale including washing machines, freezers and ovens, orders can also be taken over the phone and www.sainsburystelecom.co.uk , which is a partnership with the Carphone Warehouse and O2 offering a range of mobile phone services including pay monthly and pre-paid phones as well as a ringtone download service.

Local Sourcing Sainsburys stated aim is to increase the number of local/regional products available in its stores (provided they meet all of the necessary quality, technical and welfare standards), and has established local and regional sourcing teams dedicated to finding these products and bringing them to market. In some cases, these products will be truly "local", sold in a small cluster of stores close to the point of origin. However in other cases, the products may be "locally renowned" products, but with a much wider, even nationwide distribution. In addition to the sourcing and listing of appropriate locally produced food, Sainsburys also operates a Supplier Development programme, designed to provide specialist help and advice to small and medium sized suppliers wishing to market their products and grow their businesses within larger supermarket operations. The programme is also open to suppliers who do not currently trade with Sainsburys. Building on the success of the Supplier Development Programme, Sainsbury's has also launched "Supply Something New." The scheme involves top representatives from the supermarket taking to the road every two months in a search for new, innovative, large and small UK suppliers. Many of the suppliers attending the workshops will have little or no experience in dealing with a supermarket so Supply Something New has been built around the suppliers needs for long term and positive contact. As with the Supplier Development Programme successful producers will begin by supplying just a few stores in their region. If their products have a wider appeal, Sainsburys will help to build their businesses by expanding distribution. In addition, 12 regional managers have been appointed, responsible for developing the regional sourcing programme, supporting and expanding the 3,000 regional products already sold. This scheme has been extended to Australia, France and Germany as part of the retailer's drive to find new global products.
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As part of its Northern Ireland local sourcing initiative, a dedicated buying unit has been established for Ireland and currently sources around 200m worth of goods from locally based suppliers - 292 lines of Northern Irish products. Following a move in November 2007 which saw the retailer only sell locally sourced lamb in its Northern Ireland stores, in March 2008 Sainsbury's announced that 100% of its beef sold locally would also be sourced, processed and packed locally. In addition, Sainsbury's has also doubled the number of locally produced products in its Scottish stores to more than 2,000 following the launch of a dedicated buying unit for Scotland. Global Sourcing The Sainsburys Global Sourcing Team which was based in Holborn was disbanded in July 2008. Sainsburys operate non-food sourcing offices in Poland and Hong Kong. Organic Sainsbury's has launched a range of initiatives to support organic production. For example, the retailer offers contracts for organic beef to producers across the country, including Northern Ireland producers. Sainsbury's is also to offer 'top-up' price agreements for producers in conversion whilst a contract scheme for producers supplying Sainsbury's Extra Matured Taste The Difference range is to be piloted. This will require additional farm requirements that will be new to the industry which will position the award winning extra-matured range at a higher level. Fairtrade In February 2010 Sainsbury's announced that it had become the world's largest retailer of Fairtrade products, with almost one in every four pounds spent on Fairtrade in the UK spent at a Sainsbury's store. Sainsburys annual Fairtrade sales increased to 218m over 2010 (+10% yearon-year). The scale of Sainsbury's success is thanks in part to a series of conversions it has made in major food and drink categories. In July 2007, the supermarket moved all its bananas to Fairtrade and since then has converted 100% of its own brand roast and ground coffee and sugar ranges and 95% of its own brand tea ranges. The range now extends to over 800 products, including elements of its clothing ranges. The support of Fairtrade is very much in line with Sainsbury's broader ethical credentials and heritage. With a strategy of offering 'value with values' the retailer has continued to develop its added-value ranges, including its Fairtrade offer, whilst also placing a stronger emphasis on its value credentials, including the further development of its private label ranges. Through switching some of its core ranges to Fairtrade, Sainsbury's has been able to achieve both goals. Technical Developments Since 2000, Sainsburys has been an equity partner in GlobalNetXchange (GNX), a web-based business-to-business trading facility. It uses the latest IT to unite major buyers worldwide with supplier companies. Benefits of membership include: Efficiencies and cost savings from competition between suppliers Collaborative buying opportunities for capital items Time savings by trading and communicating on-line More efficient planning and forecasting Faster development of new products Increased range and choice of goods, particularly in private label. Sainsburys was the first retailer in the world to develop food products via the Internet, in a scheme intended to cut development times and costs by as much as a third. The package, known as ProductVine, is supported by GNX and stores all relevant information on a secure website where NPD participants can access and modify it as the development programme continues. The package has automatic checks built in, so for example if an ingredient was changed an e-mail would be sent to the packaging designer alerting them to alter the packaging. This reduces the mistakes that slow down the launch of products.
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The Sainsburys Information Direct (SID) website is the main facility for the exchange of information between Sainsburys and suppliers on a day-to-day basis. The portal is dedicated to improving supply chain performance. Supply Chain Strategy Sainsbury's supply chain goals are: to deliver an ever improving, quality shopping experience for customers; to provide great products at fair prices; to exceed customer expectations for healthy, safe, fresh and tasty food; and to make customers lives easier every day. The retailer aims to develop a world class supply chain delivering flexibility to support future growth and resilience. Sainsbury's colleagues are encouraged to be truly engaged and focussed in order to deliver best in class service and industry leading availability for customers, with industry matching cost and sales share. The values that influence the development and operation of Sainsbury's supply chain include: Getting better every day. Great service drives sales. Individual responsibility team delivery. Keep it simple. Respect for the individual. Treat every as your own.

Developing into a sustainable operation is now a key part of Sainsbury's strategy. Sainsbury's sustainability goals include: Reduce the CO2 emissions per square foot by 25% by 2012. Reduce total waste sent to landfill by 50% relative to sales by 2010. A commitment to divert all food waste away from landfill.
Sainsburys has identified corporate responsibility as core to the way in which it operates. The five key principles that drive this are: Best for food and health. Sourcing with integrity. Respect for the environment. Positive difference to the community. A great place to work. Green Store Developments Sainsbury's opened its latest 'green' store, Sainsbury's Crayford, at the end of September 2010. In a world first, the retailer is using ground-breaking technology that captures natural energy from hundreds of metres below ground, to heat and cool one of its largest stores in Crayford, Kent. The technology is expected to reduce the store's overall energy consumption by approximately 30% compared to a typical store, and has the potential to revolutionise supermarkets' approach to thermal energy use across the world. The newly extended store is now 2.5 times bigger, at 100,000sq ft, but has the same carbon footprint as the smaller store because of the use of onsite renewable technology. The stores also uses sun pipes to maximise use of natural light and daylight dimming for electric lights, along with an array of environmentally-responsible features which are becoming standard at a growing number of Sainsbury's stores.
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Sainsbury's has a commitment to reducing the carbon footprint of its store network, and has set a target of reducing CO2 emissions per square metre by 25% by 2012. Each year, Sainsbury's is planning to open a minimum of two environmental trial superstores and a greener Sainsbury's Local, enabling it to continue to innovate and test new ideas and technology. In March 2011 Sainsbury's was awarded the Green Retailer of the Year Award at the annual Drinks Business Green Awards. The award recognised the supermarket's work behind the scenes to reduce its carbon footprint, improve performance in supply chain management and reduce its impact on the environment. The company was commended for its leadership in raising awareness and making a "real difference" in this area. Packaging & Recycling Between 2005 and early 2011 Sainsbury's has reduced its total packaging weight by 13.32%, relative to sales, and is working to reduce own brand packaging weight by 33%, relative to sales, by 2015. Sainsbury's aim for their packaging to either be reusable, recyclable or homecompostable. Energy Efficiency This continues to be a top priority for Sainsburys with both economical and environmental benefits. Sainsburys measures improvements in energy efficiency by monitoring CO2 emissions per square metre of sales space (relative emissions) as well as the total amount of CO2 emitted (absolute emissions). Water In 2007 Sainsburys set itself the target of reducing water use per square metre of sales space by 50% by 2012. Initiatives to achieve this target include fitting 2,200 water-saving taps in colleague and customer toilets and saving 80 million litres of water per year. A water usage audit in 100 stores helped to bring the stores in-line with company-wide water use averages, giving an additional expected saving of 280 million litres per year. Waste In 2009 Sainsburys invested 9m in establishing five food recycling plants as part of its plans to send no waste to landfill by the end of that year. When it comes to helping customers reduce waste, the focus is on packaging, carrier bags and food waste. Sainsburys supports customers who want to be environmentally responsible by providing them with recycling facilities at stores and has removed plastic bags from view at the check-out. Pesticides Sainsburys list of banned and restricted pesticides is industry leading and was developed in conjunction with an expert third party, Cambridge Environmental Assessments. This list has now been adopted throughout the Sainsburys produce supply base. A database of over one million pesticide residue tests has also been established on over 5,000 products, with independent assessment to ensure the data is reliable. This work is moving Sainsburys towards their goal of significantly reducing the amount of pesticide residues on primary fruit, vegetables and salad. Carbon Academy Launched in May 2011 the Sainsbury's Carbon Academy aims to highlight the importance of carbon-awareness, while also improving the skills and knowledge base among Sainsbury's contractors, suppliers and employees. The initiative will play a key role in helping Sainsbury's to achieve its target of cutting carbon emissions by 25% on 2005 levels by 2012. Training at the academy will be wide-ranging, covering issues varying from how small changes in everyday working practices can reduce carbon emissions to highly specialist training for engineers to install environmentally responsible CO 2 refrigeration systems. Also included in the programme is Sainsbury's Reset scheme which trains store managers and their department
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heads to manage their building's energy more efficiently. Stores that have been through the Reset process have achieved an average energy reduction of 17%. The launch of the new academy follows one year after the commencement of Sainsbury's partnership with Imperial College's Faculty of Engineering and Grantham Institute for Climate Change. A major output of this collaboration was the development of a new energy management at Sainsbury's Smart Grid store in Hythe which activate the store's bio-generator at times of increased demand for electricity.
Brief History
J. Sainsbury plc is the parent company of Sainsbury's Supermarkets Ltd, commonly known as Sainsbury's, the third largest chain of supermarkets in the United Kingdom with a share of the UK supermarket sector of 16.5%. John James and Mary Ann Sainsbury founded the company in Drury Lane, London in 1869. It grew to become the largest grocery retailer in 1922 and pioneered self-service retailing in the UK. In 1995, Tesco overtook Sainsbury's to become the market leader, and Asda became the second largest in 2003, demoting Sainsbury's into third place. Justin King became chief executive in 2004 and implemented the Making Sainsburys Great Again strategy. This was aimed at reducing costs and improving profits by implementing a massive overhaul of the companys supply chain and IT infrastructure. All targets set out in the Making Sainsburys Great Again programme were achieved if not succeeded. Sainsburys has since gone through a period of from recovery to growth and has experienced 21 consecutive quarters of like-for-like sales growth with like-for-like sales growth in 2009/10 up 4.3% on the previous year. Sainsburys has defied market expectations after being earmarked as a probable victim of shoppers trading down to cheaper stores, said the sales figures reflected the strength and resilience of its brand and its focus on value with values.
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Hilmore House, Gain Lane, Bradford. BD3 7DL Tel: 0044 (0) 85611 5000 www.morrisons.co.uk
Domestic Market: United Kingdom No of Formats: 2 No. of Stores: 455 Turnover: GBP 16,749mn Operating Countries: 1 Sales area: 2,521 sq m
Morrisons Mission Statement To be the Food Specialist for Everyone Corporate Strategy: Continue with space growth. Invest in manufacturing capabilities and capacity. Work towards the completion of the logistics optimisation plan by 2011, including a new RDC for the south of England. Continuation of its IT renewal project including EPOS roll out and product management Drive top-line sales. Increase efficiency. Capture growth. 2011 Key Highlights: As of October 2011 Morrisons was the fourth biggest grocery retailer in the UK with a 32 market share of 11.9%. Over the year to January 30 2011 pre-tax profit at Morrisons was 874m, up from 858m the previous year. Sales rose 7% to 16.5bn, while like-for-like sales increased by 0.9pc. Over the year to January 30 2011 Morrisons opened 15 new stores, bringing the total number of stores to 455, and a series of extensions carried out. Morrisons expects to add 35 new stores to its portfolio during 2011, they total store numbers to reach 501 by the end of 2012. In early 2011 Morrisons made its first move into online retailing, when they acquired kiddicare.com followed by a 10% investment in FreshDirect, a New York based online grocery retailer. This was a significant move as Morrisons is the only major UK retailer not to have an online presence. In July 2011 Morrisons opened its first convenience store in Ilkley, West Yorkshire. The store stands at 3,000 sq ft and focuses strongly on fresh food. This is the first of three trial stores for Morrisons, with the others located in Wilmslow and Upton Rocks, Widnes.
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In addition to fresh, Morrisons will also look to differentiate the stores on the criteria of strong availability and easy in-store navigation. In August 2011 the Financial Services Authority levied a 210,000 fine on Sir Ken Morrison after finding him guilty of failing to disclose share sales worth more than 400m in the supermarket group. The watchdog said the former Chairman of Morrisons broke stock market rules on disclosure and transparency after failing to inform the company about a series of disposals over three years, which saw his stake being reduced from 6.38% to 0.9%. 2010/2011 Key Challenges: Morrisons has a limited non-food presence, meaning that the retailer is missing out on the breadth of sales and growth opportunities being achieved by key rivals. Converted Safeway stores often do not have a standard Morrisons footprint, nor the space to adequately accommodate the full Market Street concept. Maintaining the increased penetration and double digit growth that has already been achieved. Morrisons has no online transactional presence. The retailer is unique among the UK's four largest grocery retailers in not operating a transactional website. This has been an important growth area for Morrisons' major rivals, and a new route to customers. Further success and expansion of the discounters could impact negatively on Morrisons.
Following the departure of Marc Bolland to Marks and Spencer, Morrisons announced the appointment of Dalton Philips to the role of Chief Executive. In June, Morrisons unveiled Richard Hodgson as Group Commercial Director. Hodgson joins from Waitrose where he held the same role. Morrisons Group Trading Director, Martyn Jones, moved into a new role as Group Corporate Services Director. Morrisons believes that its core competencies lie in the vertical integration of processes internally in the organisation. This integrated chain, along with a disciplined route to market, facilitates easy compliance for suppliers across the portfolio.
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In the 52 weeks to 30 January 2011 Morrisons experienced a 7% increase in turnover to 16.5bn with like for like sales growing 0.9% (ex. fuel, ex. VAT). Underlying profit before tax was 874m, up from 858m the previous year with Morrisons also reporting an increase in customer numbers of 0.2% over the year, with 11m people visiting stores each week. Cash generation was strong with cash from operations up 127m (13%) on the previous year. Sales rose 7% to 16.5bn, while like-for-like sales increased by 0.9pc. Capital expenditure of 592m was substantially lower than the prior year's 916m which was inflated by the opening of the new Bridgwater RDC and conversion costs associated with stores acquired from Co-operative Food. Net debt fell during the year to leave gearing at 15%, a level well below the sector average. Space grew by 400,000 sq ft over the period, with 15 new store openings and a series of extensions carried out. Agreement was also reached to acquire 16 Netto stores from Asda. The 2011 financial year will mark the retailer's first ventures into online retailing, with the acquisition of kiddicare.com followed by a 10% investment in FreshDirect, a New York based online grocery retailer. This will enable Morrisons to take learnings from the FreshDirect business in order to grow its experience before developing its own transactional website, which it has committed to launch by 2013. In the 13 weeks to 1st May 2011 (Q1 2011/12), total sales at Morrisons (ex fuel) grew by 4.2% and like-for-likes of 2.5%, providing a clear improvement over the second half of 2010/11. The performance was underpinned by the strong promotional campaigns with which Morrisons started the year including the 'Biggest Ever Price Crunch' and the 'Let's Celebrate' activity which caught the mood of the nation. The 'Fuel Britannia' fuel promotion clearly also targeted widespread consumer concern over still rising fuel prices, perhaps the most obvious of all the growing burdens on the shopper's pocket; and the success of the activity has been reflected in record numbers of customers in Morrisons stores.

Following Dalton Philips' appointment as CEO, and the development of the 'Different and Better than Ever' Plan, the Group's internal management structures and processes were realigned to ensure delivery of the Plan. The company strategy was updated in late 2010 to take advantage of further growth opportunities. This included plans to simplify ranges, increase private label differentiation and strengthen customer service, with three key areas picked as areas of focus: Drive top-line Increase efficiency Capture growth Over 2011, the key priorities of the business were expanded to take the retailer 'from National to Nationwide'. These included delivering sustainable long term growth, building on their traditional strengths of fresh food, quality, value and service, backed by their unique vertical integration capability, whilst reflecting their customers' needs and the changes that are taking place in the market. In March 2011 Dalton Philips announced that Morrisons will be investing around 3bn over the next three years to accelerate new store openings, test convenience stores and launch an online business.
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Optimisation Plan Update In March 2010 the company formally signalled the completion of the optimisation plan, with all major milestones achieved or exceeded. In total, sustainable annual EBITDA improvements of 526m have been delivered through the various initiatives contained in the plan. Key highlights in the latest year included improvements to in-store efficiency from queue management self-scan checkout systems. The Optimisation Plan included significant investment in infrastructure, and a key milestone was the opening, three months early, of its new Regional Distribution Centre (RDC) at Sittingbourne in Kent. The 900,000 sq ft site services 65 stores in the South East, to ease capacity issues created by its rapid growth in recent years and reduce the distance travelled in servicing these stores by around 22m kilometres annually. Morrisons has also submitted a planning application for a new Regional Distribution Centres (RDC) in the South West, at Bridgwater, which will provide further capacity when needed in 2011/12 to support its National to Nationwide expansion. The roll-out of voice picking technology across all its grocery warehouses has been completed and has proved particularly successful in increasing depot productivity and pick accuracy, and hence improving in-store availability. Growth Opportunities In March 2009, Morrisons outlined three key growth opportunities: New customers, new locations and smaller stores. Over 2010 and 2011 the retailer has been working on effectively taking advantage of these opportunities. Over 2011 Morrisons opened 15 new stores and increased customer footfall by 0.2%. Despite opening 15 new stores in 2010, there are still many parts of the country where Morrisons continues to be under-represented. A key part of its strategy, therefore, is to grow the number of Morrisons stores. Morrisons has confirmed that its offer works well in a wide range of store sizes, from 10,000 to 40,000 sq ft, giving it increased flexibility when finding sites. Morrisons expects to add a further 1.5m sq ft of selling space in the three years to January 2013. This growth will largely be driven by smaller stores under 20,000 sq ft, however the retailer was keen to stress that while these shops are convenient, they will not be convenience stores and will still offer a complete Market Street.
Trading Strategy
The Buying Department In common with the rest of the company the structure of command in the buying function is flat and the lines of communication short, ensuring quick decision-making and rapid implementation in trading matters. Buyers themselves have the authority to make decisions on listings in most circumstances, albeit within the strict parameters of company strategy, making the negotiation process relatively quick and straightforward. The success of the trading function owes much to its wide brief, with responsibilities including: Negotiating trading terms Promotion programmes Supplier development Own label development and involvement in: Stock management Ordering Merchandising programmes Store implementation
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The highly integrated 'supply chain' nature of the buying role, right down to store implementation provides suppliers with a highly disciplined route to market. Combined with the uniform character of Morrisons stores, this enables the buyers to deliver a very high level of compliance with supplier contracts across the whole portfolio. This gives Morrisons a strong position in the negotiation of buying terms and the development of promotional programmes. To maintain close contact between the buying function and stores, individual buyers have 'buddy' relationships with particular stores, which facilitate the communication of buyer requirements to stores as well as providing feedback on ranging and products from store to buyer. Supplier Relations The emphasis placed on promotions as central to its strategy means that the company expects significant investment from suppliers on special offers. Morrisons is keen to facilitate this and points out that it does not require listing allowances, preferring investment to go into promotional programmes instead. Morrisons maintains its supplier relationships on a largely informal basis. Preferred Supplier Agreements do exist with a number of major trading partners providing opportunities for them to work more closely with Morrisons, but these remain relatively unstructured. Ranging Historically, ranging has been fairly consistent across stores, with little regional variation, in keeping with the company's strategy of maintaining a highly consistent shopping experience across the portfolio. However, Morrisons is putting increasing effort into tailoring ranges to catchments, with more regional specific ranging. A significant example of this has been in Scotland, where the retailer has introduced a number of local products. Another example of introducing more tailored ranges is the development of Polish ranges in selected stores. Morrisons sells a number of own label and branded Polish products such as meat, rye bread, jams and juices where there is a high proportion of Polish consumers in the local population. Morrisons' product catalogue covers around 30,000 lines. Following the acquisition of Safeway, Morrisons conducted an extensive review of the Safeway and Morrisons ranges. This range harmonisation project developed one single catalogue for the retailer. This incorporated around 1,500 lines from Safeway, including The Best (premium) and Eat Smart (healthy eating) subbrands. As part of Morrisons 'Different and Better Than Ever' plan the retailer set about strengthening the Morrisons brand, by conducting a comprehensive review of private label ranges. 8,000 lines have been reviewed during the period, and areas for improvement identified, including ready meals which will see major development in the third quarter of 2011/12. In 2010, the retailer prioritised development in areas where it acknowledged that it does not currently lead on. These included: Best quality fruit and vegetables Premium own label Ready meals Healthy eating In 2011 Morrisons is stepping up investment in its own label ranges by capitalising on the fact that it produces much of its own food via its manufacturing division, a rarity among British supermarkets. In 2010 Morrisons own label sales accounted for 6bn worth of business but Dalton Philips believes this should be 10% higher. To drive growth, Morrisons has created a separate management structure to oversee its own label business. There was some evidence of people trading up to more expensive products in 2010, with supermarkets' premium own label sales up 2.8%. Whilst premium sales have risen, there has been a corresponding fall in the sales of value ranges. Consumers do however remain prudent with their spending with greater pressures on their finances.
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Fresh Food & Produce Strategy Market Street The most notable element of the Morrisons food offer is its fresh food, merchandised through its 'Market Street' concept. This provides a far larger range of serve-over counters than other retailers, offering a wide range of fresh products and food to go, plus fresh produce incorporating its own unique merchandising concepts (e.g. banana hammocks that allow the fruit to be merchandised in the various stages of ripeness.). Under the Refresh programme this is being given a new contemporary look and feel and increasing the visibility of in-store prepared products and craft skills, and the introduction of new "prepared for you in this store" labels on all 1,700 instore prepared lines. Where possible Morrisons will look to extend its ranges in these areas, similarly to how it expanded its Artisan Bakery range in 2009. Within this Market Street concept, fresh food is prepared in store daily in the following areas:
Bakery Bread and cakes are prepared as well as sandwich bread for the in-store caf. Newer stores also provide American-style doughnuts alongside fresh popcorn, cookies and muffins.
Butcher Meat and poultry cuts are prepared to customer requirements.
Fishmonger The fishmonger is usually the first service counter located at the front of the store. Morrisons was the first company to receive the Seafish Quality Award for its fresh fish and seafood counters. Morrisons claims that whatever the request its fishmongers can source any choice of obtainable fish within 48 hours. Morrisons is the only supermarket to only offer a fresh fish range, with no frozen fish offering.
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Pizzeria and Fresh Sandwiches Over 50 types of each are available, the majority of which are produced daily in-store.
Deli Express
A choice of freshly packed products such as salads and sandwiches sold on the counters.
Oven Fresh Offering oven-cooked chickens, spare ribs and other savoury foods.
Salad Bar Morrisons was the first supermarket to introduce a self-service salad bar, with over 30 salads freshly prepared daily.
The Provisions Merchant Offering cooked hams, quiches, bacon and ham.
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The Cheese Counter Offering traditional county and continental cheeses. Ambient Grocery Morrisons packaged goods provide a deeper branded offer than most of the superstore retailers. This is seen as an important element in maintaining consumer choice, providing opportunities for keen pricing, with Morrisons willing to switch between suppliers to get the best prices and pick up tail ends of production runs on beneficial terms. The wider range of brands also provides opportunity for a wide range of promotional offers backed by suppliers. Beers, Wines and Spirits The Morrisons BWS range comprises more than 900 lines. As of August 2011 the range consisted of 592 wines, 206 beers, 69 different fortified wines, 36 wines with 10% or less alcohol, including no alcohol, 188 different spirits, 46 different ciders and 44 pre-mixed drinks. In August 2011 Morrisons Beers, Wine and Spirits were declared Multiple Spirits Retailer of the Year at the Drinks Retailing Awards ceremony in London. Non-food Strategy Unlike Asda and Tesco, Morrisons had in the past remained cautious about the further development of non-food ranges and had often reiterated that it is a food retailer first and foremost. However, in February 2011 Morrisons announced the acquisition of fast-growing internet retailer Kiddicare in a 70m deal that it said would give it the know-how to sell clothing and homewares online. Chief executive Dalton Philips billed the acquisition as "first step" into ecommerce but cautioned that the deal did not signal plans to launch a full-blown internet grocery service as the baby goods website does not use "food related software". "I see food and non-food as very distinct," said Philips. The purchase opens numerous doors for the grocer as Kiddicare's multi-channel expertise will underpin the Morrisons non-food website, which it said would launch in spring 2012, and raise its expertise to expand its range of in-store products. Kiddicare, which sells everything from cots to car seats and nappies, uses Argos-style kiosks which could be deployed as part of a "click and collect" service. Morrisons also has a less developed presence in the pharmacy sector than its rivals, and only became active in this market following the acquisition of a number of in-store pharmacies following the Safeway acquisition. There have been no indications from Morrisons of any further growth plans in this area. Petrol has become an increasingly important element of the Morrisons offer and the company is to include forecourts in all new store developments.
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Morrisons occupies a unique position in UK retailing by combining key elements of both EDLP (Every Day Low Prices) and 'Hi/Lo' (a strong promotional offer). This strategy has previously been described by the Competition Commission as:"an EDLP pricing policy combined with extensive multi-buy promotions, together known as value-based pricing". This pricing and promotional approach has been consistently adopted by Morrisons over recent years. Price surveys show Morrisons remains competitive against both Asda and Tesco on basket price, and this price perception is reinforced by more than 1,000 deals every week, which create a sense of theatre and price urgency for the shopper. As measured on the Grocer 33 index, Morrisons remains competitive. In addition Morrisons operates a uniform national pricing strategy across all its stores. In 2010 the rise in the price of oil, exacerbated by increases in fuel duty and continuing Sterling weakness, meant that consumers were paying on average 15.8p per litre more at the pump than in 2009, with average unleaded prices per litre of 115p. Overall fuel price increases impacted Morrisons customers' disposable income by nearly 400m in 2010, income that could otherwise have been spent in-store. In 2010 Morrisons fuel volumes increased 4.8%, as customers shopped around for the best price in town. Overall, like-for-like fuel sales were up 18% in the year. In May 2011 Morrisons announced that it would cut petrol by 1p per litre and diesel by 3p per litre across all its forecourts. It also promised diesel would be no more than 140p per litre and that petrol would fall to an average of 135.2p. Throughout 2010/2011 the UK grocery market continued to be heavily promotional and Morrisons main prime focus was on reducing the cost of everyday essentials and their offers on bread at 50p and fresh fruit and vegetables at 30p, represented the lowest priced staple products in the country. The range and value of their offers, including their 'Price Crunch Week' and extended 'Collector Card' over the Christmas period resonated particularly well with customers. Sharp everyday pricing and a strong promotions programme were a feature of Market Street, which again performed strongly throughout 2010. Morrisons vertically integrated food production capability supported by the food preparation that is carried out every day in-store, allows the retailer to be flexible and offer more value and innovative offers on fresh produce.
In January 2011 Morrisons launched its biggest ever price cut campaign in a bid to cancel out the 2.5% rise in VAT. Morrisons claimed the price crunch has cut the cost of over 5,000 products, meaning a typical shop of the top 44 items in each category should now cost 56.73 in comparison to 96 before the promotion began. With over 150 Buy One Get One Free (BOGOF) deals in stores each week in 2010 and 2011, promotions create a significant point of differences between Morrisons and its competitors.
Morrisons makes extensive use of gondola ends to highlight its promotional activities, often dedicating an entire end to a single brand pallet.
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Loyalty Card Whilst Morrisons does not operate a standard loyalty card, it does offer a "Morrisons Miles Card". With this card customers earn up to 15 Morrisons Miles with every litre of fuel purchased. Once 4,995 miles have been collected on a single card, or once 333 litres of fuel have been purchased, 33 customers receive a 5 shopping voucher to spend in-store.

