Wm. Morrison Supermarkets PLC

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Wm. Morrison Supermarkets PLC

Hilmore House, Thornton Rd.
Bradford, West Yorkshire BD8 9AX
United Kingdom
Telephone: +44-1274-494-166
Fax: +44-1274-494-831
Web site: http://www.morrisons.plc.uk

Public Company
1899 as William Morrison (Provisions) Ltd.
Employees: 23,294
Sales: £2.99 billion (US$4.79 billion) (2000)
Stock Exchanges: London
Ticker Symbol: MRW.L
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores

Wm. Morrison Supermarkets PLC is holding its own in the battle for the British supermarket customer, despite its relatively small size and regional focus. Englands fifth largest supermarket group, behind the national giants Sainsbury, Tesco, Safeway, and Wal-Mart-owned Asda, Morrison remains somewhat concentrated on its traditional northern England region, despite moves during the late 1990s to open stores in the countrys southern regions. Morrison operates 107 stores, some 80 of which include gasoline stations. More than 30 Morrison supermarkets also feature branch banking in a partnership arrangement with Midland Bank. Morrison stores stock some 20,000 items; Morrisons private labels account for more than half of all sales. The stores feature a Market Street concept, with specialty shops, including fishmongers, butchers, pizza, and baked goods, and American shopsselling doughnuts and hotdogsproviding a High Street shopping experience to Morrisons largely suburban customers. Morrison boasts to be the sole grocer in the United Kingdom that offers the same prices in all of its stores. The company also produces most of its own products, through its Farmers Boy and Wm. Morrison Produce subsidiaries, enabling it to keep its pricesand costslow. Morrison is led by 70-year-old Chairman Ken Morrison, son of the founder. The Morrison family owns 40 percent of the company, worth about £900 million. With no clear successor in sight, the company has not ruled out a future takeover by one of its larger rivals.

Wholesale Origins at the Turn of the 20th Century

William Morrison began his career selling eggs and butter wholesale, founding William Morrisons (Provisions) Ltd. in 1899. Soon after, Morrison opened a stall in Bradford, Englands market, and then added stalls in other nearby markets. By the 1920s, Morrisons business had flourished enough to allow him to open his own retail stores, offering counter service, in the early 1920s. Morrisons operation remained a small, Bradford-area focused business throughout Morrisons lifetimethe companys warehouse was in the garage behind the familys home. Morrison had six children, the youngest of whom, Ken, the only boy, was born when Morrison was already 57 years old.

The younger Morrison was already working for his father by the age of five, running deliveries and later stocking goods in the warehouse. While his father encouraged Ken Morrison to study for a different future, Morrison joined the army at the age of 18. In 1950, with his health failing, William Morrison offered the family business to his son. Morrison joined the company that same year, telling the Independent: I decided to make a go of it.

Ken Morrison approached the grocers trade with a new perspective. Rather than the small, urban center shops run by his father, Morrison saw the future in larger-scale supermarkets, particularly in ex-urban and suburban locations. At the same time, improvements in packaging, and increasing branding of grocery products were occurring, coupled with a growing trend toward self-service shopping. Taking over as company chairman in 1956, Ken Morrison steered the family company into the newly developing supermarket industry, placing prices on all of its goods and adding checkout lines, a first for the Bradford area.

Morrison next turned his attention to opening new stores. In 1962, he bought an abandoned theater in Bradford and converted it into a supermarket. Once transformed, the theater offered some 5,000 square feet of retail space and a parking lot for the companys increasingly mobile customers. The success of that store encouraged Morrison to begin opening new stores. In 1967, the company backed its expansion with a public offering on the London Stock Exchange. Morrisons focus remained on its northern England region, and by the late 1970s, the company had succeeded in establishing itself as the regions top