Morrisons has a substantial private label offer. Prior to the acquisition of Safeway, Morrisons' private label structure was underdeveloped compared with those of its main rivals in the market. While the standard Morrisons private label brand was much in evidence across the store, and the value Bettabuy range was used across selected key categories, Morrisons lacked the additional private label development of rivals in areas such as premium and healthy eating. However, on acquiring Safeway, Morrisons adopted the Safeway private label sub brands The Best and Eat Smart, and began introducing products in these ranges into its offer, albeit initially on a modest basis. In May 2011 Morrisons announced plans for a major revamp of its private label range. Morrisons Chief Executive Dalton Philips has identified improvements in own label as a key area of growth for the supermarket as sales from its own products. In July 2011 Morrisons announced further details on its overhaul of its private label range stating that it will introduce a family of brands to replace the current three-tier system. The move, its first such revamp in four years, will affect nearly 8,000 own label products at the UKs fourthlargest grocery chain. Morrisons currently offers value, mid-market, and premium Best lines a strategy used by its competitors but termed oversimplified by the groups Commercial Director Richard Hodgson. He said having a family of brands would be a better way to present to customers. Hodgson said the revamped products will be introduced at Morrisons outlets towards the end of September 2011, adding that the offer will be different to anything you've seen in the UK. Own label sales account for 45% of Morrisons overall turnover, and Hodgson said the group is aiming to expand that figure, which in turn will help boost group profit margins. There are currently 8 own label sub brands in the Morrisons range.
Value This is the economy range with over 300 lines, offering entry price points throughout the store across food, drink and home categories. In March 2011 Dalton Philips announced that sales of its own label value range rose 34% in the year to January 2011, while sales of premium organic and fairtrade products declined.
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Core Morrisons This is the standard own-brand range marked with the strap-line quality and value. It consists of a wide range of products spanning food and non-food.
The Best This range has strongest representation in ready meals and fresh bread. Morrisons position this range as exceptional food for every day.
Organic There is a modest organic range across key categories but this is an area of growing focus, with c.200 lines.
Eat Smart This range is calorie, fat, sugar and salt controlled. The range breaks down into Eat Smart Diet with less than 3% fat and under 400 calories per portion, Eat Smart Reduced with less than 25% fat and sugar than the full on versions, and Eat Smart Nutrition with wholesome foods, the purest ingredients and little or no processing. The range was re-launched in 09/10 helping to lift sales for the sub brand 7%.
Kids Smart Every product in the Kids Smart range is free from artificial colours, artificial flavours and hydrogenated fats. The range spans many food areas including fresh produce, grocery products, canned lines, fresh fish and meat and dairy products. There are currently over 27 products in the range which is supported in-store by leaflets giving hints and tips for enjoying a balanced diet.
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Free From Previously this was an umbrella brand for a number of branded products offering an alternative for customers with allergies or special dietary requirements. The range was extended to Free From sub-branded products that form part of the Morrisons private label offer. These products are merchandised alongside branded lines that fulfil similar customer dietary requirements.
Wholefoods This is a new healthy foods range introduced in July 2010. The range consists of three categories: 'Superfoods', 'Wellbeing' and 'Everyday Health'; products include pulses, beans and dried fruits. The Wholefoods range is being promoted on the retailer's website, under its food range section, which includes a host of tips and advice on how to incorporate these new foods into shopper's meals.

As a price/volume-led retailer, Morrisons emphasis on value has traditionally resulted in strong penetration in the C2 and D socio-economic groups. The bias towards less affluent socioeconomic groups that can be seen in Morrisons customer base is nevertheless far smaller than for other price-led competitors such as Iceland, Lidl or Aldi. The age profile of the Morrisons shoppers follows the broader UK shopper base very closely. Of its major rivals, only the age profile of the Sainsburys shopper is marginally closer to that of the UK total grocery shopper base. Meanwhile, both Tesco and Asda exhibit relative bias toward younger shoppers and away from the 65+ age group.

Morrisons has always been associated with low prices and great offers, but has not previously communicated about its high quality food. However, Morrisons makes and prepares more fresh food in-store than any other major UK food retailer, a fact that most consumers were unaware of. Therefore, as part of the strategic review announced in March 2007, it was stated that a new advertising campaign would be launched to support the new positioning for the retailer as "the food specialist for everyone."
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The rebranding programme began in earnest in July 2007 with new advertising and a new look website which focused heavily on communicating the retailer's fresh food attributes, introducing the slogan "Fresh Choice for You." During 2010 Morrisons launched a television advertising campaign which focused on the provenance, quality and freshness of its food and on its in-store food preparation skills, with food stories told to school children. In 2010 and 2011 the group also returned to celebrity-based advertising with advertisements fronted by cricket star Andrew Flintoff. Morrisons dropped celebrities such as Richard Hammond and Alan Hansen from its advertising in 2009 in favour of the campaign featuring school children. In recognition of the toughening trading environment, Morrisons kicked off 2011 by launching its biggest ever Price Crunch campaign, cutting the price of over 5,000 items. Morrisons put strong emphasis on their support for British farming through their own farm at Dumfries in their advertising. Morrisons makes a point of highlighting the fact that they are the only major British retailer selling 100% British fresh pork, beef, lamb and poultry raised to British standards of animal welfare. Morrisons television advertising campaign continues the strong emphasis on the provenance, quality and freshness of their food and on their in-store skills, with food stories told to school children. In-Store Magazine In 2008 Morrisons launched its in-store magazine and it 2009 the retailer put the publication online, with the development of an interactive ezine on its website. This advertiser-funded publication, Morrisons Magazine, is distributed free of charge across stores on a bi-monthly basis. The magazine features a range of dietary and recipe advice, customer features and advertising from third parties. Loyalty Card Morrisons does not operate a traditional loyalty card scheme, with Sir Ken Morrison previously claiming that his customers were interested in "pounds not points". The one obvious exception to this is in its petrol stations, which operate the Morrisons Miles card as mentioned.

Prior to the merger with Safeway, Morrisons had one of the most uniform store portfolios of any retailer in the UK, operating a single format, extended range superstore (with an average sales area of 36,200 sq ft). However, the acquired Safeway business was much less uniform. Not only had Safeway developed a variety of different store formats (from convenience stores to hypermarkets), but the acquisition-based nature of its development resulted in a wide range of store sizes and configurations. In addition, the retailer has also segmented store ranges based on demographic, region, ethnic and competition factors, creating up to 16% difference in range between stores of the same size.
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In 2008 the acquisition of 38 smaller format stores from The Co-operative Group represented a significant departure for the retailer, although the stores have proved to be very successful to date. Consequently, smaller format supermarkets have become an important element of the retailer's growth plans. In January 2011 Morrisons entered into an agreement with Asda to purchase 16 former Netto stores, the first of which began trading as a Morrisons store on 9th May. In July 2011 Morrisons entered into agreement with Asda to purchase a further two former Netto UK stores. The 2 stores are among 47 that the Office of Fair Trading (OFT) has required Asda to sell to competitors, to avoid a lessening of consumer choice in those areas where Asda and Netto currently compete with one another. Small Stores (<25,000 sq ft) These stores have traditionally performed well for Morrisons and deliver growth ahead of the group as a whole. Following the acquisition of 38 smaller format stores from the Co-op/Somerfield, Morrisons has significant opportunity to develop its smaller store portfolio. In February 2009 Marc Bolland spoke of the desire to create 'bespoke' ranges and segmentation for smaller stores, and that the retailer would consider local catchments rather than imposing a rigid model on each store. This demonstrates the increasing flexibility of the Morrisons operation, and is a core contributor to continued commercial success. Large Stores (>40,000 sq ft) There are over 40 of these stores in the Morrisons estate, most of which were previously Safeway mega stores. These stores are not treated as a separate division by Morrisons and retain a strong focus on food in-store. There is a substantial non-food element but this is very much focused on Morrisons targeted non-food categories of health & beauty and home & leisure. The Morrisons Superstore Format The core superstore format makes up the majority of the estate, with almost 80% of Morrisons stores are between 20,000 and 40,000 sq ft. The Market Street concept is a key contributor to the size of Morrisons stores and the key differentiator of the superstore format. With the need for additional preparation and storage areas this is a space hungry concept. This results in Morrisons having the lowest ratio of sales to gross store area of any superstore operator. Market Street is also labour intensive and as a result the stores tend to have higher staffing levels (and costs) than its competitors. Market Street generally occupies the first aisle and the back wall of the store with serve-over counters and stalls. This concept is fuelled by the products of its own in-house suppliers and is now present in all but the smallest stores. Stores to visit: Morrisons International Sports Village International Drive Grangetown Cardiff CF11 0JP Tel: (029) 2023 2883 Morrisons Foss Islands Retail Park Foss Islands Road York YO31 7UL Tel: (01904) 633365 Morrisons Chalk Farm Road Camden London NW1 8AA Tel: (020) 7428 0405
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Online Retailing
Although Morrisons does not offer a transactional shopping service online, it utilises its website to provide a range of consumer information, ranging from promotions and special offers, new store opening details and its sourcing and supply strategy. Recognising the growing importance of the online environment, in March 2010 the retailer added a new facility to its website which enables customers to develop their shopping lists online. Through this service they are able to assemble of list of in-store promotions and save the lists that they have created. In the year ahead Morrisons is also expected to make greater use of social media. In February 2011 Morrisons purchased Kiddicare.com, a specialist online retailer operating in the baby and infant merchandise category. Included for the total consideration of 70 million, were the rights to Kiddicare's advanced technology platform. Building its online non-food business and developing the kiddicare.com platform and management team, Morrisons has said it will launch its first products in 2012.

Vertical Integration Morrisons is unique within UK food retail in terms of the level of vertical integration that exists in its supply chain. This ranges from the manufacture and supply of fresh meat and dairy products to the processing of fresh fruit and vegetables. This is facilitated through Morrisons' ownership of subsidiary companies and effectively eliminates key intermediaries in the supply chain, enabling Morrisons to exert a greater control on costs and wastage, with resulting improvements in margin. Morrisons is also able to ensure that its own quality requirements are adhered to, whilst enabling it to respond quickly and efficiently to changes in demand. The company also maintains a strong commitment to source British produce for its fresh food offering, though its production facilities also extend to the Netherlands. In March 2008, Morrisons announced that all fresh beef, sold in its stores nationwide, is exclusively British sourced, and it believes it is the only UK retailer to sell only British beef, lamb, pork and poultry. Morrisons views its vertically integrated structure as providing a key point of difference, not only because it supports its 'Market Street' concept, but because it helps drive high levels of availability, and flexibility, enabling the retailer to respond quickly to changing shopper preferences. Importantly it also enables Morrisons to offer competitive pricing and strong promotional deals across many of these products, e.g. 'The big family BBQ for 4' promotion which was run in 2008, the 'Free 4 Fruit' promotion which was executed in March 2009 and the Price Crunch that is being run in 2011. With the 2011 Price Crunch campaign customers can immediately save 10 a week (520 per year) by simply buying a basket of ten essential items: bread, milk, orange juice, teabags, sugar, bacon, whole chicken, sausages, baked beans and tomatoes. These facilities also enable Morrisons to offer unique products to its shoppers, including specialised cuts of meat and different grades of vegetables, helping it to deliver valueorientated products in particular. The separate companies owned by Morrisons include the following: 1. 2. 3. 4. 5. 6. Wm Morrison Produce Ltd produce packaging Bos Brothers Fruit & Vegetables B.V. a Dutch produce wholesaler Neerock Ltd fresh meat processors Farmers Boy Ltd fresh food product manufacturers and distributors Rathbone Kear bakery operations Simply Fresh Produce Supplier
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In addition to these fresh food companies, Morrisons also owns the Farock Insurance Company Ltd as well as Holsa Ltd (a polythene bag manufacturer) and Nathanspire Ltd, which provides financial services to the retailer. To help maximise its buying advantages, Morrisons joined the European buying group AMS, made up of major retailers from across many of the key European markets. Local and Regional Sourcing UK consumers are increasingly demanding locally produced food. IGD research has revealed that 70% of consumers want to buy local and regional foods, with almost half wanting to buy more than they currently do. This is being driven by public health concerns and recurring food safety crises, while many consumers also want to support their local food producers. Due to its vertically integrated structure, Morrisons has a long established link with UK farming and local producers, and currently promotes a wide range of products including: Speciality meats Sausages - e.g. West Country Sausages Ice Creams - e.g. Dairyland (Norfolk), Brymor (North Yorkshire), Bradwells (South Yorkshire) Cheeses - e.g. Hereford Hop, Cornish Yarg Prior to the acquisition, Safeway had built up a very strong brand in Scotland, and Morrisons has now started to leverage this strength with over 400 Scottish specific products now ranged within its Scottish stores. Further regional range development is expected in the West Country and Wales, building on the ranges that had previously been sourced by Safeway. This is a key area of development at Morrisons and indeed locally sourced ranges are increasingly detailed on its website, linked to individual stores. Supply Chain Strategy Morrisons has traditionally maintained a high level of direct control over its distribution function. The depot network is run wholly in-house, and there is only limited third-party involvement in transport. One of the key reasons for this is the high degree of vertical integration which exists within the business. Morrisons acquired Manchester based product packaging facility Simply Fresh Foods in 2010. The facility in Worsley will form part of Morrisons manufacturing division and provides a dedicated packaging and distribution service to its more than 425 stores. Systems Renewal and Network Developments In March 2010 the company formally signaled the completion of the optimisation plan, with all major milestones achieved or exceeded. The Optimisation Plan included the first phase (110m) of a major programme of systems renewal, which will continue for a number of years. The programme will see the replacement of all the Group's core systems, including store based point of sale, warehousing, manufacturing, supply chain, product management, HR, payroll and financial systems. The retailer successfully delivered the first phase of its new financial systems, continued the rollout of new HR and payroll processes and implemented voice picking into their distribution centres. Morrisons has also begun a pilot of their new EPOS system in store, which will provide a common platform replacing the five separate systems it currently operates. The programme will continue at high levels of activity until 2013. In 2010, Morrisons began to roll-out the new EPOS system to all stores, to implement new manufacturing systems into its packing houses and to begin the roll-out of the warehouse management system. Additionally, it began to populate the product master file which was also introduced in 2010 and which will, in due course, replace its legacy system.
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In March 2010 the first phase of the roll out of the companys new financial systems was completed, and later that year new human resources and payroll processes were introduced. Morrisons plans to invest 200m over the three years to 2013 on developing this programme. By the end of 2011 Morrisons hopes to have completed the roll-out of its new EPOS platform. Depot Network In November Morrisons announced that massive changes to its depot structure and supply chain had helped the retailer to cut the cost per case delivered by 13% since 2006. Logistics director Neil Austin said that following Morrisons acquisition of rival Safeway in 2003, the firm was left with a distribution network that was more costly than that of its rivals and was saddled with "legacy depots" from Safeway that were not fit for its operation. In addition, it lacked the distribution centre (DC) infrastructure to support its ambition to expand into the South-East of England; stores in that region we were being served by Midlands depots, creating unnecessary road miles and limiting capacity elsewhere in the business. The South-East is now served by a distribution centre in Sittingbourne, Kent. As well as improving service to stores in that region, it has had knock-on effects elsewhere. For instance, this generated sufficient space to cope with the acquisition of a number of former Somerfield stores. In the South-West by opening a new distribution centre in Swindon, Wilts, instead of having store deliveries sent from its Northampton, some four million vehicle-km were taken off the road, he explains. The Swindon site will soon be supplanted by a new DC in Bridgwater, Somerset that should be on stream by the end of 2011. The Morrisons distribution fleet is vital to their supply chain and gives them flexibility in how we move products from suppliers to Regional Distribution Centres and from our food manufacturing sites to our stores. In logistics, Morrisons measure route planning efficiency in terms of how many cases per kilometre they are able to move. Over the last two years they have increased the number of cases per km by 12.7%. The distribution network now consists of the following: 1 National Distribution Centre Swan Valley, Northampton 10 Regional Distribution Centres Wakefield, West Yorkshire Gadbrook Park, Cheshire Kettering, Northamptonshire Swindon, Wiltshire Bridgewater, Somerset Yate Bellshill Latimer Park Patchway Droitwich (Fresh only) Stockton (Fresh & grocery) Corby (Frozen Bathgate (ambient)
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6 Produce Pack houses Cutler Heights (Bradford) Gadbrook Park, Cheshire Flaxby, North Yorkshire Thrapston, Northampton Rushden, Northamptonshire Hook of Holland

In May 2008 Morrisons launched a new eco-plan to highlight the broad range of activities which it undertakes in terms of sustainability, responsible sourcing and care for the environment. Entitled 'Today', the campaign focused on specific actions which can be taken to reduce the impact of its activities on the environment, starting with a give-away of 10m reusable bags featuring the slogan, "Today I'm doing my bit for tomorrow with this reusable bag." Reducing the environmental impact of carrier bag use is one element of Morrisons' policy to prevent waste through a sustainable waste management strategy that focuses on optimisation, reduction, reuse and recycling. In 2010, a 'Tomorrow' element was added to the plan, with targets laid out for initiatives to 2013. These focus on areas that are key to the business and where a continuing positive impact can be made. In 2007, Morrisons also made some clear commitments on a number of key environmental measures, setting clear targets for Morrisons to hit by 2010. These were then updated to provide re-evaluated measures to be met by 2013.
KPI Emissions reduction
2013 Target Reduce by 30% from a 2005 baseline Zero waste to landfill from stores by 2013 Reduce carbon impact of packaging 10% by 2012 Develop 'Great Taste, Less Waste' programme
Waste to landfill
Own brand packaging Enable customers to reduce food waste
In 2010 and 2011, the increased use of double deck trailers saved Morrisons 4.1 million kms. These streamlined, supersize trailers enable the retailer to transport up to 80% more volume per trip. The goal for 2011, with an additional 44 double decks in the fleet, is to save a further 83,000 kms per week. This would equate to an annual saving of 4.3 million kms. 90% of Morrisons current fleet utilises the latest Euro 5 engine emissions technology, which help to limit nitrogen oxides (NOx) emissions. This is an increase of 13.8% compared with January 2010 and the retailer anticipates that 100% of the fleet will be Euro 5 compliant by the end of 2011.
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Additional Services
Morrisons has diversified its offerings by including in-store cafes, and petrol stations in over 75% of its stores. In-store pharmacies have been added to stores in the West Midlands and South East, as have travel bureaux, which all expand the customers shopping experience at Morrisons. Compared to other retailers, Morrisons offers a relatively limited range of financial services. Its current exposure includes HSBC Your bank at Morrisons which is a strategic alliance with HSBC to provide banking and financial services in around 40 stores. There are unconfirmed reports that Morrisons is working on a range of further financial services, including loans, insurance and a credit card, which are being developed with HFC Bank a division of HSBC.
Brief History
Morrisons was founded in 1899 by William Morrison and was headed by his son, Sir Ken Morrison until March 2008 when he stood down as chairman to become Life President. From its origins as an egg and butter merchant in Bradford, the company developed into market stalls and onto counter service, opening its first town centre shop in 1958, and its first supermarket in 1961. Morrisons is a price/volume led retailer, with a heritage in well run single format superstores. The company is also known for its additional operations in the processing of fresh food products and produce packing, which provide dedicated supply to its own outlets (see Trading / Sourcing section). The management structure maintains short lines of command and communication and low levels of management bureaucracy, providing a high level of discipline and integration within the executive function. Under the stewardship of Sir Ken Morrison, the Morrisons business developed through steady organic growth to become a key regional retailer in the North of England. In more recent years the company had also been expanding beyond its traditional heartland into new regions, both through individual store acquisitions and new store openings. However, the acquisition of Safeway in March 2004 was a landmark event in the company's history, finally giving it nationwide coverage, and catapulting it to become the UK's fourth largest grocer. In the ensuing two years, the Morrisons business was focused on converting Safeway stores to the Morrisons format, while disposing of Safeway stores that did not fit its operating model. While the integration process delivered a number of operational challenges, the retailer has since emerged as a national operator with strong sales and profit growth.
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The Co-operative Group Ltd, PO Box 53, New Century House, Manchester. M60 4ES Tel: 0044 (0) 161 834 1212 www.co-op.co.uk
Domestic Market: United Kingdom No of Formats: 4 No. of Stores: 3,001 Turnover: GBP 12.856bn Operating Countries: 1 Sales area: 1,297,983 sq m
Company Mission: The core objective of the co-operative is to optimise profits from businesses where our cooperative values give us a positive marketing advantage, allowing us to serve our members and deliver our social goals as a successful co-operative, while making a reasonable financial return to our member-owners, both corporate and individual. Corporate Strategy: Strive for world class levels of business performance Be open, responsible and rewarding, putting co-operative values and principles into everyday practice Enhance the lives of the people, members, customers and communities in which the company trades Work for the long-term success of the co-operative sector Key Highlights: st 524 stores were converted to The Co-operative brand in the 52 weeks to the 31 of January 2011. Group sales increased by 9.1% to 13.7bn over the same period with sales at the food business up by 4.8% to 7.5bn. Like-for-like sales in food were down by 2.5%. In 2011 The Co-operative set a new target for lifting membership from 6 million in 2010 to 20 million in 2020. In March 2011 The Co-operative launched a new marketing campaign using the theme 'Join the Revolution' drawing on its heritage as the hub of the co-operative movement and the UK's largest social enterprise. In July 2011 The Co-operative began construction on a new convenience store in Darvel, Ayrshire, Scotland, which is expected to open in November. Three other Co-operative Food stores will follow later this year. The Co-operative plans to open an additional 300 stores over the next three years, with 40 potential sites identified in Scotland. As of October 2011 The Co-operative was the fifth biggest UK grocery with a 7.0% 34 market share.
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Key Challenges: Corporate 'overstretch' - The Co-operative Group has been through a period of unprecedented acquisition and merger activity. The speed and ambition of the subsequent integration processes has placed huge demands on its resources, infrastructure and management focus, creating operational turbulence and challenges from legacy issues in acquired businesses. Inconsistency across UK co-operative movement - Though the UK co-operative movement is more closely aligned than ever, the national Co-operative movement still accommodates independent societies operating as separate entities, which can present inconsistencies in retail implementation and customer confusion over marketing messages. Disconnect with shopper base - Although the shopper base is gradually shifting, the majority of the retailer's customers remain older and less affluent. The retailer also has a large number of sites in neighbourhood locations, where average incomes may be low, and where competition from value-focused retailers is tough. In such locations Cooperative pricing and brand values do not mesh well with the shopper base. Store network - The Group's network of almost 3,000 stores will incur on-going capital expenditure in terms of maintenance on a rolling programme of refits, as well creating challenges to brand uniformity.
The management of the Co-operative Group is accountable to a board of 26 non-executive directors that meets monthly. The boards objective is to ensure that the Co-operative Group is a successful co-operative business. Membership of the board is made up of senior representatives of the management of independent member societies and membership representatives of the societies merged within the group. The current chairman of the Co-operative Group is Lee Wardle. Senior Group Management Peter Marks - Group Chief Executive, Co-operative Trading Group Martyn Wates - Chief Executive - Specialist Businesses and Deputy Group Chief Executive Neville Richardson - Chief Executive, CFS and Deputy Group Chief Executive Sean Toal Acting Managing Director, Food Retail Richard Bide - Director of Human Resources Martyn Hulme - Managing Director Estates Mark Craig - Director of Corporate Affairs Gill Barr - Director of Marketing* Stephen Humes - Group Chief Financial Officer Moira Lees - Group Secretary Senior Retail Management Sean Toal Acting Managing Director, Food Retail Trevor Ashworth - Director of Food Retail Logistics Debs Gleeson - Director of Food Retail HR Stephen Humes - Director of Food Retail Finance Mark Hale - Director of Food Retail Information Systems The Co-operative Retail Trading Group (CRTG) was set up in 1993 to centralise the buying power for member Co-operative Societies. CRTG is now the largest and most successful, buying group in Co-operative history, and controlling 100% of Co-op food buying in the UK. CRTG is a highly disciplined National Buying Group servicing the needs of over 4,000 Food Stores, which are sited in every UK television area.
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The Co-operative Group announced its 2010 results (covering the 52 weeks to the 31 of January th 2011) on the 30 of March 2011. Over this period group sales increased by 9.1% to 13.7bn with sales at the food business up by 4.8% to 7.5bn. Like-for-like sales in food were down by 2.5%, reflecting disruption caused by the Somerfield conversion programme. Commenting on the results, Peter Marks, CEO, said: "I am delighted to report that 2010 was another record year for the Co-operative Group, with solid results right across the Group and continued growth in sales and profitability. The past year caps what has been a truly remarkable and exhilarating period for the Group, marking the completion of our three-year business plan following the merger of the Group and United Co-operatives in 2007." Market conditions for the food business in 2010 were extremely challenging characterised by fierce competitor activity, severe winter weather at both ends of the year, a poor summer and a disappointing World Cup. Despite these hurdles, operating profit was up by 33.3% to 382.6m 35 (pre significant items). For Co-operative Food, integrating the Somerfield business was the key focus of 2010. In the 12 months under review, 524 stores were converted to The Co-operative brand and ranges were harmonised. In addition, back office, supply chain processes and commercial functions were simultaneously restructured. Inevitably this work took a toll on like-for-like sales, but these actions should provide a solid platform for sales and profits growth going forward, with the business able to benefit from greater buying power through its increased scale. 2011 is expected to be a very tough year for all food retailers with much evidence of belt tightening by consumers in the opening six months of the year and the prospect of further cutbacks to come, as tax rises and benefit cuts bite and public sector redundancies take effect. Consumer confidence is low, and expected to continue to drop. Co-operative Food however may be less impacted by these events than retailers reliant on trade at out-of-town superstores. The business should benefit from the trend for consumers to shop more locally and frequently to reduce shopping bills, while its older customer base will be less affected by tax changes and petrol cost increases than more family oriented retailers.
st

Overview The Co-operative Group is the largest consumer co-operative in the world. It has its origins in the Co-operative Wholesale Society, which was established in 1863 to provide buying and wholesaling services to the Co-operative Movement. It now operates a 'family' of businesses including food retailing, financial services, travel agency, funeral services, and farming, manufacturing and distribution activities. Approximately half of the Group's net turnover is generated by food retailing. The Group aims to: Strive for world class levels of business performance. Be open, responsible and rewarding, putting co-operative values and principles into everyday practice. Enhance the lives of our people, members, customers and the communities in which it trades. Work for the long-term success of the co-operative sector.
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Food Retailing The focus of the food division is on convenience and neighbourhood retailing. Its acquisition strategy, culminating in the purchase of Somerfield in 2009 has created a portfolio which stood at 3,001 food stores in August 2011, almost all under 10,000 sq ft. As well as the conversion of Somerfield stores the last two years has seen a major drive to roll out a uniform store format and identity to the whole portfolio, in line with the wider co-operative movement. The strategy of the enlarged Group now is to become the market leader in the convenience and small store sector, capitalising on key social and consumer trends, including an increase in the number of single person households, ageing population and promiscuity and frequency of grocery shopping. As part of its mission to be "the UK's favourite community food retailer," the retailer operates stores ranging from 2,000 sq ft to 15,000 sq ft. These include petrol filling stations that aim to offer: As part of its mission to be "the UK's favourite community food retailer," the retailer operates stores ranging from 2,000 sq ft to 15,000 sq ft, including petrol filling stations that offer: Quick, friendly service. Easy access. Good availability. Good value for money. Consistent quality. Emphasis on fresh food, in particular bakery, fruit and vegetables, meat and fish and meal solutions. Consistent brand proposition delivery and communication. The key strategic challenges which the broader CRTG face includes: Improving its price perception. Maintaining the pace of product development. Brand roll-out. Developing an efficient and modern supply chain. Range evolution. Maintaining its leadership on Fairtrade. Developing the membership proposition. Social strategy In line with the Co-operative Movement's ethical and social objectives, The Co-operative Group seeks to develop further relationships with suppliers that set similar standards to its own. The Cooperative Group is keen for all suppliers to be aware of its unique nature and the goals it aims to achieve. The Responsible Retailing Campaign has been driven by a survey of 30,000 consumers. The key issues which emerged, and examples of how they influence buying operations are as follows: Animal Welfare - The Co-operative Group seeks to attain the best standards possible e.g. the 'Freedom Foods' own brand range which has been developed to RSPCA standards. A further example is the Group becoming the first grocery retailer to be awarded the right to use the new International Cruelty-Free symbol on its health & beauty products.
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Access for All - The Co-operative Group was the first to introduce Braille on the packaging of medicines, vitamins and other medical goods. This process has taken over two years due to the considerable technical issues involved. Other initiatives include the availability of tear strip openings on biscuits etc. Environment - Activities include the assessment of packaging of own brand goods to ensure that the minimum content of paper and plastics is used. At a broader level, environmental management systems are being developed to improve regulation of the environmental impact. Ethical - A key initiative here has been the introduction and extension of Fairtrade lines, with examples present in growing number of categories such as chocolate, coffee, tea, wine and biscuits. In some categories, such as chocolate and coffee the entire private label offer has been converted to Fairtrade. The Co-operative Group is driving ahead with plans to roll out further Fairtrade initiatives in the future and is a major supporter of related events such as Fairtrade Fortnight. Diet & Health - The Co-operative Group continues to implement policies and procedures above and beyond what is required by law. Of particular importance are commitments to reduce items such as salt, sugar and saturated fat, and the avoidance of artificial colours in own label products. Labelling - For suppliers to the business it is important to recognise that the Co-operative Group's policy of openness and honesty in food labelling in own brand. This is above and beyond what is required by law. The Group has published a succession of reports investigating the issues of labelling legislation and setting out blueprints for the Groups next steps in improving its own standards in line with customer feedback. The Group is also a supporter of improved labelling practices in the wider food industry, as well as of stricter legislation.
Trading Strategy
The development of the Co-operative Group food ranges is being driven by the requirements of the new format (The Co-operative) that now forms the backbone of the retail strategy. The key strategic focus of these formats on convenience and top up shopping is now common to all CRTG members, though many societies, including the Co-operative Group, retain larger stores, which require more extended ranges. Range Harmonisation Following the acquisition of Somerfield, the Co-operative Group initiated the process of range harmonisation with a view to taking the 'best of the best' from both businesses, with the aim of completion by October 2010. The goal was to create a uniquely Co-operative customer offer that establishes a clearly differentiated position versus its competitors. It also strives to drive increased productivity and profitability by increasing its customers' spend, attracting more customers and engaging with its customers to create loyalty. The main goals of the project are to: Improve overall productivity and profitability Increase sales per sq ft Increase average basket spend Increase transactions Grow fresh food penetration at 50% Grow private label penetration to 50% Deliver improved consistency of offer across the estate Generate positive customer and staff feedback
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In order to drive these goals the retailer has set clear targets in a number of areas including: Minimum/maximum range size targets Private label targets = 3,000 range size Defined 500 must stocks Re-defined space allocation for fresh and ambient Category Roles In order to support the further development of the Groups offer, and to capitalise on the opportunities provided by the enlargement of CRTG, the product range has been classified into the following four category roles: Hero - These categories provide significant growth opportunities and have the potential to generate a step change in performance. Examples include bakery, chilled, produce, beers, wines and spirits. A key part of the development of hero categories is new product development. The creation of ready meal and meal solution products has been given high priority, and recent years have seen the Group enhancing its ranges in this area with the addition of premium and healthy options in particular. Drive - Categories where there is potential to increase sales participation, either due to strong market growth or where the Group traditionally under trades. Examples include confectionery, soft drinks, newspapers and magazines, health and beauty/baby. Squeeze - Categories in medium/long term decline, or where the business tends to be over spaced relative to competitors/market demand, for instance laundry and detergents. Hold - Categories with static growth or where the Group has allocated the correct amount of space. Examples include home baking, pet food and breakfast cereals. These category roles are key to prioritising a number of resources. Areas include macro space allocation, category development, and the marketing of products and ranges. Fresh Foods A key part of the development of hero categories is new product development. The creation of enhanced ready meal and meal solution products has been given high priority in order to: Capture the growth of these areas offer. Continue to add value to the Group's core shopper. Reinforce and advance the Group's reputation in fresh foods. A huge amount of work is going into developing the convenience offer. The Group has especially focused on building areas of weakness, adding space for impulse chilled categories such as yoghurt, milk and ready meals, with cheese, fats and cooked meats conversely decreasing in space. As part of the range harmonisation process, the retailer is placing a greater emphasis on fresh foods in order to: Give customers a wider choice. Add excitement to the offer. Maintain Co-operative private label ethical standards. Deliver added value to ex-Somerfield customers.
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Grocery home delivery service In December 2010, The Co-operative Group announced a trial of grocery home delivery service for shoppers living in Manchester city centre. Despite the fact that The Co-operative already operates a similar home delivery stores from over 330 of its food stores in smaller towns, this is a significant move by the retailer to now offer this service in city locations. The retailer's home delivery service allows its customers to shop as usual in-store, but will deliver the shopping free, as long as the order is over 25. If the order is less than 25, shoppers can still avail of the service, but will pay a 3 fee. Non-food Trading Strategy The Co-operative Group has now disposed of all its traditional non-food department stores, however in recent years they have imported selected non food elements into its grocery stores. The key goals of this strategy are to develop a proposition which complements its food offer, as with its recent kitchen and dining offer, offers value for money, fulfils customer needs and is easy to shop. In June 2010, the retailer introduced an electrical products trial/concession called The Cooperative Electrical into three of its larger stores. Following its success, the retailer announced in November that it is extending this trial to a further three stores. Sean Toal, Group Commercial Director said at the time: "The in-store electrical pilots within our food stores are performing well. They add real value and offer a great choice to our customers, and we're confident that the extension of the trial will prove to be equally successful".

Strategy The Group's price and promotional strategy is based on: Fewer, stronger deals. Meal solutions. Increased emphasis on price cuts / round price points. Including offers on healthy alternatives. Pricing The Co-operative Group is keen to be competitively-priced in the catchments within which it operates. It recognises that full scale price competition with leading superstore multiples will not be practical (or necessary) for its smaller stores. However, the business aims to differentiate itself from competitors in the smaller stores sector through a strong pricing platform combined with a unique promotional programme offering true value to customers. The Group sees the maintenance of this stance as key to its marketing effort, in particular being effective and rewarding. It continues to make an investment in selected Key Value Item's (KVI) reviewing the price position of every category, and the spread of prices within categories, in order to develop a more simplified pricing structure designed to push any investment towards strategic Hero categories. Promotions The Co-operative Group runs an ongoing programme of promotional activity throughout the year structured around 17 three-week periods, which is common to the whole of the CRTG membership. Each period includes a theme built around seasonal events (Easter, Mother's Day etc), focus on a particular mechanic (Half Price, BOGOF etc) or category focus (Wine Festival, Fairtrade Fortnight etc), which is supplemented with other sub-themes including other sales event opportunities. Each period is supported with door drop leaflets targeting 2.4 million households as well as in-store. Promotional participation runs at c.37% which is above the market average of c32%.
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At a higher level the periods are clustered into seasonal themes to bring an overall structure to the year. Annual themes tend to include: Value & Health - periods 1-3 Spring Fresh - periods 5-6 Summer Fun - periods 7-12 Autumn Harvest - periods 13-15 Christmas Sparkle - periods 16-17 In November 2009 a 200m investment was announced to allow the retailer to offer a triple Dividend on key lines while also rolling the scheme out to Somerfield stores. The Co-op Membership Card, the re-launched Dividend Card, aims to deliver the 'rewarding' element of the Group's retail strategy through an offer which comfortably exceeds the threshold expectations for a loyalty scheme in the top-up market. Objectives An important objective of the promotional strategy is to increase basket sizes from occasional shoppers, for example by encouraging distress shoppers in the Group's convenience stores to trade up to fuller top-up shopping. By changing promotions on a three-weekly basis, customers are encouraged to visit stores regularly to ensure they are not missing out on great value special offers. Product and price advertising reinforces this message for existing shoppers and promotes brand reappraisal from non-shoppers. The Group also uses its membership scheme to encourage greater spend, targeting promotions based on previous purchases. There are indications that this tactic is proving successful, with the Group stating that members spend on average twice as much as a non-member. Whilst a range of mechanics are used to optimise promotional impact, there is a preference for using 'two for a set price' or 'three for a set price' type promotions as these can assist in building customer basket values. However, the Group also uses deep cut prices and BOGOF's (Buy One Get One Free) to strengthen external communications and stimulate traffic. Meal deals are also used in both convenience and Market Town format stores which include signage featuring the name of the town and store exteriors designed according to location. Lunchtime deals have been successfully deployed in both formats, whilst 'eat tonight' meal deals have proved popular in Market Town stores. Such deals would include for example four key components of an evening meal, with the lead meat and cook-in sauce components merchandised together in the same area of the store at exceptional value. Convenience stores feature a meal deal surrounding pre-prepared ready meals. In recent months, The Co-operative Group has focused on its value offer, and now offers a series of 'meal solution' promotional deals, in line with many other UK retailers, offering a range of meal components for a family of four for under 5.

The Co-operative Group maintains a well-established private label offer, which it shares with the rest of the UK Co-operative Movement through its role at the centre of the CRTG buying group. Traditionally known as the Co-op Brand, these private label ranges have been re-branded 'The Co-operative' as part of the wholesale project to roll out this common identity to all aspects of the retail offer across all the UK societies. The new packaging is bringing a more contemporary look to the private label ranges with clearer focus on product quality and provenance. The Buying Division seeks to drive sales of the Co-operative brand within The Co-operative Group and the CRTG, the intention being to improve customer perception of the total brand offer including value for money.
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The Range Development, Quality and Consumer Care function of the Marketing department acts as the custodian of the Co-operative brand. Its responsibilities include development, implementation and communication of brand strategy. The category teams use this strategy to ensure the development of a Co-operative brand range of quality and value for money, which exceeds consumer expectations. The Co-operative ranges are seen as a key element in establishing the Co-operative difference and to be crucial to the future of the business, with own-brand penetration now reaching around 50%, consisting of c.3,000 SKUs. The core principles guiding development are: To build an interesting and relevant customer-focused range. To ensure that 'responsible retailing' is hard-coded into all products. To be 'Good with Food'. Through the development of the Co-operative brand, the retailer is able to: Deliver its ethical and responsible philosophy. Build customer loyalty driving market share and incremental sales. Increases the value for money perception of its product offer. Recent years have seen major enhancements made to the Co-operative private label ranges, with development focusing especially on major growth categories such as fresh and chilled particularly including ready meals. In conjunction with the roll out of the new 'The Co-operative' identity areas of focus have been the issues of provenance in areas such as fresh meat, local sourcing, Fairtrade and organic. Since launching the first private label Fairtrade product in 2000 the Co-operative Group has built the largest Fairtrade range in UK retailing and includes chocolate, wine, tea, coffee and fruit. As mentioned, following the acquisition of Somerfield, The Co-operative Group initiated the process of range harmonisation. Early examples of this include The Co-operatives low priced brand Everyday Value being replaced by Somerfields Simply Value equivalent and the Healthier Choice brand replacing the Co-ops Healthy Living and Somerfields Healthy Choice ranges. Own Label Tiering
Simply Value Formally Somerfield's private label line, Simply Value has been re-branded with the co-operative logo and replaces Everyday Value, a value line from the co-operative. Simply value offers a highly competitive opening price point for categories.
Truly Irresistible The Truly Irresistible range contains products created by award-winning chefs using some of the very best ingredients. The range includes ready meals, desserts and fresh produce. The Cooperative Group is looking to expand their premium brand in a bid to take on Tesco Finest and Sainsbury's Taste the Difference. Currently the range comprises 270 lines and is worth 80m annually.
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Healthier Choice In June 2010, The Co-operative announced it had rebranded its private label healthy eating range to Healthier Choice. The rollout of the range, which comprises approximately 100 SKUs, was completed in Oct 2010. Products under this label will either have controlled overall calorie counts and less than 3% fat or will be products in which fat, salt or sugar has been reduced by 50%. The new brand replaces the Co-operative Health Living and the Somerfield Healthy Choice ranges.
Simply The Simply range consists of easy-to-prepare ready meals, soups and vegetable dishes that do not contain any unnecessary additives, preservatives, stabilisers, emulsifiers, hydrogenated fats, artificial colours or flavours. Furthermore, all products in the range meet the salt target levels set by the Food Standards Agency, only use free-range eggs and display the FSA front-of-pack traffic light labelling scheme.
Fairtrade The Co-operative Group stocks Fairtrade products in more outlets than any other retailer. With over 100 certified Fairtrade products, the range includes wine, chocolate, cake, coffee and pineapples. The Co-operative has maintained an innovative and leadership approach to product development. In February 2011 The Co-operative unveiled its ambitious three-year Ethical Operating Plan. Under this new initiative, by 2013, their target is for 90% of the primary commodities they source from the developing world to be Fairtrade certified.
Eat In range In September 2010, The Co-operative Group launched a convenience range of private label meals called 'Eat In'. Products in the new range will feature a selection of read-to-cook meat and fish dishes, and prepared vegetable accompaniments. According to the retailer, the new product lines have been introduced in response to the growing demand for 'convenient, quality, fresh meal solutions for customers to cook and enjoy at home'. The new Eat In range will allow customers to avail of a 5 meal deal, including any pre-prepared meat or fish dish, plus two accompaniments. The range also includes a selection of meat joints which are ready to roast. In keeping with The Co-operative Group's stance as a 'Responsible Retailer', it has placed particular focus on sourcing its meat for this new range. All the poultry in the Eat In range is The Cooperative's higher-welfare Elmwood standard and British. The beef and pork used in the range is also 100% British. Additionally, all Eat In fish products are responsibly sourced.
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The social class of the total Co-op Group is predominantly lower class. This is driven by their town centre and urban store locations which primarily support local neighbourhoods. The customer base is also older compared to the total market. Customers who do not have any children account for the majority of total Co-op spend, again reflecting the neighbourhood locations and older age profile of their customer base. Customers from 1 or 2 person households now account for roughly two-thirds of total spend. . There are a large number of stores which are relatively small in size and located on urban sites. The custom in these stores tends to be characterised by smaller, top-up shops, giving the stores a lower than average spend per visit. Frequency of visit is a key strength of the Co-op, with customers visiting their stores almost 7 times in every 4 week period. Taking the above into consideration, the current customer profile and spending habits sit well with the Co-operative Groups plans to expand further in the convenience sector, one of the reasons that Somerfield offered such as good strategic fit.

The overall marketing strategy of the Co-operative Group is to deliver the Co-operative goals of being effective, responsible and rewarding retailers. This entails: Effective operation - that is to say meeting and exceeding the standard expectations of customers in the marketplace - "getting the basics right". In marketing terms this means that range, pricing and promotions must be seen by customers as good value and enticing when benchmarked against competing retailers. The branding, image, ambience and condition of stores must also meet consumer expectations. Responsible retailing - a characteristic which has historically been important for the Cooperative Group. In marketing terms the implementation and demonstration of this will build Co-op brand values, reinforcing the historical tradition of the Co-op as a sociallyaware and consumer-led organisation. As issues such as the ethics of food production gain currency amongst consumers, the Group wishes to gain greater recognition and marketing advantage from the consumer focus of its policies. Rewarding customers - this is about delivering over and above customer expectations and giving something back in return for their loyalty. The primary way in which the Cooperative Group rewards customers is through the membership card scheme (previously the Dividend Card). Food Retail Marketing Food retail marketing is charged with developing the Food Retail message and communicating this to customers, taking the lead from the wider corporate message developed by The Cooperative Group. Over 2010 and 2011 the Co-operative Group has launched a major drive to build a more coherent and quality focused brand image based around the strap-line: "Good with Food" which features in a national TV advertising campaign. The 'Good with Food' programme aims to enhance all elements of the food retailing offer aiming to achieve: Better Shops Better Products Better Service Better Execution
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Advertising The Co-operative Group regards television advertising as a key driver of brand perception and reappraisal. This is supported by press advertising and door-to-door leaflets communicating promotional value to drive traffic into store. Television The Co-operative Group is increasingly using national television advertising to drive its brand values both business wide (e.g. the 'Blowing in the Wind' campaign) as well as to support food retail in particular. Recent food retail adverts have provided both focus on the credibility of the overall offer ('Good with Food'), as well as highlighting specific elements of the value proposition. Early 2011 saw the launch of a new corporate campaign built around the theme of 'Join the Revolution' seeking to drive the heritage of the co-operative difference and the value of social enterprise. Press In contrast press advertising is focusing more specifically on The Co-operative Group's value proposition as represented in its ongoing programme of promotional activity, but has recently been widened to communicate more about the Group's ethical and environmental credentials. Aside from Food Retail, other segments of The Co-operative Group's business take adverts in national press, emphasising the mutual points of difference. Door-to-Door Each of the 17 three-week promotional periods is supported by extensive leafleting featuring a selection of the strongest deals, with 2.4 million households targeted in every period, plus an extra six million in the run up to Christmas. Leaflets are produced in 177 versions to suit the needs of the different store types and the different CRTG member societies who implement the common promotional programme across their stores. In-store marketing The Group has been heavily promoting its re-launched premium range 'Truly Irresistible' in-store using leaflets and recipe idea cards.
The Group acknowledges the importance of in-store communications and is developing new ways of promoting its Responsible Retailing difference at point of sale. In 2005, the Group launched the use of screens at every checkout and kiosk as a customer communication medium. The purpose of the screens is to further educate customers about the Co-op brand and encourage an ongoing re-appraisal of the qualities and values of the brand. The Group is also working with CRTG Societies to parcel screen-based and other in-store media into a flexible advertising medium available to all suppliers.
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The Co-operative Group now also has an in-store radio service installed in some 1,000 of its stores, which provides a listening audience of around six million listeners a week, and delivers over 7,000 product and price messages. As part of the store rebranding process, The Cooperative Group uses space such as pillars - which would otherwise be unused - to emphasise its ethical and environmental messages and sourcing policies. In April 2010 the retailer revealed that research it had commissioned showed that multi-media instore activity can boost the additional sales uplift from promotions by an average of 25%. An independent econometric study, which analysed the additional sales generated over a two-year period in food stores operated by The Co-operative, showed that retail media communications attributed incremental sales of 13.4m. The Co-operative Group operates a sophisticated retail media operation offering third party suppliers more than 40 different media channels. Through the use of these different channels, suppliers are able to develop integrated campaigns consisting of in-store radio, press and promotional flyers. This study revealed that in-store radio was the most successful in-store channel registering 30% to 40% higher uplifts per 1 media value than the other measured channels. Of the 13.4m incremental sales, radio accounted for 5.3m followed by shelf talkers which generated 4m compared with all the other channels, such as shelf wobblers, in-store sampling, till screen adverts, direct mail and leaflets accounting for 4.1m. The co-operative deal 'The co-operative deal' is the primary mechanic for highlighting promotions in store and on advertising materials. Using unmissable red and white graphics and colours, the campaign stresses the key promotions in-store. Dump bins, hanging POS and shelf barkers are all themed to ensure a strong impact. Several types of promotion appear under 'The co-operative deal'. 'Buy one get one free' and other multi-buys feature heavily, as well as significant price cuts. However, the tactic is also combined with flyers delivered to store catchments each period and in national and regional newspapers every 3 weeks. By encouraging customers to make the link between advertising and in-store execution, the Cooperative Group is conveying a strong message about its value proposition. It also continues the theme of the overall integrated marketing campaign, where there is unity and a common authorship across media. Direct Marketing Direct mail is a significant component of the Co-op Groups communications campaign and runs to millions of units every year. The Group works with appropriate suppliers to develop their own bespoke Direct Marketing activity targeting membership cardholders. Targeting can be undertaken by geography, life-stage, socio-economic classifications and current purchasing behaviours. Membership Cards The Co-op Membership Card, the re-launched Dividend Card, aims to deliver the 'rewarding' element of the Group's retail strategy through an offer which comfortably exceeds the threshold expectations for a loyalty scheme in the top-up market. The Membership Card now boasts over 1.5 million active cardholders within the food division alone. The card is a strong driver of loyalty and basket-spend with 30% of all Co-operative Group food sales being accounted for by cardholders. While the average basket of a non-cardholder is 5.27 the average member basket is worth more than twice that at 11.45. The demographic profile of members, according to the Group, is getting progressively younger and more affluent, indicative of the ongoing success in repositioning the Co-operative brand.
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Membership Payouts Payouts are made twice-yearly in cash (vouchers exchangeable for cash or goods, as the customer sees fit, at any retail store). This "cash" option is a key differentiator in this field. Cardholders earn 1% reward on all products. Special bonus promotions are run in-store from time to time, for example customers will earn 10p in the pound on all Co-op Brand Fairtrade products during Fairtrade fortnight. Rewards are paid out in whole s. Cardholders can donate their "odd pence" left over to a Community Fund, which distributes cash to voluntary organisations and local good causes. Distributions are decided by each Region's elected Society membership.

Following the acquisition of Somerfield, the Co-operative has the largest number of stores of any UK retailer.
Convenience (< 3,000 sq ft) This is the key segment for the Co-operative Group with 1,900 stores (incl Somerfield). The small stores are typically located in suburban areas serving relatively small catchments and are typically used for impulse, distress or emergency purchasing. Since 2006, the Co-operatives store portfolio has been revamped with the simple The Cooperative badge and a new colour scheme. By the end of 2011, the Co-op aims to have rebranded the entire estate.
Supermarkets Supermarkets continue to play a significant role in the Co-operative Group store portfolio with the acquisition of Somerfield significantly increasing the proportion of stores from 25% to 40%. The supermarkets have no set minimum size as stores for this format are chosen with location and catchment in mind, but average 7,300 sq ft. They are typically located in rural areas, with a relatively low population density and little or no competition so that the co-operative store can dominate the catchment. The intention of the supermarket format is to provide a bright and modern shopping environment with ranges and facilities to fulfil a main shop. As with the convenience stores, all supermarkets will be refitted with the new The Co-operative fascia and colour scheme by the end of 2009. Superstores With the strategic focus firmly on smaller stores, the group had been undertaking a steady withdrawal from the big store sector over the last few years. The Co-operative Groups steady divestment of its superstores resulted in only 4 stores of over 20,000 sq ft in operation since 2008.
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Stores to visit: 162 Worcester Road, Malvern, Worcestershire, WR14 1AA Tel: +44 (0) 1684 564 684
380 Woodhouse Road, Finchley, London N12 0LH Tel: +44 (0) 208 368 0641

The Co-operative Group/CRTG has a strong commitment to sourcing goods from British suppliers and British farmers especially. It particularly prides itself on its appreciation of the complexities and nuances of regional tastes and preferences and 10% of store lines are listed on a regional basis. It actively encourages approaches from smaller regional suppliers with appropriate products through an ongoing programme of regional 'meet the buyer' events, held throughout the UK. The Group's stance as a 'Responsible Retailer' places specific requirements on its sourcing strategy particularly as it seeks to extend its Fairtrade and organic ranges. Its own rigorous environmental pledges also filter through into both product and packaging sourcing for all areas of the operation. International co-operative movement links, especially in the Far East and China, are now providing significant opportunities for global sourcing especially for non-food ranges. The Co-operative Group is also a member of SEDEX (Supplier Ethical Data Exchange), an organisation for businesses committed to continuous improvement of the ethical performance of their supply chains. Through SEDEX, the Co-operative Group is able to benchmark its operations against other members, and share in best practise across a number of initiatives. Category Captains The Co-operative Group has selected suppliers who are best-placed and most willing to assist in driving the business forward. Ideally the group appoints one supplier for branded and one for own label in each category where appropriate. Over 60 Category Captains have now been appointed and the majority of the key hero categories have been covered. E-tendering The Co-operative Group runs Internet-tendering for the supply of commodity lines, and is continuing to use this tool in conjunction with its chosen auction provider. Potentially, up to 10% of CRTG's buying could be conducted via auctions, in commodity areas such as paper goods and soft drinks. The Group believes that e-tendering is also beneficial to suppliers as the process enables transparency, immediacy and reduced cost, and has been recognised and adopted by many of its suppliers to lower raw material costs. Milk supply In November 2010, The Co-operative announced that it was planning on moving to a dedicated milk supply scheme when its existing contracts expired. In August 2011 Robert Wiseman Dairies started supplying all of the Co-operative Group's own-branded milk under a deal that saw 350 farmers become dedicated suppliers for the Manchester-based chain. These farmers receive a premium for supplying around 360m litres of milk to more than 4,000 Co-operative stores. Tim Hurrell, MD of the group's food business said: "Under our supply model, which is still evolving, we will recruit a pool of farmers and, in partnership with our processors; we will develop long-term, transparent relationships. The foundation for this will be our own food ethical policy and the DEFRA 'milk roadmap' with the focus on animal welfare, environmental stewardship and carbon footprint reduction".
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The Co-operative Group has a well-established social strategy, with the aim of making a positive difference to the communities in which it operates and trades. High ethical standards are an integral part of Co-operative's brand values and in 2011; the group has taken steps to bolster its reputation further. A major focus is the extension of the Elmwood range of high animal welfare meat products across its turkey, chicken and pork ranges. Co-operative has also moved to a dedicated milk supply scheme in partnership with Wiseman Dairies offering a premium to farmers that can demonstrate higher standards of animal welfare and environmental stewardship, for the milk they supply. Initiatives such as these resulted in The Co-operative to winning the 2011 Oracle Retail Week 'Responsible Retailer of the Year' award. The Co-operative Groups community investment is amongst the highest in UK business. In 2010, Fairtrade sales increased 37%, contributing to the support provided to over one million people in the developing world. In 2010, the Co-operative Group launched a Social Banking Unit to boost their offering to organisations that deliver environmental or social benefit, such as the green energy sector and charities. As part of their work to promote social inclusion, products such as basic bank accounts (up 29% in 2010) give more people access to financial services. In 2010 the Co-operative also launched a 30m inspiring young people strategy, helping 330,000 young people across the UK to change their world. The C-operatives new Ethical Operating Plan, which they announced in 2011, includes the following objectives: Ensure that 10% of the profits available for distribution is made available for community investment by 2013, with 5m deployed per annum to tackle UK poverty around stores and branches. Aim that if a primary commodity from the developing world can be Fairtrade, it will be Fairtrade by 2013. Extend commercial lending for energy efficiency and renewables from 400m to 1bn and kick-start a revolution in community-owned renewable energy generation.
BRIEF HISTORY
The Co-operative Group was set up in 1863 to provide support services to over 300 societies in the North of England. It is currently the largest single co-operative business in the UK. In April 2000, CWS (CO-operative Wholesale Society) merged with CRS (Co-operative Retail Society) to form the largest consumer co-operative in the UK. The developments in the Co-op and its acquisitions have positioned it as the leader in the UK convenience market. 2007 was a landmark year for the Co-operative Movement with the merger of the two largest co-operative chains in the UK the Co-operative Group and the United Co-operatives Group. This merger formed the biggest consumer co-operative in the world, creating a society that has 85% of the co-operative trade in one business. In July 2008, The Co-operative purchased Somerfield for 1.57bn subject to regulatory approval. The deal made The Co-operative the 5th largest UK grocery retailer with an approximate turnover of 8bn, a market share of 8.0% and added around 880 stores to the estate. The acquisition was completed in March 2009, after the Office of Fair Trading gave final approval, subject to the divestment 126 of stores in areas where local competition issues arose. Morrisons acquired 38 of these stores in December 2008, at a price of 223.1m. Buyers of others stores include the Musgrave Group, Tesco, Spar and Lidl. Somerfield will continue to be run as a separate entity for an 18-month period; the Co-operative has commenced the rebranding process of the Somerfield stores, with full integration expected in 2011.
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Waitrose Limited, Doncastle Road, Southern Industrial Estate, Bracknell, Berkshire. RG12 8YA Tel: 0044 (0) 1344 424 680 www.waitrose.co.uk
Domestic Market: United Kingdom No. of Formats: 3 No. of Stores: 242 Turnover: GBP 5,026.68m Operating Countries: 1 Sales area: 408,179 sq m
Company Mission: The partnership aims to deal honestly with its customers and secure their loyalty and trust by providing outstanding choice, value and service. Corporate Strategy: Deliver premium quality and fresh food Emphasise provenance and integrity of food Build upon Waitroses position as a trusted UK brand and retail institution Price commitment on 350 basic items whilst maintaining a quality rather than price-led proposition Double the business to 400 stores within ten years
Key highlights: As of October 2011 Waitrose was the sixth biggest UK grocery retailer with a market 36 share of 4.4%. In January 2011 a trial of the new 'Little Waitrose' fascia begin at the retailer's Old Brompton Road convenience store in Kensington, London. In early 2011 Waitrose re-launched its website. Mark Price is quoted as stating that he expects its online business to grow at between 40-60% a year going forward. The move, introduced in January of this year, which saw Waitrose making its first home deliveries within the Greater London area, will be an important factor in driving this growth. In July 2011 a provision in Waitroses contract with Ocado expired, meaning there are no longer any barriers to complete competition between the two retailers. The provision had been preventing Waitrose from operating within the M25. In 2010 Waitrose acquired 5 shops in the Channel Islands, the first of which opened in February 2011. Waitrose opened twenty new branches in 2010/2011, bringing the total number of stores to 242 and representing an increase of 5.7% in selling space.
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Waitrose has released its results for the half year ended 31 July 2010, reporting net sales increasing 10.3% to 2.3bn with like for like (LFL) growth of 3.9% (ex. fuel). For the first quarter, Waitrose's LFL sales were up 3.9%, however this grew strongly and the second quarter reported a LFL increase of 4.5%. The retailer has been investing heavily in its offer and strengthening its value credentials, both through its essentials range and promotions that tied into its advertising campaigns. Portfolio growth has also been key to Waitrose over the period, with nine new stores opening over the half and amounting to 75,000 sq ft (1.7%) of new space. This expansion will not be letting up over the second half with a further 15 shops set to open. This period also marked Waitrose's first venture into convenience retailing, with three new smaller format stores coming online. In March 2010, Waitrose revealed that it had appointed Delia Smith and Heston Blumenthal as its food ambassadors. The success of the food ambassadors strategy led to Heston Blumenthal lending his name to the latest Waitrose own brand extension. The Heston from Waitrose range launched in store in October 2010. Key challenges: Waitrose is a relatively small grocery business compared to other operators, e.g. Tesco or Sainsburys. While Waitrose is performing well over all, it does not benefit from the same economies of scale of larger businesses. Waitrose overtrades in the more affluent social grouping AB and in the over-65 age group. Given this restrictive and aging demographic, the challenge for Waitrose is to attract younger affluent consumers. Sainsburys renewed focus on the retailing of quality food at a value price poses a clear threat to Waitrose. Tesco, Sainsbury's and Asda have been opening increasingly large stores. These stores bring the concept of a truly 'one stop shop' to the UK. There is a danger for smaller store operators like Waitrose, that consumers will prefer the convenience of hypermarkets to supermarkets for their primary shop.
Mark Price became Managing Director of Waitrose in April 2007 having previously held the positions of Marketing Director and Selling Director. With the departure of Richard Hodgson to Morrisons in June 2010, Mark Williamson has now taken up the role of Commercial Director. Hodgsons departure also made way for Marketing Director Rupert Thomas appointment to the Management Board.
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All buying activities at Waitrose are supported by five functional departments: Food Technology, Merchandising, Direct Business, Buying Service and Special Projects e.g. Space Management. As Waitrose pursues an ambitious growth strategy, which includes the extension of the Waitrose brand to other retailers, the company has restructured its buying department accordingly. The purpose for these changes is to beef out the buying department as the retailer looks to grow by focusing on strategic partnerships. Although full details of the new structure have not been released and all rolls have not been filled the framework going forward will look something like this:

Over the 26 weeks to 30 July 2011 Waitrose reported a total sales increase of 8.7% (inc. fuel) or 8.5% exc. fuel, with online sales up 15.9%. This demonstrated its continued customer appeal as it develops its strategy across new stores, channels and ranges, with much progress in each over the first half. Over the period, Waitrose benefited from strong trading surrounding Easter and the royal wedding with good weather later in the period also helping sales. However, sales growth remained strong at the end of the period, with growth of over 10% in the last week of July. Investing in its value credentials has been an important factor in boosting Waitroses performance over the past year. In September, the retailer introduced its Brand Price Match, which is a longterm commitment to price match Tesco on 1,000 branded products. Combining this price matching pledge with the retailer's more value-focused essential Waitrose range means that the retailer is really broadening its appeal to more and more shoppers. In total, the retailer invested 64.3m in infrastructural developments, which included opening a new 100,000 sq ft chilled warehouse in Bracknell. Operational efficiencies implemented across the grocery supply chain have captured significant savings for Waitrose.
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Overview Waitrose's principal activity is the sale of quality foods and groceries. The retailer also has a modest, though growing, non-food offer, and this is an area where the retailer is able to make some use of the operations of its sister John Lewis department store business for product sourcing. Waitrose is positioned at the upper end of the grocery retailing market, having a higher proportion of AB customers than any of the other major multiple retailers, although as part of its expansion plans, it is seeking to develop a broader customer base. The key elements of the retailer's growth strategy are: Format strategy - Waitrose has developed a range of formats, particularly smaller formats, over the last two years to enable it to take its offer to smaller catchment areas, seize on opportunities in convenience and top-up based shopping missions, and open up access to a larger property market. Online - Waitrose continues to increase the number of stores from which its 'Waitrose Deliver' service is available from. Strategic partnerships - Waitrose is aiming to increase the ease with which shoppers can access its private label products. In the last year the retailer has developed new strategic partnerships with both Boots and Shell in the UK, with a previous partnership with Welcome Break Structure The John Lewis Partnership is made up of the John Lewis department stores and the Waitrose grocery retailing business. The company is owned by the staff it employs, all of which are partners in the business. Theoretically, this keeps the retailer insulated from some of the pressures associated with PLC retailers. However, the company does need to make sufficient returns to finance future development and distribute a share of profits to members. Waitrose also differs from many retailers in the criteria it uses for decision making. The Principles of the Partnership which include democratic input to management decisions and ethical relationships with customers, suppliers and the community also play a role. This is very much an established, long-standing, structure for the business. Waitrose aims to act ethically as a business in dealings with customers, trading partners, partners (employees) and the wider community. The principal of acting ethically in relationships with these parties dates back to the original 1929 Constitution of the John Lewis Partnership. Customer Offer Waitrose aims to win customers' loyalty by offering quality, choice, value and service. It describes its customer strategy as The Waitrose Difference. The key elements to this are: A Belief in Quality: the company has a clear strategy to deliver premium quality and fresh food. This is achieved by continuously developing the expertise of their buying team and by stressing the provenance and integrity of the food throughout their advertising and marketing. A Partnership: the ownership structure offers Waitrose a unique position within the food retailing industry and potentially gives the company higher levels of commitment and longer service. Price Commitment: the company's proposition has always been quality-led rather than price-led. It has not advertised aggressive promotions in the same way most of its major competitors do. However, in order to maintain a competitive position on everyday pricing, it has in place a Price Commitment on 350 basic items. This is checked each week to ensure it offers "consistent good value for money". That said, this commitment does not guarantee that it will match the price of its rivals.
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Easier Shopping: Waitrose offers some unique shopping services, such as a carry to car service for customers' shopping, as well as staff to accompany customers around the store to help with product selection. These features are particularly relevant to Waitrose's customers as the company attracts a far higher percentage of older customers than its competitors. Growth Off the back of strong growth, an ambitious growth strategy for Waitrose was revealed in March 2007, with plans to double the number of outlets over the following 10 years which would take the number to close to 400. In March 2010 Mark Price reiterated his company's plans to significantly grow the business over the long term. Over the next ten years, the goal is double the size of the business, increasing sales from 5bn to 10bn. This will be driven by range enhancements, new store openings and strategic partnerships such as those formed with Boots and Shell. The retailer also believes that there is the potential for over 20 stores in the Middle East. This strategy was further updated in July 2010, when Mark Price stated that there was potential for over 1,450 outlets selling Waitrose products by 2015. This would include a further 220 Waitrose stores alongside 1,000 partner shops. As of June 2011 Waitrose had just over 20 convenience stores, but it has ambitious plans in this arena, with a goal of opening 300 convenience stores by 2020. Aligned with this, Waitrose is increasingly developing its proposition to meet the needs of convenience shoppers, for instance with the launch of a new 'Good To Go' private label range. Though there is an ongoing push towards new store development, Waitrose continues to recognise the importance of driving like-for-like sales growth. In terms of building sales from its existing portfolio, the plan is to grow its business by: Dominating on product - become the leading fresh food retailer. Provide a differentiated offer on quality and service; this is particularly interesting given the trend towards quality food with visible provenance. Consolidate position in core trading areas. Expand into new trading areas. International Expansion In late December 2007 Waitrose announced it had reached an agreement through which it would license the use of the Waitrose fascia to Spinneys for the development of Waitrose-branded stores in the United Arab Emirates. The first Spinneys' store to operate under a Waitrose fascia was a 25,000 square foot supermarket in a suburb of Dubai that is particularly favoured by British and other European residents. Two more purpose-built Waitrose branches opened in July and October 2008 in partnership with Fine Fare Foods Market (FFFM), located adjacent to the Dubai Marina and in the new Burj Dubai Mall respectively. In June 2010 FFM announced that it would open a 22,000 sq ft store in December 2010 in Bahrain. This builds on an existing collaboration agreement between Waitrose and Spinneys Dubai LLC through which Spinneys carries a number of Waitrose products in its stores. Waitrose has similar agreements in place across a variety of geographies including India, parts of the Far East and a number of Caribbean countries. In addition, following the purchase of the license to Duchy Originals in 2010, Waitrose has revealed that it plans to export the premium organic brand to the USA. In February 2011 Waitrose opened the first of five shops in the Channel Islands its first Waitrose operated shop outside the UK. The opening of the 21,000 sq. ft. shop in St Saviour, Jersey, came shortly after the retailer opened its first shop in Bahrain. However, unlike Bahrain, which is operated as part of a licensing agreement with Fine Fare Food Market LLC (FFFM), the Channel Islands branches are managed and operated solely by Waitrose.
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Trading Strategy
Waitroses buying strategy revolves around the pursuit of food excellence. The companys food offer is highly competitive in terms of innovation and consistent quality. Waitroses buying policies are designed so that the customers can trust in the provenance and integrity of the production of their food. Waitrose attaches great importance to retailer-supplier relationships. The company has taken advantage of its relatively small size to form long term partnerships with key suppliers in order to focus on food excellence and customer needs. This strategy avoids diseconomies of scale that are sometimes associated with smaller scale operations; while leveraging advantages that are not readily accessible to larger international retailers. Fairtrade Waitrose is a keen advocate of fair trade sourcing, with a significant focus on fair trade products across the store. For instance, the retailer stocks a far more extensive range of fair trade coffees than is found in most UK superstores, and the range extends far beyond this to include chocolate, biscuits and other snack products as well as fruit and vegetable lines, in total, over 300 products. Waitrose has long stocked fair trade bananas, and had converted its entire range of bananas to fair trade lines by February 2007. The retailer is also aiming to certify all rose bunches sold as Fairtrade in the near future. Organics Whilst the growth of organics in the UK is often hindered by criticism of the cost versus conventional products, the premium product perception and relatively affluent customer base of Waitrose mean that its organic offer is one of its key strengths and differentiating factors versus other leading multiples. Waitrose was one of the first supermarkets to sell organic products (along with Safeway) in 1983, and now has over 3,000 organic product lines in its stores including 600 private label products. Furthermore, Waitrose also has a policy of sourcing its organic produce from the UK wherever possible, and to facilitate this, it has established a number of initiatives designed to maintain a constant supply. These include: The Waitrose Organic Assistance Scheme was launched in 1998, and provides support and encouragement to UK producers in making the conversion to organic farming. Waitrose was one of the first companies to sign up to the Organic Targets Bill, which aimed to ensure 30% of its farmland was organic by 2010. The Waitrose Organic Horticultural Bursary is run in partnership with the Henry Doubleday Research Association (HDRA), and funds three annual student bursaries to develop expert organic agronomy skills.
Strategic Partnership
One of the key goals of the current trading strategy is to extend the reach of the Waitrose brand. In addition to driving format development the retailer is also looking at new opportunities for other retailers to stock its ranges. In the last two years, two such ventures have been launched in the UK. In a partnership with Shell, the retailer's food-to-go ranges have been stocked in six forecourt locations while a multi-faceted venture with Boots has seen: Waitrose's 13 in-store pharmacies re-branded under the Boots fascia. The introduction of Waitrose's food-to-go ranges into Boots' stores. The trialling of four Waitrose store areas within four larger Boots stores, offering a wider range of Waitrose's products.
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Its partnership with Welcome Break has also seen the establishment of nine Waitrose stores at motorway service stations. In March 2010, Boots and Waitrose launched the first trial of selling Waitrose food in the former's outlets. At the time, four Boots introduced a 'new range that combines the best of Boots and Waitrose lunchtime'. The stores are Canary Wharf, Swansea, Abingdon and Milton Keynes. In Sept/Oct 2010, the second trial was in operation too, which stocks a larger selection of both lunchtime and grocery convenience food. There are currently four stores, including one in Watford stocking the range.

Whilst Waitrose generally trades at a price premium to its main competitors, the retailer seeks to maintain the value of its proposition by offering "consistently good value for money". It does this via an advertised Price Commitment across a limited range of 350 everyday products, as well as systematically tracking pricing across a wider range of products. This commitment does not however guarantee it will match the lowest price. Waitrose checked the price disparity between itself and Sainsbury's on 12,000 lines in July 2010 and found that difference between the two was 3.7%. While traditionally having little involvement in promotional activity historically, an impactful and ongoing programme of deals has become a more prominent feature of the Waitrose offer. Waitrose regularly offers more than 800 promotions per week, a figure that is broadly in line with other major multiples. As Waitrose becomes present more widely across the country it is becoming more sensitive to issues of price, and while not wishing to compromise the quality of the core offer, it is seeking to sharpen its competitive positioning on major branded goods above all. Waitrose remains committed to offering high quality food and drink, and managing director Mark Price has committed to maintain a price differential compared with rivals where this is justified through attributes such as greater freshness or a more ethical sourcing process. However, as Waitrose increases its store estate, and consequently attracts a broader customer base, it is focusing on driving a stronger price and promotional message. This has been done through investment in core pricing, the launch of its essential Waitrose private label range and a stronger promotional package. A key element of this promotional package has been its 'meal deal' promotions which have enabled it to demonstrate it broader capabilities in prepared foods. Promotions are also being run concurrently with its advertising campaigns featuring brand ambassadors Delia Smith and Heston Blumenthal. Ingredients used in the recipes that the two chefs present in the adverts are placed on special offer for that week. In an interview with Mark Price in July 2010, speaking about the shift in the retailer's pricing position following the onset of the recession, he has said that Waitrose has dramatically increased its number of promotions and has made sure its prices are 'sharper' than they were historically. This focus on value has been adapted as an ongoing strategy, and the retailer is currently investing approximately 40 million a year on reducing its prices.
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Waitrose is recognised for the high quality of its private label offer. Private label is used as a tool for Waitrose to differentiate its offer from competitors and enhance its customer loyalty. Prepared Foods The retailer is particularly recognised for its prepared food ranges. By exploiting its quality credentials, Waitrose has sought to position many of its prepared and pre-prepared meals versus restaurant quality foods. Ranges in these areas include the following:
Easy to Cook The Easy to Cook range offers customers convenience without compromising quality. Products include Smoked Haddock fillets with a rich cheese sauce and fresh spinach, Venison & Mushroom Wellington, Pork Sausage and Lentil Casserole with tomatoes, onions and red wine.
Deliciously Different This is Waitroses nutritious range of meals with healthy, wholesome ingredients such as fibrerich grains and pulses. Waitrose positions it as a fast and easy way to eat well. Each dish contains at least one five-a-day vegetable portion.
Menu From This range of ready meals was launched in February 2010 following collaboration with three leading chefs, Pierre Koffmann, Anthony Demetre and Bryn Williams. The range has been designed to offer meal choices which are similar to those which can be found in upscale restaurants.
As Good As Going Out This is Waitroses award-winning prepared meal range which has been inspired by good restaurant food and made with premium ingredients. The range contains sophisticated restaurantstyle main courses, starters and accompaniments that are aimed at entertaining or a meal solution treat. To drive sales in 2009 and 2010, Waitrose promoted the range as part of their Dine in for 10. This offer includes an As Good As Going Out meal for two consisting of a starter, main course, side dish and bottle of wine for 10.
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In addition the retailer has developed an extensive range of prepared meals including Indian, Oriental and British Specialties. Other Ranges:
Cook's Ingredients As a premium retailer, appealing to those with a strong interest in cooking, this range is an essential element. It encompasses beans, lentils and rice, chillies, herbs and spices, oils and vinegars, sauces and pastes and nuts and seeds and breadcrumbs to aid customers cooking from scratch.
Waitrose Wholesome Waitrose Wholesome is a range of approximately 130 minimally processed, naturally nutritious foods which are often referred to as 'wholefoods'. All of the foods in this range are free from hydrogenated fat, artificial colours, flavours, sweeteners or added salt.
Waitrose Organic Waitrose Organic is a range that extends across both grocery and fresh foods. In grocery, the focus is predominantly on everyday items.
Duchy Originals from Waitrose In July 2010, Waitrose announced it was to rebrand a large amount of its Waitrose Organic brand products to Duchy Originals from Waitrose. The retailer will started rolling out the new range on nd the 2 of August. Waitroses total organic offering now totals more than 1,700 lines and further development of the Duchy range is expected in 2011.
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Seriously Waitrose Seriously is a premium range of puddings, desserts and treats using natural and simple ingredients. This range also extends into the chilled category.
essential Waitrose Waitrose had traditionally not focused on developing a private label value proposition, believing that this would only serve to dilute and confuse its core offer. However, in March 2009, Waitrose launched a range of budget products called essential Waitrose. The range is now moving towards 1,400 lines across many categories, including dairy, meat, fruit and vegetables and household goods. The brand design has received many accolades and helped to position the range as more than a price fighter option Waitrose has enjoyed increased footfall as a result of the offer. In late 2010 Waitrose walked away with the retail award at the Marketing Week Engage Awards for the launch of its Essentials range, which helped make Waitrose the fastest growing supermarket during the recession. Since launch, the Essentials range has continued to grow and is a permanent part of the Waitrose brand strategy, accounting for 16% of total sales in 2010. Heston from Waitrose In July 2010, Waitrose added a new dimension to their partnership with Heston Blumenthal as they announced that food designed by the chef is to go on sale in Waitrose later this year. The retailer is currently working on more than 20 different products to go on sale in October. The Heston from Waitrose range will include vanilla mayonnaise, tea-smoked salmon and ponzu salad dressing. The move comes after Waitrose recruited Blumenthal to star alongside Delia Smith in a high-profile advertising campaign that is credited with dramatically boosting sales of featured products. Access to the Waitrose Brand Waitrose's private label ranges are also available in 25 countries through sourcing agreements with international retailers. These ventures currently generate sales of around 100m per annum, however, in March 2010; the retailer announced that it was seeking to significantly grow this area of its business. Waitrose believes that there is an opportunity to leverage Waitrose's brand credentials, both within and beyond the UK, with agreements already in place with Boots and Shell in the UK.
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There is a paradox present in the Waitrose customer profile on one hand Waitrose overtrades compared to the total market amongst the affluent AB grouping, while on the other, it takes a higher than average proportion of its revenue from the least affluent E grouping. Waitroses popularity with the AB consumers is due to its quality-driven offer, wide range of speciality products and strong customer service principles, while the location of many sites in prime high street/neighbourhood locations make outlets easily accessible from public transport. This location factor could be one of the reasons for Waitroses popularity amongst the E grouping, who have lower access to cars and rely on public transport or access to retail outlets on foot. Additionally groupings represent the source of income rather than the level, so class E includes pensioners with larger than average levels of disposable income. The age profile of Waitrose customers is skewed towards older shoppers. This is likely to be because older customers do not have children living at home and so have more disposable income to spend on quality food and drink from Waitrose. Waitrose tends to be less attractive to younger families, relative to the total market, due to more pressure on their finances and also because Waitrose stores tend to be slightly smaller than those of the other major retailers, many not being suited to a primary trolley shop, and cannot offer the under one roof range of services available at larger format retailers. As a consequence of this, Waitrose tends to overtrade in households with no children. This is reflected in part by the ranges in a typical Waitrose store. Less space is allocated to areas such as baby-care and meal solutions aimed at children, and more space given over to adult luxuries and treats. Average spend per customer at Waitrose in absolute value is traditionally some way below the top 4 average. This is largely due to the fact that Waitrose operates smaller stores than the leading multiplies and that Waitrose stores are often used for convenience/top-up shopping due to its position as a premium retailer. This in turn means that Waitroses customer frequency of visits is higher than the top 4 operators, due again to the locations and convenience shopping opportunities offered by its stores. The quality of fresh produce, meat and prepared foods in a cornerstone of Waitrose offer encourages regular shoppers to visit frequently to buy the freshest product available.

Waitrose's marketing strategy revolves around recruiting new customers, and increasing the loyalty of existing customers, through the communication of brand values. Waitrose has a powerful brand. Its strength is based on the substance of the company's offer and business practices. In particular the Waitrose brand stands for food excellence, ethical business practices and customer service. Food Excellence: The food offering in Waitrose stores in of a high quality. Waitrose products are produced to high specifications. The company also offers innovative products that suit the lifestyles of its customers. It should be noted that Waitrose aims to provide 'Everyday Food Expertise' as opposed to food which is largely purchased for special occasions. Waitrose prices are competitive when like-for-like products are compared.
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Ethical Business Practices: Waitrose aims to act ethically as a business in dealing with customers, trading partners, partners (employees) and the wider community. Waitrose customers can be assured that the food offered by the company has been produced with care. Food traceability, animal welfare and environmental sensitivities are taken into account in the production process. For example, Waitrose has banned the sale of battery eggs in all its stores. Customer Service: Waitrose offers high quality customer service, with the aim of making the shopping experience more enjoyable. Key features of Waitrose's customer service include: Bag packers and carriers. Enough checkouts open at all times to prevent queuing. A refund and replace guarantee if customers are not satisfied. In July 2011 Waitrose launched a new marketing campaign to promote the re-launch of its website and rebranding of its grocery delivery service to Waitrose.com from Waitrose Deliver. Using the We shop like you shop tagline, the campaign aims to highlight the high level of service customers can expect to receive and humanise the often faceless world of internet shopping. It will also draw attention to the free delivery offered on all orders over 50, a key point of difference from rivals. The new campaign was timed to take advantage of the expiry of a no compete agreement with Ocado on July 1st that now enables Waitrose to deliver to customers within the London area. The focus on London is mirrored by the retailers just announced plans for its convenience store rollout, which will see 20 Little Waitrose convenience stores opened in the capital over the next 18 months. Waitrose also plans to open two full size supermarkets in the London area (at Wimbledon and Stratford) before Christmas. Advertising Waitrose's marketing strategy revolves around recruiting new customers, and increasing the loyalty of existing customers, through the communication of brand values. Advertising for Waitrose has traditionally been carried in quality magazines and broadsheet newspapers. The company bolsters this proposition through television advertising at key times of the year such as Christmas and Easter, when customers typically trade up to its stores. In March 2010, in a departure for the retailer, Waitrose appointed chefs Delia Smith and Heston Blumenthal as food ambassadors, the first time it has used personalities to promote its brand. The two chefs feature in 40 three and a half minute adverts that air on prime-time TV as they present and discuss recipes and food tips using Waitrose ingredients. The adverts highlight the retailer's food credentials as well as promoting the growing trend for cooking from scratch. The adverts used in the recent TV and press campaigns follow a distinctive style. They are relatively minimalist, using simple images that are designed to reinforce the quality ethos of the retailer. In many cases they highlight the producer alongside the product to demonstrate the castiron link between supplier and shelf. Waitrose has been bolstering its advertising with a strong online presence, creating a dedicated channel on YouTube where it has archived its adverts, alongside videos promoting healthy eating and cooking for different occasions. As part of its centenary celebrations, Waitrose developed a press campaign which lists 100 facts "you may not know about Waitrose". This included many points that demonstrate the company ethos, which is strongly geared towards quality food and ethical trading. A few examples from the list of 100 include: Waitrose values long-term relationships with growers, suppliers and farmers, many extending back for over 20 years. Last year the John Lewis Partnership - of which Waitrose is a part - donated more than 3 million to good causes, equivalent to 2.3% of pre-tax profits. During the foot-and-mouth outbreak, Waitrose financially supported its producers to help them through the crisis.
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Food Ambassadors In March 2010 Waitrose announced that it had appointed Delia Smith and Heston Blumenthal as its food brand ambassadors, in a collaboration that saw these two top food icons feature in TV, press and online advertising. The campaign saw the two inspire cooks, share their expertise and showcase recipes.
Increasing Customer Loyalty Waitrose recognises that the loyalty of existing customers cannot be guaranteed and has built mechanisms to persuade shoppers, particularly account cardholders that Waitrose should remain their first choice. These include Price Commitment, customer evenings in branches, reduced ticket prices to special events, services such as Quick Check, and a free subscription to its Waitrose Food Illustrated magazine. These initiatives are intended to re-enforce the existing brand values of trust, value (in relation to quality) and service. Waitrose's Price Commitment also plays a key role in communicating value perceptions to all customers and in converting secondary shoppers to primary shoppers. It is designed to reassure customers that Waitrose is price competitive on basic everyday groceries. Currently, 350 lines are price checked against those of the leading major multiples weekly. Waitrose is not a price led business however. The company's competitive points of difference are in product quality and service. Waitrose Food Illustrated aims to reinforce Waitrose's reputation as a quality food retailer; it does not directly promote Waitrose products or its stores. The magazine includes features about food and wine, farming issues and specialist producers. It includes recipes and restaurant reviews. Its other in-house publications, the quarterly Seasons magazine and monthly "Selections" leaflet detailing the latest in store offers and new products also help to reinforce its commitment to quality, choice and price.
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Direct Marketing In an effort to build on the success of its advertising campaign featuring Delia Smith and Heston Blumenthal, as well as increasing brand awareness and capitalising on the popularity of digital platforms, June 2010 saw Waitrose launch a branded YouTube channel. The channel will feature interactive video content highlighting the provenance of its food alongside recipes and cooking tips. The John Lewis Partnership has two loyalty cards; the Simple Club Card and the Partnership Card, which is also a credit card. John Lewis has almost two million cardholders. Customers receive one point for every 1 spent and are sent out vouchers three times a year. Cardholders can also use the Quick Check self-checkout system at Waitrose stores. Waitrose also uses in-store leaflets to highlight its promotions. The featured products span several categories for the retailer which allows it to deliver two key benefits: Promotional prices emphasise the competitiveness of the products, serving to support the retailer's value message. Three-week cycles allow the company to drive additional sales via purchases of the featured items made in subsequent visits to its stores. The benefits of these opportunities are maximised by placing key impulse products on the front page of the leaflet.
Building on this campaign, in 2008, the retailer launched a new price offensive where it matched the prices at Sainsbury's on around 300 everyday products.

The UK food and grocery retail sector remains a highly competitive market with most major retailers operating more than one format. In response to the current market challenges, Waitrose has made a number of acquisitions and extensions including the opening of three new store concepts: Convenience, Market Town and Motorway Services. Convenience The development of Waitrose's convenience stores followed on from recent opening of smaller format, market town stores. Waitrose developed a new store concept in St. Neots and Buckingham with a strong focus on fresh foods and local ranges. Approximately half the space within the 10,000 sq ft stores is dedicated to fresh foods, while local producers are encouraged to sample their products in-store, helping to create a local market environment. The move represents a significant departure for the retailer, for although Waitrose operates smaller supermarkets, it has relatively little experience of operating stores of less than 3,000 sq ft. Such stores require a dedicated supply chain, the development of new and unique products, and the re-design of existing private label ranges into smaller pack formats. Having successfully grown this trial, in June 2010 Waitrose opened its first smaller format convenience store as part of its plans to increase its presence in the UK's convenience sector. The first of the new format stores, offering shops with sales areas ranging from 2,000-4,000 sq ft, opened in Fitzroy Street, Cambridge. It was the first Waitrose shop in its core estate to measure under 3,000sq ft.
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The smaller convenience shops will help the supermarket in bringing its brand to the 6.5m potential customers it has identified who are currently unable to easily access Waitrose. It has already opened five successful convenience shops measuring between 5-7,000 sq ft and its latest format will play an integral role in its expansion plans. Research into shopping patterns at Waitrose existing convenience shops demonstrates that customers purchase everything they need for the next 24 hours, so the new shop will focus on three key areas: Food to eat now: such as freshly baked bread and the retailer's new range of 'food to go'. This range includes sandwiches, salads, deli products and individually wrapped cakes. Food to take home and eat later: quick & easy meal suggestions, fresh meat & fish and ranges such as Menu From Waitrose - restaurant style dishes created by some of the nation's best chefs. Everyday items: the retailer's ranges such as essential Waitrose, as well as other household items such as health and beauty, cleaning products and cards and gift wrap.
In June 2011 Waitrose's Managing Director Mark Price outlined new ambitions for the retailer's convenience store estate and online operations, speaking at the Reuters Consumer and Retail Summit. The new target of up to 500 convenience stores by the end of the decade is substantially higher than the retailer's initial goal of 300, with strong trading at recently opened stores contributing to the retailer's increased ambition. The news follows the January opening of the retailer's new Little Waitrose format in affluent Kensington with its strong focus on fresh counters and varying merchandising by time of day. As of June 2011 the retailer had convenience store division.
Market Town Waitrose developed a new store concept, Market Town, and opened stores in St. Neots and Buckingham over 2009 with a strong focus on fresh foods and local ranges. Approximately half the space within the 10,000 sq ft stores is dedicated to fresh foods, while local producers are encouraged to sample their products in-store, helping to create a local market environment.
Motorway Services Waitrose has concluded a deal with motorway services operator Welcome Break that saw the retailer open at various locations, including Oxford and South Mimms. The sites stock c.850 lines, including sandwiches, salads and beverages, alongside elements from the core Waitrose offer such as bread, milk and ready meals.
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Superstores/Supermarkets Waitrose opened its first superstore (over 25,000 sq ft) in Stroud in 1993, but still considers optimum store size to be between15,000 sq ft and 25,000 sq ft. Waitrose tailors the range offered in individual stores to match its trading profile. It is worth noting however, that Waitrose's food/non-food mix is evolving. While Waitrose's core offer is based in fresh food, larger stores are allowing for an increased range of complimentary non-food categories. On average it takes Waitrose 22 weeks to build a new store under its new 'step change' store development programme. Waitrose is keen to expand beyond its traditional southern base and the company is planning an aggressive programme of future development, through both organic store growth and store acquisitions.
General Merchandise In 1994, Waitrose opened its first Food and Home store in Southend; a second was opened in Salisbury in 1997. There are now also stores in Cheltenham, Canary Wharf and Rushden. The Food and Home format combines the full Waitrose range with a selection of John Lewis department store merchandise positioned to complement the food offering. Food and Home stores also include dry cleaning services, photo processing, a post office, a Food All Day restaurant, coffee shop and petrol station.
John Lewis Food Hall The John Lewis Food Hall on Oxford Street, London was the first to be introduced to a John Lewis department store, drawing on supermarket expertise of Waitrose and developing the natural synergies between the two key John Lewis Partnership operating divisions. The new concept store opened in September 2007 and has a sales area of 17,000 sq ft, 20 express-style checkouts and service counters for delicatessen, charcuterie, fresh fish, bakery, butchery, patisserie, chocolatier, confectionery and soup as well as a cheese room and wine tasting area. The offer is naturally all about food, with emphasis on fresh, specialist and premium ambient, and BWS products. 90% of products are sourced through Waitrose. This connection ensures that the offer is notably more coherent than some other department store food halls. There is a strong emphasis on presentation in-store with wicker baskets used extensively for displaying fruit and vegetables, while wood is also used extensively in the merchandising of BWS. Clearly the food hall offer caters to the occasions/treating/single-need/on-the-go/lunchtime types of mission, though has sufficient range to enable a modest (top-up) supermarket shop, with provisions (milk, butter, eggs etc) and broader grocery/household categories also present. Waitrose uses the John Lewis food hall to trial new product developments. A second John Lewis Food Hall opened in August 2009 in the refurbished John Lewis Store at the Bluewater shopping centre in Kent.
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Stores to visit: Convenience Manor Road, Brackley, Northamptonshire, NN13 6BE Tel: +44 (0) 01280 703 333 Food & Home Canada Place, Canada Square, Canary Wharf, London E14 5EW Tel: +44 (0) 207 719 0300 Market Town St Neots Priory Lane Cambridgeshire, PE19 2BH Tel: +44 (0) 1489 473372
Supermarket The Brunswick, Bloomsbury, London WC1N 1AF Tel: +44 (0) 207 713 6096 John Lewis Food Hall John Lewis, Oxford Street, London, W1A 1EX
Tel: +44 (0) 207 629 7711 Motorway Services Waitrose at Oxford Services M40 Motorway, Junction 8a Thame Road, Waterstock, Oxfordshire OX33 1LJ Tel: +44 (0) 707 621 001
Online Retailing
Waitrose and its parent company the John Lewis Partnership (JLP) operate a number of online services between them. Waitrose also supplies products to online grocer Ocado, in which JLP holds a minority (24%) shareholding. In March 2011 Waitrose re-launched its entire online shopping website at a cost of 10m, to drive the retailer's multi-channel offer. Mark Price said at the time that its new platform will accelerate Waitrose's progress as a 'truly multi-channel offer'. As well as the transactional elements, this also supports the development of Waitrose.com as a key communication tool for the retailer. Waitrose continues to use its online business as a tool to provide the full breadth of the offer to customers who do not have access to its larger stores. The roll out of the recently developed Waitrose smaller store format will also be important to this as it looks to build additional brand touch points, with Click and Collect now featured in selected locations. New look homepage The new site is a vast improvement on the retailer's original offering, with an easy to use navigation bar for shoppers to find what they are looking for quickly and easily.
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Choice of shopping methods A choice of three different methods of shopping is presented to customers: order online and Waitrose will deliver; order online and collect in-store; or shop in-store. Inspiration and recipes ideas The new site has an interactive 'Inspiration' section which provides shoppers with a number of information tabs ranging from food issues and policy information, health and nutrition, latest events and cookery videos. Promoting value An 'Offers' section directs shoppers to the retailer's latest in-store offers and promotions, demonstrating Waitrose's value credential in some lines. The section also includes information on the retailer's brand price match with Tesco. Delia and Heston There is also a dedicated section for the retailer's food ambassadors, Delia and Heston.
Ocado Ocado sells Waitrose-branded private label products, together with a complementary line of branded products. The retailer covers all key categories found in a bricks-and-mortar store, including ambient grocery, fresh and chilled foods, frozen foods, health and beauty and BWS. Ocado began deliveries in 2002 to about 100,000 households in Hemel Hempstead in London; the online retailer's current geographical coverage represents over two thirds of the country. Ocado principally serves households within the M25, the South East, the Midlands, Yorkshire and the North West. In contrast to other grocery retailers, Ocado's exclusive online focus means it can fulfil orders from a dedicated warehouse. Ocado picks directly from a purpose-built warehouse; this facility is, in turn, supported by smaller regional distribution centres. In 2010, Waitrose and Ocado announced a new 10 year agreement between the two retailers which will run until September 2020. 2010 also saw Ocado confirm its intention to float on the stock exchange. The grocer said as well as institutional investors, it would offer shares to all staff and any customer who had spent more than 300 with the company this year. In July 2010, Ocado successfully completed its stock market flotation following an initial public offering of 180p per share. Following it successful flotation, Ocado has said it has raised significant funds from the sale of its new shares. This will provide essential capital for the online retailer to expand its business operations further across the UK. In January 2011 a gradual relaxation of a contract provision between Ocado and Waitrose which had barred Waitrose from expanding its online business within the M25 kicked in on 1 January, allowing Waitrose to start deliveries from 16 outlets in the area. The provision expires on 1 July, meaning there will be no barriers to full competition between the two companies. In the 24 weeks to 15 May 2011, gross sales at Ocado increased by 20.8% year-on-year to 296.7m. Net revenues grew by 20.1% to 276.6m. The company also made its first pre-tax profit (0.2m), providing it with a solid platform to fund investments to ease capacity constraints.
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Waitrose wine www.waitrosewine.com To compete with the large online wine propositions offered to customers from Tesco, Sainsbury's and Majestic Wine Warehouses, Waitrose has set up a direct delivery offer of wines. Customers can mix their own cases of 12 bottles from a selection of 1,000 wines and spirits, or they can take advantage of the discounted pre-selected cases available.
MyWaitrose.com In February 2009, Waitrose 'soft launched' its new online social hub, mywaitrose.com. The site is aimed at improving interactivity with its customer base, and is used as a forum for ideas, new product development and company information; featuring contributions from customers, Waitrose senior management and buyers. As an incentive for providing information and ideas, registered customers will be given exclusive offers and behind the scenes visits to Waitrose sites. Ultimately, the site is aimed at driving further interest in the Waitrose brand and associated products, and the retailer hopes to generate further customer loyalty. Waitrose Homeshop In August 2009, Waitrose announced the launch of Waitrose Homeshop, a move that saw the retailer offer John Lewis kitchen and homeware lines alongside its online grocery offer. The move significantly extends the scope of Waitrose's non-food business and allows the retailer to offer a much wider range, without needing to stock the actual products in its stores.
Waitrose iPhone App In July 2010, Waitrose announced it had launched its first iPhone app and mobile site, in a move that should open a new channel for the business. According to the retailer, it has seen mobile traffic to waitrose.com grow by 83% year on year, with the iPhone and iPod Touch devices accounting for 87% of mobile traffic to its site. The new application allows users to access Waitrose's latest recipes, view updated offers, create shopping lists, locate their nearest branch and view video clips of cooking techniques and tips.
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Additional Services
By Invitation is the Waitrose online and catalogue food ordering service. This offer started with food such as sandwiches, canaps, cakes and flowers. Given the initial success, it has since been extended to include buffet selections and food that can be cooked simply at home to cater for occasions such as suppers or dinner parties. Orders can be placed via branches, phone or online and goods are either delivered or made available for collection.

Waitrose's buying strategy continues to revolve around the pursuit of 'food excellence'. Buying initiatives focus on enhancing Waitrose's reputation as a trusted retailer; traceability, animal welfare, the removal of GM ingredients from own brand products and increasing the range of organic foods all continue to feature high on a buyer's list of priorities. In addition, attempts are being made to improve the food knowledge of the buyers, with many being sent on food awareness training courses. Many are also taking cookery courses to gain a greater understanding and knowledge of the products they are working with. Waitrose has also recently launched an initiative designed to flag up the protected status of Welsh lamb on shelf barkers. Local Sourcing Waitrose has publicised the fact that it seeks to source goods from Britain wherever possible and actively champions the interests of British suppliers. This has been taken a step further by employing regional buyers, tasked with finding smaller suppliers. Waitrose run meet the buyer road-shows for producers to present their proposals and successful suppliers often succeed in serving a cluster of local stores. Local and regional produce include fruit and vegetables, sausages, bacon, ice cream, wine, cheeses, sauces and honey and are sourced from within 30 miles of the store. Waitrose regional produce comes from a wider area i.e. East Anglian potatoes. Waitrose has undergone several years of supplier consolidation. In some fresh food areas for example, the company only has 25% of the suppliers it had a number of years ago. Waitrose has dedicated supply facilities for both raw material sites and finished products. The aim of these dedicated facilities is to ensure product quality and drive innovation. They also can guarantee product traceability and can control animal welfare standards. Dedicated production units have been set up in many areas, focusing on categories which are key to Waitrose e.g. ready meals and cooked meats. Waitrose buyers use a Supplier Assessment Scorecard based on the ECR scorecard system to form the basis of a formal annual review. This covers suppliers performance across the business, including criteria such as service level, invoice accuracy and promotion management. Informal suppler reviews are conducted as often as business dictates. Suppliers should understand how often they are expected to meet with their buyer and whether they are expected to make contact higher up the buying structure. In September 2008, Waitrose announced it would be entering into a buying alliance with regional supermarket chain Booths, aimed at helping both businesses benefit from greater economies of scale and increased supply chain efficiencies. The two high-end retailers have agreed to share cost prices and deal structures on a range of branded products, taking advantage of their similar brand positioning as premium operators and allowing them both to pool the buying of stock.
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Supply Chain Strategy The Waitrose Supply Chain Mission is to deliver Market leading availability at minimum cost. Waitrose continues to focus on making the distribution network as efficient, safe and environmentally responsible as possible. In order to improve on efficiencies within the supply chain, a number of initiatives were introduced in 2008 including forecasting, transport and brand ordering. Sustainability continues to be a key strategic focus for Waitrose and the retailer has benefited from a number of industry awards, including coming top of the National Consumer Councils Green Supermarkets Report, winning Compassionate Supermarket of the Year by Compassion in World Farming and being recognised for Supply Chain Excellence by Business in the Community.

Waitroses longstanding objective is to reduce waste wherever possible, and to reuse or recycle more of what is produced. Packaging Waitrose packaging designers are continually looking at ways to improve packaging performance, and where possible, reduce packaging weight. As part of its sign-up to the Courtauld Commitment along with 12 other leading retailers, Waitrose is on track to fulfil its commitment having reduced packaging consumption relative to sales by 33% since 2000. Recycling Waitrose has recycled packaging materials such as cardboard and plastic from its shops and distribution centres for more than 20 years. As part of their legal packaging obligation, Waitrose spends almost 1 million a year to help recycle consumer packaging. Waitrose also supports a website (www.recyclenow.com) that enables consumers to identify their nearest recycling centre and more importantly, the types of materials that may be recycled. Food Waste Waitrose continuously aims to minimise food waste through accurate ordering. 60% of its total waste is food, and where it arises, donating surplus food can offer a socially beneficial solution. Following a successful trial of the FareShare Food Donation Scheme, Waitrose is rolling out food donation to shops FareShare can provide a collection service. Donated food is redistributed to charities throughout the UK working with homeless and vulnerable people. Waitrose has also been exploring the possibility of using food waste to generate electricity instead of sending it to landfill. After a 3 month trial at five stores in the Midlands, a total of 71 tonnes of food waste produced was sent to one of the countrys few bio-digesters, where it was turned into electricity by anaerobic digestion, an eco-friendly alternative to landfill where food rots, emitting greenhouse gases. In late 2008 the retailer rolled out the initiative to another 50 stores in the Midlands. Plastic Bags Waitrose is keen to reduce the amount of unnecessary plastic bag usage and was the first retailer in the UK to introduce a Bag for Life in 1997. Since then Waitrose has avoided the use of around 50 million plastic bags and 6,000 tonnes of packaging a year. Regular Bag for Life promotions are run in-store to encourage the remaining users of plastic carrier bags to convert to Bags for Life. In 2009, Waitrose removed all plastic bags from view at the checkouts. It is hoped that by making customers ask for a bag, they will reduce the number used.
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Responsible Sourcing Waitrose encourages its suppliers to: provide the best possible conditions for workers protect the natural environment promote high standards of animal welfare
BRIEF HISTORY
Waitrose was founded in Acton, West London in 1904. The John Lewis Partnership acquired the business in 1937 when it comprised of 10 small shops, opening the first Waitrose supermarket in 1955. Today Waitrose has over 200 stores in the UK and as of August 2011 had a 4.3% share of the national grocery market. There are Waitrose shops in the South of England, East Anglia, the Midlands and Wales. During 2005, Waitrose began successfully expanding outside the South East. Store locations range from high streets to edge-of-town sites. The John Lewis Partnership as a whole employs over 63,000 people and has a turnover of just under 5bn. Besides Waitrose, the partnership runs department stores throughout the UK, several manufacturing concerns and a farm.
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Marks & Spencer Group plc, Waterside House, 35 North Wharf Road, London. W2 1NW Tel: 0044 (0) 207 935 4422 www.marksandspencer.com
Domestic Market: United Kingdom No of Formats: 4 No. of Stores: 1,078 Turnover: GBP 10,828m Operating Countries: 41 Sales area: 1,923,350 sq m Marks and Spencers Mission: To make aspirational quality available to all Corporate Strategy: Increase the pace of change and operational execution. Deliver innovation and value to customers. Accelerate towards becoming a multi-channel retailer. Drive its International business. Explore new opportunities, including new markets and an international food business. 2011 Key Highlights: As of October 2011 was the seventh biggest UK grocery retailer with a market share of 37 3.10%. M&S is extending its overall food range from 7,000 to 8,000 lines, bringing new products into the offer to fill gaps in consumer shopping missions and provide increased choice. M&S Direct sales continue to grow quickly, with an increase of 31% in 2010/11. The roll out of 'Shop Your Way', allowing customers to shop seamlessly across the different channels, has now reached 444 M&S stores, including 151 Simply Foods. Following the decision to terminate the contract with Amazon, M&S is now designing and building its own in-house online platform, which will be in place in 2013/14. M&S now has 361 stores in 42 overseas markets, having opened 49 new stores during 2010/11. Overall international sales were up by 6.1% over 2010 and now make up 10% of group sales, while operating profit increased 8.6% to 147m. In April 2011 Marks and Spencer announced that it is planning on returning to France by opening an store on the Champs Elysee by the end of the year, driving a combined ecommerce and retail strategy.
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Key Challenges in 2010/2011: Breadth of offer - M&S mainly appeals to customers on top-up shopping missions, although new range launches such as M&S Ingredients and the branded foods trial are helping to overcome this. Relatively higher price positioning - as a premium retailer, M&S has had to work hard to develop stronger value price perceptions during the recession. Fashion drives footfall - with food only accounting for 51% of the business, footfall into its core estate is highly dependent on the success of its clothing ranges, particularly in womenswear. Town centre locations - M&S has been relatively slower in developing a presence on retail parks and at edge of town locations.
Sir Stuart Rose stood down as Chief Executive in May 2010 and was succeeded by former Morrisons CEO, Marc Bolland. In May 2011 M&S confirmed the promotion of Andy Adcock to the newly created position of Trading Director for Food. He will report to John Dixon, Executive Director for Food, who has been working steadily to strengthen M&S's food team in recent months. In May 2011 the retailer also revealed that it had recruited Robert Weston, Head of Strategy and International Development at John Lewis as its new Brand Director for food. These announcements also coincided with the arrival of Chris Taylor as the new head of M&S's standalone Simply Food stores and its foodservice operations who joined from Morrisons. The restructuring of the food team will play a key role in the retailer's push to strengthen its position in grocery. CEO Marc Bolland outlined his vision for M&S to consolidate its position as a specialist high quality food retailer at the group's interim results presentation in November 2010 with an increased emphasis on innovation, through a focus on fresh, speciality and convenience items. Marks and Spencer Senior Team
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Announcing its full year results for 2010/11 Marks & Spencer revealed that group sales were up 4.2% to 9,740m, with pre-tax profit up 11.7% to 781m. Operating profit however fell 1.8%, and operating margin dropped slightly to 8.6%. Marks & Spencer total sales in the UK rose 4.0% underpinned by like-for-like growth of 2.9%, despite a deterioration in trading conditions for general merchandise in the last quarter. However, performance in UK food sales remained more consistent through the year, even producing a stronger final quarter with total sales of 4.9% and like-for likes up to 3.4%. M&S is extending its overall food range from 7,000 to 8,000 lines, bringing new products into the offer to fill gaps in consumer shopping missions and provide increased choice. This year has seen a 'step change in innovation' with 1,900 new lines launched, as well as a significant increase in product communication through advertising, promotions and in-store cafes. To accommodate the extended range M&S is focusing on improved space utilisation in its food halls, implementing a new scheme of 'zoning' to provide increased staff focus and product knowledge in-store. 'Zoning' will be rolled out to all stores in September 2011. Multi-channel has been identified as a key opportunity for future growth, and focus on the sector will move-up significantly when Laura Wade-Gery joins as Executive Director of Multi-channel Ecommerce in July. M&S Direct sales continue to grow quickly, with an increase of 31% in 2010/11. The roll out of 'Shop Your Way', allowing customers to shop seamlessly across the different channels, has now reached 444 M&S stores, including 151 Simply Foods. Following the decision to end its deal with Amazon, M&S is now designing and developing its own online retail platform, which will be in place in 2013/14. M&S now has 361 stores in 42 overseas markets, having opened 49 new stores during 2010/11; and the business will return to the French market in the autumn. While some markets remain challenging, a focus on emerging markets such as the Czech Republic, India and the major cities of China, like Shanghai, is paying dividends. M&S now has three stores in Shanghai and has plans for six more. Overall international sales increased by 6.1% on the year and now account for 10% of group sales.

Overview M&S is one of the UKs leading retailers, with over 21 million people visiting its stores each week. The retailer offers a range of clothing, and home products, as well as a recognised quality food offer. M&S is also the number one provider of womenswear and lingerie in the UK with a growing market share in menswear, kidswear and home, due in part to its growing online business. Overall, its clothing and homeware sales account for 49% of its business, with 51% of the business being food.
Trading Strategy
In October 2009, M&S outlined the findings of a strategic review and the priorities for each of its core divisions going forward. Known as Project 2020, the aim of the review is to set in place the foundations for sustainable long term growth, as opposed to the more cyclical growth patterns which the retailer has traditionally experienced. Through this plan the retailer is aiming to transform itself into a customer focused, multi-channel, international retailer, setting a long term vision to develop and grow the business.
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There are three key elements to this plan: Increase the pace of change and operational execution. Accelerate towards becoming a multi-channel retailer. Drive its international business.
Food Strategy As a premium food retailer, M&S has developed particular strengths in high quality food, food for special occasions, new and interesting products, and top-up and convenience shopping. The product mix is focused on high quality fresh foods and the retailer has built a reputation for quality, service, value, innovation and trust. Until recently the range had been 100% private label, but following a 16-month trial, in November 2009 the retailer announced that a range of 400 branded products would be rolled-out across its store estate. In November 2010 M&S announced that they would be reducing the number of branded SKUs in-store from 400 to around 100 SKUs. As part of the Project 2020 strategic review, in October 2009 M&S announced a new strategy for its food business with the aim of establishing M&S as the leading quality food retailer in the UK. The key areas of focus for the retailer are: Innovation and range Price and promotion Customer service and availability Access to the brand
In November 2010 M&S announced plans to accelerate the benefits of Project 2020, its plan to transform IT and logistics, and increase the original target cost savings from 250m to 300m, comprising 125m from improvements in IT and 175m from logistics, with no increase in capital investment. A strong performance in UK food in the second quarter of 2011 was a major contributor to the 2.7% increase in M&S UK sales for that period. A key driver here was the pipeline of innovation with over 500 products launched during the quarter, putting the retailer on course to meet its goal of 2,000 new product launches for 2011. There was particular emphasis on broadening the choice of healthy eating options, and these products delivered results ahead of expectations. M&S also capitalised on demand for party food for the Easter and Royal Wedding holidays. Non Food M&S non-food range consists primarily of clothing. Quality and value remain at the forefront of the retailer's activities in this area, and over the 2010/2011 significant investment has been made in pricing in order to re-establish the retailer's value credentials, and in particular in lowering opening price points. M&S continues to refine its branding and segmentation to ensure that it offers clear and focussed ranges, with 'Per Una' in particular delivering a strong performance. The next phase of the strategy will see M&S develop its 'better and best' ranges, so that it has a 'good, better, best' ranging strategy. 'Home' is seen as a significant opportunity over the 2010-2014 period, this is expected to be a small scale initiative in towns where the existing M&S store does not have the space to feature the retailer's furniture ranges. At December 2010, there were six standalone stores operating. More recently, technology departments have been opened in several stores offering a range of TVs, DVDs and laptops, with furniture ranges being sold in 64 stores.
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International M&S has identified four key priorities for its international business as it seeks to grow it to represent 15% to 20% of sales by 2020. International currently represents 10% of sales and 15% of profits: Accelerate growth with franchise partners Grow central and eastern European venture Build sustainable businesses in India and China Explore new opportunities, including new markets and an international food business
Outside the UK sales growth was strong at 7.8% in the second quarter of 2011, with good growth in most markets. While sales were down in economically troubled Ireland, Greece and Romania, this was more than compensated for by rapid growth elsewhere, particularly in India and China, where M&S is prioritising investment. Overall, international space has increased by 10% year-onyear. In April 2011 Marks & Spencer announced that it was planning re-entering the French retail market, 10 years after shutting down its stores in Western Europe. The company said it would open a 15,000 square foot store on the Champs-Elyses in Paris in advance of Christmas this year. M&S also said it was in talks with its partner SSP to launch a number of its Simply Food stores, under franchise, in Paris Innovation and Range M&S has a programme of constant and genuine innovation planned which it describes as "setting the benchmark for the food industry". The retailer has set itself a target that its catalogue should deliver 25% genuine newness in its ranges each year. The innovation agenda will be driven by four key drivers: Wellness and Health. Events and Entertaining. The best of Restaurant, Delicatessen and Home Cooking solutions. Destination Categories. This will be supported by more effective ranging, which will include planograms for all categories which will be enforced in-store. Customer Service and Availability From a customer service perspective, M&S sees an opportunity to significantly improve availability, targeting availability at above 96%. This will be driven predominantly through the investment which is being made in restructuring the supply chain and IT systems. The further deployment of self-service checkouts will also have a major impact on the speed of service, particularly within its busy city-centre locations. The retailer is also reviewing category ranging as well as the aforementioned planograms for all categories, which should help improve the shopping experience. Access to the Brand In terms of improving shopper access to the brand, the retailer aims to have a store within a 10 minute drive of all potential customers, a fact that is currently true for just over half target customers. As part of its plans to extend its geographic reach M&S has identified areas where it is under represented and can grow market share, and will drive expansion through its Food Halls, Simply Food and Simply Food franchise partners. Although an online food operation was highlighted as a means to improve convenience for its customers, it was indicated that this would be a longer-term goal.
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Ranging Strategy / Private Label Strategy

Despite the introduction of some branded food and non-food items, M&S distinguishes itself through its almost exclusively own brand focus. The company's in-house technical expertise combined with its deep and long standing supplier relationships continue to produce a high level of product innovation in both food and clothing. While the main focus across the majority of M&S ranges is on prepared foods, in 2008 a range of cooking ingredients, M&S Ingredients, was added as part of an initiative to meet more of the M&S shopper's food requirements. In 2009, M&S Wisebuys range was expanded to cover 600 items and 10% of the total food offer. A price check is run every week against major competitors to ensure the products' value credentials. M&S's private label focus gives the retailer a unique opportunity to be able to set the agenda for quality, integrity and related working conditions for the entire product range by managing the specifications of every product from source to shelf. M&Ss range of food brands include: Marks and Spencer This is the retailer's standard private label range, which can be found across a range of fresh and grocery product categories.
Eat Well This is a range of 1,300 products, representing over 30% of food sales, which do not contain artificial flavourings or sweeteners and are all well balanced as endorsed by the British Nutrition Foundation. M&S aims to increase sales of these to account for 50% of food sales by 2013.
Food to Go This is an extended range of sandwiches and snack foods, including prepared fruit, crisps etc, for immediate consumption.
Cook! This is a range of 140 additive-free lines, in the form of ready to assemble recipe packs which provide a wide choice of fish, meat and vegetable dishes.
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Organic 350 lines including 20 in the food-to-go range.
Eat Well for Kids An additive-free range of foods designed to appeal to children. .
Fairtrade M&S announced in March 2006 that its tea and coffee ranges would be exclusively Fairtrade, totalling 38 lines. This move has increased the value of all Fairtrade instant and ground coffee sold in the supermarkets by 18% and Fairtrade tea by 30%. M&S has a total of 70 Fairtrade lines, including conserves and jams, selected wines and fresh fruit and vegetables.
Simply Fuller Longer A range of meals designed with balanced nutritional qualities and lower calories.
Count on Us
A range of meals containing 400 calories or under and less than 3% fat.
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Gastro Pub A range of modern British classics, inspired by the best bistro menus. Branded Foods While M&S' 100% own brand food offer allowed it to control the supply chain from "farm to fork", in May 2008, the retailer started trialling 350 branded products in 19 stores in the North East, which was followed by an extended trial in Hertfordshire and north-west London in March 2009, Having now rolled out some 400 lines to 280 stores Marks and Spencer stated that the presence of branded goods is increasing its basket size, and showing strong like-for-like growth.
This move would enable customers to buy "must have" products such as Marmite, Heinz Tomato Ketchup, branded household products and toiletries. The retailer stated that it would focus on brand-dominated categories where it has a low market share, including soft drinks, sweets, laundry and personal care, and that no M&S products would be de-listed or replaced. The supply of branded product to M&S stores is managed by Booker, and prices are competitive with the major supermarkets.
Ingredients M&S product range includes 300 food ingredients to give its customers more choice and make shopping more convenient. It includes herbs, spices, bread and cake mixes, ready-to-use stocks, dried and tinned vegetables and rice, pulses and noodles. The extensions by M&S into brands and ingredients indicate a desire to broaden the food offer and to compete for a greater proportion of shoppers needs and to increase basket size.
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Price and promotions have been at the forefront of M&S' trading strategy as it has invested significantly to improve its price position. The challenging trading conditions and the erosion of its market share required the retailer to improve its entry-level pricing and demonstrate broader value for money credentials. As a premium food retailer, with a particular emphasis on convenience ranges, it was always likely to be impacted as shoppers cut back on their discretionary spending. The following mechanics are a key part of the price and promotional strategy: Wise Buys - highlighting entry level price points, the Wise Buys label is now on 600 everyday products just under 10% of its food range from staples such as milk and eggs, to ready-meals. The competitive prices reassure customers that they can economise at M&S, without compromising on quality. Dine in Promotions - the 'Dine in for 2 for 10' has been a major success for the retailer and similar promotions have been run such as the 'Dine in for 4 Family Roast' at 15, 'Dine in for 2 for Valentine's Day' at 20 and 'Dine in for 4 for Mother's Day' at 15. These promotions have enabled M&S to showcase its strengths in prepared foods to both new and existing customers.

Marks & Spencers shopper profile is biased towards wealthy older shoppers. Consumers tend to use the company to shop for: High quality food Food for special occasions New and interesting products Top-up and convenience shopping Marks & Spencer takes a much higher percentage of its customers from the upper-middle social class groupings of A, B and C1 compared to the total market. It is also worth noting that M&S has a high percentage of spend from Class E shoppers. This is likely to be due to the high level of elderly people Marks & Spencer attracts. The age profile of the M&S shopper confirms the retailers popularity amongst the higher age groupings. These older customers are attracted by the long-established brand name of M&S which has a good reputation for high quality foods. The scale of chilled ready meal ranges is also appealing to those who are unable to prepare and cook meals through illness or disability. A high proportion of M&S shoppers tend to have no children in their households compared to the total market. As most of the retailers shoppers are aged 65+, they are unlikely to have children living at home. A smaller household size also suggests the ability to afford higher quality, innovative foods due to a higher disposable income through lack of dependents living at home.
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M&S strategy has evolved by taking the above customer characteristics into consideration. The business is focusing its efforts on the well-established brand name, which implies high quality, trustworthy and innovative foods to customers, coupled with easy to shop stores. M&S has a lower than average trip-spend when compared to the Top 4 retailers, this is dictated by the nature of typical customer food missions in its stores: top-up style shops during the week and food-to-go sandwich and snack shopping for immediate consumption. M&S hopes to drive up average transaction size through must have branded products and food ingredients, encouraging shoppers to use M&S for their weekly shop. Frequency of visit has rose slightly in 2010 for M&S, reversing a downwards trend, and household penetration levels are also growing. This may be due in part to the success of the Simply Food stores in BT Connect service stations and the highly publicised Dine in for 2 for 10 and Wise Buys promotions.

M&S's marketing strategy revolves around communicating the companys corporate ideals of quality, value, service, innovation and trust to customers. M&S has increased its customer research and marketing activity in recent years. In 2005 M&S developed one brand for the whole business under the "Your M&S" advertising campaign by de-cluttering stores, using consistent brand handwriting, better promotional planning and linking windows to point of sale. Marketing messages for clothing focus on style, value and prices and those for food now focus on ethics, quality, features and benefits. M&S has a clear trust agenda to motivate customers to buy food from M&S. The new campaign for its food ranges launched just before the Easter trading period, highlighting the retailer's added-value ranges and what is special and different about the offer at M&S. The retailer has developed a package of 20 seasonally themed TV advertisements which will air over the course of the year, highlighting both the quality and value dimensions of its ranges. In line with its previous campaign, M&S will continue to use celebrities to promote its ranges. The "Your M&S" campaign also saw the introduction of a new logo which featured on the majority of marketing materials, and was also trialled as a store banner.
In March 2010, M&S announced it was overhauling its marketing campaigns, both in food and clothing, and replacing its existing, well recognised strap-line, 'This is not just...' with 'Just because...' The new campaign for its food ranges launched just before the Easter trading period, highlighting the retailer's added-value ranges and what is special and different about the offer at M&S. The retailer has developed a package of 20 seasonally themed TV advertisements which will air over the course of the year, highlighting both the quality and value dimensions of its ranges. In line with its previous campaign, M&S will continue to use celebrities to promote its ranges.
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Loyalty Cards M&S launched its first loyalty scheme in autumn 2003, with the &MORE card. More recently this has been re-branded as M&S Rewards. This acts as both a credit card, issued by M&S Money, and a loyalty card, with points being earned at a rate of 1 point for every 1 spent at M&S or 1 point for every 2 spent at other outlets. Four times a year, M&S converts the points into M&S Rewards vouchers which are mailed to customers and can be redeemed on any goods in-store. The launch of the M&S Premium Club in 2009 enabled customers to earn three points for every 1 spent within its stores, in addition to a range of other rewards including vouchers for its instore cafes. The company also mails exclusive bonus points offers to customers to drive additional sales and to strengthen its relationship with cardholders. Through the card the retailer is better able to understand shopping behaviours and link rewards more appropriately.
(1) Simply Food Simply Food is a standalone food-only format store. The first Simply Food stores opened in Twickenham and Surbiton in July 2001. Since then the format has been rolled out and has since expanded to include stores up to 15,000 sq ft., including company owned stores and a range of franchise developments as part of the retailer's strategic focus on the convenience and top-up shopping markets. By September 2011, there were 373 Simply Food stores in the UK. M&S Simply Food stores are also operated through a variety of franchise schemes, such as those opened in partnership with SSP at railway and airport locations, in conjunction with Moto at motorway service areas and on forecourt sites with BP Connect. The railway station stores range from 1,500 to 3,000 sq ft, and achieve the highest sales density of any stores in the company. The portfolio is further segmented as follows: Convenience o Travel (for now) o Grab n Go (for now, for tonight) Local Food Shop o High Street (top-up, treat) o Out of town suburbs (main shop)
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(2) Kitchen In early 2007, Marks & Spencer opened a trial caf-only format called 'Kitchen'. The outlet sits on a 2,000 sq ft standalone site which adjoins M&S' main store in Canterbury, Kent. Created and designed by retail design consultant Fitch, the caf offers a full range of sit-down hot and cold cuisine in addition to an 'express' area which is more akin to its standard in-store caf format. The site opens until 8.30pm, providing a brasserie style offering, with the entire food and drink menu using only M&S ingredients. As of September 2011 the Kent store is still the only Kitchen format store operating in the UK.
(3) Superstores/Supermarkets The M&S property strategy is currently based around: Enhancing its presence in major city centres through extensions, redevelopments and relocations Developing major out-of-town stores by extending existing space and seeking opportunities for new space Growing its presence in retail parks Investing in its high street stores Continuing to develop its Simply Food business
The aim of the measures above was to increase total owned space by between 15% and 20% between 2006 and 2012. In 2006 M&S had a portfolio of 518 stores in the UK, as of September M&S has a portfolio of 715 stores operating in the UK. This represents total space growth of 27.5% between 2006 and 2011, which has exceeded their target. Over the longer term the retailer plans to continue to improve its retail space by increasing and extending into new locations and markets, as well as continuing the refurbishment programme over the next few years. Around 80% of current space has been refurbished since 2007. The majority of the retailer's superstores are focused on clothing and homewares, with the food hall playing a secondary role in store. However, the company has built on the success of its smaller format Simply Food stores through opening outlets up to 15,000 sq ft, predominantly on out-of-town retail parks. The retailer has also introduced new initiatives, and in 2010 it was operating 245 in-store cafes, 38 Hot Food to Go counters, nine Eat Over Delis, as well as full service restaurants in seven stores. It is anticipated that there is the potential for 100 hot food counters, 25 deli bars and up to 25 restaurants in the future, and is a key growth area. Internal research has revealed that hospitality customers also spend more in store. The trial of electrical products in its largest stores is now present in 25 stores, with plans to extend this to 100 in the future. The range will be tailored dependent on the size of the store with the largest stores receiving a wide offer including LCD TVs, DVDs and laptops linked with a number of guest brands.
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Online Retailing
Marks and Spencer's e-commerce site 'marksandspencer.com' now offers a relatively wide range of items and as part of a broader multi-channel strategy is an important element of the retailer's operations going forward. In October 2009 the site was re-launched with improved search functionality, clearer signposting of customer reviews, improved product imagery and product availability information. Delivery is now available to over 80 countries worldwide. As a business, M&S Direct online sales climbed 31% to 543mn in 2010 with site traffic growing by 18% to over 3 million visits per week. In May 2010, M&S announced it launched a version of its website specifically designed for use on mobile phones and mobile devices. The new site offers a range of over 20,000 products including clothing, home and furniture, electrical goods and food hampers. In February 2011 M&S hired Laura Wade-Gery from Tesco to head up M&Ss online business. In 2011 M&S terminated its contract with Amazon, and is now designing and building its own inhouse online platform, which will be in place in 2013/14. A broad range of products can now be purchased through the retailer's online website: Clothing from its women, men, kids, lingerie and schoolwear departments. Exclusive online offerings - Big and Tall ranges, made to measure shirts, furniture to go. Wine by the case (500 lines with 100 of them exclusive to the retailer). Flowers (M&S is the largest non-specialised online flower retailer with about 30% market share). Gifts (in addition to ranges more readily associated with the M&S offer, the range includes books, CDs, DVDs and gift cards). Jewellery. Home and furniture. Garden equipment. Technology (the most recent extension to the company's on-line offer which carries al range of TVs, radios, iPods etc.). In September 2011 M&S introduced a food offer online. The high street retailer has listed 100 favourite food hall products on its website, including everyday items such as ready meals, fresh meats and desserts, for customers to order online and collect in store. Previously M&S had only offered food for entertaining including big salads, hampers and personalised cakes on its site. The new range includes gluten-free, nut allergy-friendly and vegetarian products.
Shop Your Way 'Shop your way' is how M&S describes and markets its multi-channel strategy. Essentially this outlines the range of ordering and collection options which shoppers have. Orders can be placed online, by-phone and in-store, while deliveries can be made at home (or other address) or to store. Developing this proposition has been identified as a key part of the Project 2020 vision for the retailer. M&S has stated that by 2020 it estimates that Direct will have an influence on 60% of general merchandise sales and 11% of food sales. In order to maximise the opportunities, M&S believes that developing a comprehensive multi-channel strategy is the only way to achieve this. In the short term, the immediate priorities are to improve availability, service, cost management and customer data management.
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M&Ss food sourcing strategy is based around developing innovative and high quality foods by working closely with suppliers. The aim of the Regional Sourcing Director is to create a single approach to buying across the business, providing knowledge on sourcing opportunities, cost benchmarking, direct factories and quality audits. M&S is a member of the World Wide Retail Exchange (WWRE) along with other leading retailers such as Tesco, Kingfisher and Ahold. The WWRE potentially offers M&S an opportunity to access further global sourcing efficiencies. Supply Chain Strategy The Marks and Spencer supply chain strategy is to improve the efficiency and accuracy of the end to end supply chain and explore and exploit the use of appropriate technology in the supply chain. As part of the Project 2020 strategic review which was announced in October 2009, M&S outlined its plans to restructure its supply chain and implement new IT systems to deliver operating efficiencies, drive sales and provide a platform for long-term profitable growth. The retailer is targeting a total benefit of 250m by 2015/16, achieved through improvements in both supply chain and IT systems. The strategy revolves around four pillars: Efficiency: the vehicle fleet will be rationalised and manual processes will be streamlined to achieve a minimum of 3% savings per annum. Contract renegotiation: 3PLs (logistics providers) will be paid on results, and not paid more as costs rise. The retailer stated that in terms of food, the contract with GIST which runs 85% of the food operation had been successfully renegotiated to achieve significant savings (20m pa by 2011/12). Warehouse consolidation: the existing 100 warehouses will be rationalised to 4 sites, development of dedicated e-commerce site in the East Midlands. International supply chain: M&S states that to drive international expansion, products will be sent directly to the country of sale, rather than via a UK hub. Coupled with supply chain investment, new IT systems will work towards simplifying the operation as well as improving range and space planning in food. The retailer emphasised that supply chain and IT operations are a key part of laying the foundations for the future, and are integral to delivering the other goals of Project 2020 within general merchandise, food, direct and international. Ethical Sourcing M&S's food sourcing strategy is based around developing innovative and high quality foods by working closely with suppliers. As the majority of M&S' food ranges are private label, the retailer has much greater control over the production and sourcing of the food than other retailers. It has taken advantage of this particularly with regard to the ethical credentials of the food it sells, and ethical sourcing is incorporated into its Plan A sustainability initiative. For example, all of its fresh whole ducks, geese and turkeys come from free range producers, and it is currently trialling fresh free range pork in 100 stores. It has also set targets to further improve stocking densities for its welfare Oakham chicken. The retailer also now includes the name of the farmer or grower on a range of food labels, and the name of the county the food was produced in, and it also has its own farm assurance scheme, which guarantees high-quality food production. It sets standards across the whole agricultural supply chains and is more extensive in its requirements than other schemes such as national farm assurance initiatives. Local Sourcing Like other retailers, M&S is capitalising on current trends to increase local sourcing. In the Republic of Ireland at present 20% of the food sold is Irish, however there are plans to increase this to 40%. In 2010 the retailer was dealing with 20 local producers but announced that they had plans to expand further within the fresh and chilled categories.
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M&S is placing significant current focus on promoting its environmental and ethical credentials. The key strategic development here has been a 100-point plan which it announced on January 15th, 2007. Called 'Plan A', with the accompanying strap-line 'because there is no plan B', it covers the group's commitments in the areas of climate change, use of raw materials, healthy eating, waste and being a fair partner. The highest profile commitment to date has been to become carbon neutral by 2012, though this is just one of a raft of initiatives, supported by a 200m investment. In 2010 M&S extended Plan A to 180 commitments to achieve by 2015, with the ultimate goal of becoming the world's most sustainable major retailer. In June 2011 M&S announced an update on Plan A. The key highlights included the following: 95 commitments achieved, 77 on plan, seven behind and one on-hold; Two million customers directly involved in Plan A activities; Net benefit of over 70 million delivered in 10/11 (up from 50m in 09/10); Nine sustainability leaders recruited for new Plan A Advisory Board. After a successful trial of a scheme in Northern Ireland whereby it charged consumers 5p for carrier bags, In November 2007 it was announced that this trial would be extended to 33 stores in the South West of England. As of May 2008, this initiative was rolled-out across the store portfolio, with all profits from these sales going to environmental projects charity Groundwork. In 2011 M&S stated that carrier bag usage had been reduced by 80% versus the usage levels in 2006/2007. M&S donated all the profits from food carrier bags from May 2008-2011 to environmental charity Groundwork - which improved parks, play areas and public gardens around the UK.
In August 2011 M&S launched a 300-ml PET bottle for Marks & Spencers Essential Extracts personal care range which incorporates 30% post-consumer recycled material. As part of M&S Plan A, its ethical and environmental plan, the retailer is committed to increasing the amount of packaging made from more sustainable raw materials such as recycled plastics. In August 2011 an M&S programme to source more sustainable cotton and improve the lives of thousands of farmers in India that produce the raw material for the retailer has been extended after it has been shown to have cut water use by more than half and cut pesticides use by more than 80 per cent.
Brief History
Marks & Spencer was founded in 1884 by Michael Marks and Tom Spencer and became a public company in 1926. The group expanded in the UK through organic growth, later expanding into North America, Europe, the Middle East and Far East. By the mid 1990s, M&S was the UKs largest global retailer and its most profitable. Since then however, M&S has experienced troubled times and went through a recovery programme to rejuvenate sales and cut costs. The US supermarket business was disposed of in early 2006. In November 2009, Morrisons Chief Executive Marc Bolland was announced as successor to Sir Stuart Rose as Chief Executive.
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Iceland Foods Head Office, Second Avenue, Deeside Industrial Estate, Deeside, Flintshire. CH5 2NW Tel: +44 (0) 1244 830 100 www.iceland.co.uk
Domestic Market: United Kingdom No of Formats: 1 No. of Stores: 796 Turnover: GBP 2.388bn Operating Countries: 1 Sales area: 365,026 sq m
Key Highlights: As of October 2011 Iceland was the tenth biggest grocery retailer in the UK with a market share of 1.8%. In the year to March 2011, underlying profits at Iceland rose by 14.8% to 155.5m. Total sales (including those from its Cooltrader fascia) increased by 5.9% to 2.4bn, boosted by the opening of 20 new stores. On a like-for-like basis, sales were 5.9% higher. In early 2011 Icelandic bank Landsbanki's announced its intention to sell its 67% stake in the business as part of its bankruptcy proceedings. In June 2011 Malcolm Walker, who with other managers owns 23% of the business, announced that he was confident of raising funds to buy out Landsbanki. Officials responsible for winding up Landsbanki in May launched an auction for a 67% stake in Iceland Foods. Some analysts say the whole business could fetch over 1.5bn, with Asda, Sainsburys and Morrisons all hungry for more stores. Iceland added 10 stores to its portfolio in 2010, and expects to add a further 11 stores in 2011. Key Challenges: Iceland has a modest market share compared with supermarket rivals, leaving it with a weaker buying position than its competitors in some categories - notably away from its core frozen categories. As a niche retailer, focused on selling frozen food, Iceland faces tough competition from the leading multiples in this area, particularly at a time when the consumer agenda is weighted towards fresh products. While the level of promotions has been reduced significantly, the Iceland chain remains dependent on well publicised promotions to attract shoppers into stores. These are expensive to run, but are a crucial part of the product mix. The small average size of Iceland stores results in Iceland stocking only a limited food & grocery range. This means that customers must often go elsewhere for the bulk of their grocery shopping. Similarly, its stores are too small to include a wide range of customer service facilities.
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The high street location of stores limits basket size, with shoppers typically visiting the store on foot and therefore only able to carry so much. Certainly the delivery service that Iceland offers from its stores goes some way to counteract this, but this is not suitable for all shoppers and also requires a 25 minimum spend. With the exception of white goods, Iceland has not developed a comprehensive non-food offer; this again is primarily a consequence of the small size of most stores. This could be considered a weakness since other retailers have had considerable success in boosting turnover and margins through the sale of high value non-food items such as TVs, computers and clothing.

In the year to March 2011, underlying profits at Iceland rose by 14.8% to 155.5m. Total sales (including those from its Cooltrader fascia) increased by 5.9% to 2.4bn, boosted by the opening of 20 new stores. On a like-for-like basis, sales were 5.9% higher. Iceland's strong value credentials have made it an increasingly popular choice for shoppers during the economic downturn. Its widespread use of round pound price points and focused ranges has proved particularly attractive to shoppers on tight budgets. The retailer is currently growing sales faster than the four leading players despite a modest store opening programme. 15 new stores are set to be added to the existing 796 strong estate during 2011/12.
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TRADING STRATEGY Overview

Iceland Foods is a UK market leader in frozen food and serves retail customers through its nationwide chain of over 708 convenient, typically high street stores. After the acquisition of Iceland's parent BFG by Baugur in February 2005, Iceland founder and one-time chief executive Malcolm Walker was restored to the helm by the new owners. The business has subsequently undergone a strategic review, led by Malcolm Walker and his new management team. The key strategic decision taken by the new owners was to refocus the business on its frozen food roots, and scrap the development of convenience store formats that had been under way under the previous owners. When Malcolm Walker returned to the business in February 2005 he identified a "hundred-day plan", which was a thorough business review. The key outcomes of this review are summarised below: Return to the core frozen food business (away from the previous move towards convenience). Range rationalisation (cut by as much as 30%). Cost-cutting (400 jobs have so far been lost at Iceland's Head Office, along with the termination of the online business). Withdrawal from the Republic of Ireland. Format review (with the successful trial of the Cooltrader format encouraging the company to confirm in November 2006 that it will target 10 new stores per year). Lowering of prices worth 3.5m. Reduction in red tape and bureaucracy at head office. The business is now a leaner operation than previously, and is more focused on its core competencies. Iceland is active across the UK, with broad representation across the different regions. The chain is particularly strong in the South East where it has over 200 stores, more than one third of its entire portfolio. Its high level of representation in the South East derives from the acquisition of the larger Bejam group in 1988 which had a strong regional presence. The second most important region is the North West, and this reflects Iceland's heritage in the area. By region there is relatively little variation in store size by region, with the average store size by region falling in the 4,500 to 5,000 sq ft band in all regions apart from East Anglia, where the average is around 5,250 sq ft. In early 2011 Icelandic bank Lansbankis announced its intention to sell its stake in Iceland as part of its bankruptcy proceedings. In May 2011 the Resolution Committee of failed Icelandic bank Landsbanki commenced the formal sale process for its majority stake in Iceland Foods. The Resolution Committee is thought to be looking for a price that values the frozen food chain at 1.8bn to 2bn. In September 2011 failed Icelandic bank Glitnir announced that it would offer its 10% stake in Iceland Foods in the auction of a majority stake held by its compatriot Landsbanki. Whilst the likes of Morrisons and Asda have been touted as possible bidders, Iceland Foods Chief Executive Malcolm Walker is regarded as the front runner as he already holds a 23%% stake and has the right to match any bid. In August 2011 Walker was said to have been preparing his bid, approaching banks and private equity groups to provide the financing required.
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Grocery Trading Strategy

Over the past decade or so Iceland has worked to address customers concerns in relation to animal welfare, genetically modified ingredients and food additives. Key developments have included: Banning the use of mechanically recovered meat in all own brand products since 1990. Iceland was the first retailer to remove genetically modified ingredients from all own brand products in 1998. All artificial sweeteners, colours and flavours were banned from own brand products in 2000. Also in 2000, Iceland commenced a programme to ensure all livestock for its own brand cuts of meat are fed on a non-GM diet. All Iceland products are free of hydrogenated fats. Iceland works with suppliers to formulate own brand products in line with the above policies. Suppliers should recognise the exacting standards that Iceland demands when sourcing own brand lines. Space Re-Balancing Strategy Iceland had a long-established business selling fridges, freezers, microwaves and washing machines which were available through showrooms attached to over 250 of Icelands high street stores. In order to focus its food offer further, the company began a space re-balancing exercise in which these goods were removed and a range of chilled and grocery items ranged in their place. This allows the stores to have a food range which is more relevant to consumers and therefore compete more effectively on the high street. Consumer Retention Strategy To combat the possible departure of customers once the economy improves, in 2010 Iceland launched a loyalty card scheme across the UK. The group noted that the Bonus Card scheme had already got a base of 2.5 million members, which bodes well for future performance.

Iceland has focused on simplifying its pricing structure since Malcolm Walker returned to the business, adopting some of the principles utilised in Mr Walker's Cooltrader business. Price points are now heavily focused on round numbers (frequently 1 or 2) which aids transparency for consumers when shopping. It makes the shopping process easier for those shopping on a budget, with consumers able to calculate relatively easily what the cost of their basket will be at the checkout. Indeed it has much in common with the pricing strategies of the likes of Poundland, which has seen profits increase by 40% between 2008 and 2011. Indeed, there are certain sections in the store, notably freezers, where all products are offered at a fixed price (e.g. 1). This helps strengthen the value message in-store. More recently, the company has taken to advertising this strategy under the banner of "Clear cut prices", posters for which are sited in key locations around the stores. In terms of the promotional strategy, the company drives significant sales through its half-price and BOGOF features and also actively pursues an added value campaign. X for Y deals are also in evidence across the store, while in a number of recent store visits IGD has found a significant number of lines offered on X% extra free packs in-store.
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Iceland's heritage means that the representation of own brand in frozen categories is particularly strong. Prior to the company's acquisition, an average Iceland store carried a total product range of 2,500 lines, of which around 900 were frozen. Of these, it is estimated that around 650-700 lines were own brand. However, the new management team clearly felt that Iceland's ranges need to be simplified, and in July 2005 it was revealed that Iceland had started a range rationalisation programme, with the frozen range being cut by 30%, and the removal of 255 chilled and grocery lines. Own-Label Tiering There is currently very limited sub-branding and range architecture within Icelands own brand range. For example, Iceland does not offer a value, entry-level brand distinct for standard own label. However, some ranges particularly value added products, are positioned as premium or luxury goods.
The Iceland standard range is mostly focused on the frozen category. In recent years this range has been reduced as there was considerable duplication with some stores selling 17 types of lasagne. All products in this range are GM free and have clear nutritional labelling.
Good Choice is Icelands healthy eating offering and was specially developed to have lower levels of fat with controlled calories and salt limits and to provide clear nutrition labelling.
Dine Range is a premium range of restaurant-standard frozen food.
Great Value is Icelands economy range consisting of 52 products including pasta, chicken and cheese. Kids Crew is a range tailored towards meeting the tastes of children In September 2010 Iceland expanded its ready meal ranges with the addition of pub and restaurant style dishes. Marketing director, Nick Canning, commented: "With the economy the way it is and people staying in more, the new ranges will give our customers an affordable treat at home. We have had a takeaway range of Indian and Chinese ready meals for years and this is the equivalent for pub grub.
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Iceland has two target customer segments, which, in comparison to the industry average are skewed towards the lower socio-demographic groupings, in particular D and E. The first target customer segments include C2DE households with a skew towards slightly older than average high street top-up shoppers. The second group, also C2DE, include mums with families for whom Iceland is a destination frozen food outlet. Its advertising campaigns of Mums go to Iceland is directly targeting this segment. Some factors which influence their customer profile include: 1. Location strategy strong focus on neighbourhood and secondary high street locations which have particular appeal to those who do not have access to a car, such as pensioners and those on fixed incomes. 2. Positioning the strong focus on low prices and savings appeals to those on a fixed budget. 3. The competitive environment Icelands key rivals, including the discounters, have recently broadened their appeal among more affluent consumers giving Iceland the opportunity to exploit less affluent demographic groups. 4. Marketing the retailer has marketed itself with a strong price and value focus as it has sought to strengthen its position with key consumer groups. Iceland however has very low representation in the 65+ bracket. This is perhaps surprising given the location of Iceland stores but probably reflects the lower propensity of the elderly to buy frozen goods. Icelands strong performance amongst households with children, particularly in larger households highlights the propensity towards frozen food for meal planning.

Marketing has played a key role in communicating Iceland's return to its frozen food heritage. Icelands advertising campaigns focus primarily on communicating the value of its offer to consumers. Extending the value message, the company has introduced a savings stamps programme. Available in all stores, the company gives customers a free 1 stamp when they reach 29 stamps and 49 stamps, meaning that they can buy 50 of stamps for 48. Prior to the appointment of the new management team in 2005, Iceland has worked hard to position its own label as the leader in responding to customer concerns over genetically modified ingredients and food additives. Key developments have included: Iceland banned the use of mechanically recovered meat in all own label products in 1990. It became the first food retailer to remove genetically modified ingredients from all of its own label products in 1998. All artificial sweeteners were banned from Icelands own label products in July 2000. Iceland continues to work hard with suppliers to formulate own label products in line with these policies. For instance, all Iceland branded goods are free from artificial colourings and flavourings and, where safety and quality are not compromised, artificial preservatives.
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In September 2010 Iceland expanded its ready meal ranges with the addition of pub and restaurant style dishes. The six 'Pub Grub' meals are a key feature of Iceland's advertising campaign, which launched on 26 September 2010. This 7.5m campaign consisted of TV, press and radio activity.

Under the previous management (as part of BFG), Iceland had begun to experiment with a number of store formats designed to expand Iceland's proposition into the growing convenience sector. This consisted of the following formats: Core: this was based on a core frozen food proposition "whilst exploiting additional ranges where applicable". This range included such lines as tobacco and sandwiches, and was developed in approximately 400 stores. Core Plus: this was designed for stores with more than 3,200 transactions per week with a frozen participation less than 50%. Additional ranges included sandwiches newspapers and spirits. Convenience: this was designed to provide a convenience offer in addition to a slightly more limited frozen offer. This involved more chilled and grocery space in stores with over 6,000 transactions and an average transaction less than 10. However, these initiatives were swiftly halted following the return of Malcolm Walker. He has been reported as described the 400,000 that was spent converting the stores to these formats as a colossal waste of money. Iceland now has a more uniform store portfolio than most retailers, with stores largely located on high streets and other traditional retail locations. The clear focus within these outlets is for a frozen food led offer, with a small range of grocery top-up items where this is relevant. Following the closure of Woolworths in December 2008, Iceland agreed to buy 51 former Woolworths stores, including 10 in the Greater London area. Iceland is a predominantly high street operator and the majority of stores in this transaction are situated in prominent high street locations, therefore benefiting from good footfall and providing a good fit with Icelands existing estate. Iceland had made a bid for the entire 825-strong Woolworths portfolio earlier in 2008, but had the bid rejected. In April 2009, Iceland announced that it had entered a lease agreement with discount chain Netto to develop adjacent stores. With the sale of Netto to Asda in 2010, this agreement is now no longer in place. Stores to visit: 4 The Pavement Clapham South West London SW4 0HY Tel: +44 (0) 207 498 6617 62/64 Chapel Market Islington North London N1 9ER Tel: +44 (0) 207 837 5562 259a Caledonian Road North London N1 1EE Tel: +44 (0) 207 607 5717
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Online Previously Iceland offered customers an Internet grocery home shopping service, but it announced in March 2005 that its Internet home shopping service was to close.

As previously mentioned Iceland has strict guidelines on the content of their own label products and work closely with suppliers to achieve this. Buyers are responsible for the day to day running of the companys relationships with suppliers and the overall sourcing of new products. Each buyer has a significant level of autonomy and is responsible for achieving personal gross margin targets. Supply Chain Strategy The Iceland supply chain strategy is to deliver best in class service and availability at cost-toserve levels below 4.5%. The supply chain strategy supports Iceland's overall business strategy which aims to provide customers with the best possible value for money. During 2007 and 2008 rising food inflation presented the retailer with a challenge to further reduce costs in its supply chain, and over recent months the retailer has experienced strong growth. The Iceland supply chain has also had to keep pace with these changes and deliver excellent service at lower costs. Woolworths Stores Purchase In December 2008 Iceland purchased 51 former Woolworths stores, adding them to its portfolio of 660 stores. It is estimated the acquisition will create 2,500 new jobs at Iceland during 2009. The new stores have increased the size and complexity of Iceland's distribution operation. Distribution Network Iceland plans to expand its distribution network during 2009-2010. The capacity of the Warrington site will increase by 4,500 pallets (frozen) and the capacity of the Livingston chilled site will be doubled. The retailer is investing in greater capacity to accommodate the demands of its larger store portfolio and greater case throughput volumes. In 2007, management of Icelands physical distribution moved entirely to third party operators DHL-Exel, now the sole operator of all four of the Iceland RDCs. The Warrington RDC, after a successful transfer of operations from the Deeside facility in 2006, became the final RDC to move over to DHL-Exel management. DHL's contract with Iceland has been extended until 2015. Iceland continued to focus on managing effective inventory levels which continued their downward trend in 2008 with strong progress across all categories. The retailer will upgrade its Dallas Warehouse Management System during 2009. The new system will help the Iceland distribution centres operate more efficiently. Transport and the Environment Over recent years Iceland has increased its engagement with the environmental agenda. During 2008 the retailer continued to improve its transport fleet utilisation, as well as its reverse logistics management, particularly by increasing the volume of material recovered from the supply chain, which increased by 7% in 2008, following a 18.3% increase in 2007. Backhaul and Primary Transport Operation Initiatives During 2008 Iceland focussed on improving the efficiency of its transport operations. The retailer continued with its initiative to rebalance of the store delivery profile, including changes to delivery frequency, a designated despatch DC and 2 hour store delivery windows. Iceland considered moving part transport fleet to white, non-liveried vehicles and trailers during 2008 as part of a proposed initiative to increase collaboration with other retailers. However due to the expansion of the business (sales and case volumes) the retailer has decided to increase the size of its dedicated liveried fleet.
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Reducing GER and Voice Pick During 2008 Iceland continued to focus on driving a significant improvement in the efficiency and accuracy of the picking performance of the warehouses, through reducing the gross error rate. The retailer will review the use of voice-picking technology at its Distribution Centres during 2009 and new systems are scheduled to go live in 2010. IT Outsourcing In March 2009 Iceland signed a seven year IT outsourcing renewal deal worth over 11.5 million with supplier Getronics further integrating the Iceland and Getronics outsourcing model and improving the relationship between the two companies. Getronics will provide Iceland with increased support in areas including an anti-virus service, 24 hour server hosting; systems management, service desk provision and also desk-side PC and Blackberry support. It will integrate into Iceland's existing technology plans and includes technical architecture, database support and a managed print service. Iceland operated a variety of data sharing arrangements with its suppliers in 2008. Although the retailer continued to operate EDI, there was no supplier information portal in use in 2008. Awards Iceland supply chain team was a finalist in the 2008 Retail Bulletin - People in Retail Awards, in the category "Support Team of the Year". Distribution Network Four Regional Distribution Centres operated by DHL-Exel 1. 2. 3. 4. Enfield Livingston Swindon Warrington 220,000 sq ft 150,000 sq ft 240,000 sq ft 350,000 sq ft 960,000 sq ft
Home Delivery
Iceland began home delivery of goods purchased in-store (as opposed to full home shopping) in 1997, and it was the first UK supermarket to provide a nationwide home shopping service in October 1998. Home delivery was identified as a way of increasing customer basket sizes, for a customer base that included a high number of shoppers visiting stores on foot. In 1998 Iceland introduced true home shopping via the telephone. It set up a call centre to take customer orders and the necessary IT systems to feed orders to stores, where goods were picked for dispatch to homes. This development built on the existing delivery infrastructure for home delivery. From here, it was a relatively simple step to introduce Internet shopping, an initiative which was rolled out by October 1999. Iceland claimed a world-first in offering telephone and Internet shopping. In March 2005 Iceland announced that its online food shopping service was to close but the retailers non-food online business remains active.
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Iceland continues to offer a free delivery service. Free Home Delivery only applies to customers who hold a valid Iceland Bonus Card and who have spent 25 or more (on food and drink) during one visit to a participating Iceland store. The radius for participating stores is 10 miles except within the M25 perimeter where a 3 mile radius is applicable.
Brief History
The company began trading in November 1970, when Malcolm Walker and Peter Hinchcliffe raised 60 to rent a shop in Oswestry to sell loose frozen foods. By 1973, Iceland had 18 shops and in the following years, these shops developed into freezer centres selling packaged items. In 1984, the company successfully floated on the Stock Exchange. Throughout the 1990s, the chain grew to over 760 stores. In June 2000, Iceland acquired Booker Cash & Carry. In February 2002, Iceland Group changed its name to the Big Food Group, which encompasses Iceland Foods, Iceland Home-Shopping, Woodward Foodservice and Booker Cash & Carry. In February 2005, the group was purchased by Giant Bidco Ltd, a subsidiary of Icelandic operator Baugur Group. Soon afterwards Iceland was acquired by Ice Acquisitions led by Malcolm Walker the founder of Iceland. Walker quickly implemented a strategic review and the business has renewed its focus on frozen products. In August 2008, the board of Woolworths Group plc rejected an indicative takeover proposal for the companys retail division from Iceland as the proposal from Iceland did not include a bid for Woolworths wholesale division. However, following the closure of Woolworths in December 2008, Iceland agreed to buy 51 former Woolworths stores, including 10 in the Greater London area. In February 2009 Baugur Group, which at the time owned 13.5% of Iceland Foods, went into administration. In 2010 Landsbanki took on a 67pc stake in Iceland Foods when Baugur, the Icelandic investor, collapsed. In early 2011 Icelandic bank Landsbanki's announced its intention to sell its 67% stake in the business as part of its bankruptcy proceedings.
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An Overview of the UK Grocery Retail Market 2011 Profiles of 1st Tier Retailers

1ST TIER RETAILER PROFILES: 2011

UK Grocery Market Overview 2011

The Co-operative Group

Marks & Spencer

1ST TIER RETAILER PROFILES: 2011

1ST TIER RETAILER PROFILES: 2011

1ST TIER RETAILER PROFILES: 2011

3. Marketing & Advertising

1ST TIER RETAILER PROFILES: 2011

UK GROCERY MARKET OVERVIEW 2011

Source: Retail Analysis Datacentre, calculated in 2011

Kantar WorldPanel, till data October 2011 IGD Datacentre 17.10.11

1ST TIER RETAILER PROFILES: 2011

Source: GfK Consumer Confidence tracker - September 2010 to September 2011

World Economic Forum 2011 Office of National Statistics September 2011

1ST TIER RETAILER PROFILES: 2011

UK GROCERY MARKET SHARE

Till Roll 12week 2 Oct 2011 (KWP P11)

1ST TIER RETAILER PROFILES: 2011

1ST TIER RETAILER PROFILES: 2011

IGD UK Country presentation 2011

1ST TIER RETAILER PROFILES: 2011

CONVENIENCE SECTOR OVERVIEW

Source: IGD Convenience Retailing 2011

1ST TIER RETAILER PROFILES: 2011

ONLINE GROCERY RETAILING

Source: Kantar WorldPanel 2011

1ST TIER RETAILER PROFILES: 2011

Source: IGD ShopperTrack

IGD ShopperTrack, base: all main shoppers, fieldwork April 11

1ST TIER RETAILER PROFILES: 2011

PRIVATE LABEL TIERING VALUE VS PREMIUM

IGD ShopperTrack, March 2011

1ST TIER RETAILER PROFILES: 2011

1ST TIER RETAILER PROFILES: 2011

ETHICAL & SUSTAINABLE ISSUES

1ST TIER RETAILER PROFILES: 2011

Source: IGD ShopperTrack Shopper Trends 2011

1ST TIER RETAILER PROFILES: 2011

Tracking reasons to buy local food top six

Source: IGD ShopperTrack Shopper Trends 2011

1ST TIER RETAILER PROFILES: 2011

COMPETITION COMMISSION UPDATE

1ST TIER RETAILER PROFILES: 2011

1ST TIER RETAILER PROFILES: October 2011

Kantar WorldPanel Till Roll data October 2011

1ST TIER RETAILER PROFILES: October 2011

1ST TIER RETAILER PROFILES: October 2011

Key Financial Indicators

1ST TIER RETAILER PROFILES: October 2011

1ST TIER RETAILER PROFILES: October 2011

IGD, Tesco Retail Profile. 20.04.2011

1ST TIER RETAILER PROFILES: October 2011

IGD, Tesco raises the bar internationally 10.05.11

1ST TIER RETAILER PROFILES: October 2011

1ST TIER RETAILER PROFILES: October 2011

1ST TIER RETAILER PROFILES: October 2011

Pricing & Promotions Strategy

1ST TIER RETAILER PROFILES: October 2011

Source: Tesco Trade Briefing Presentation, May 2011

1ST TIER RETAILER PROFILES: October 2011

Private Label Strategy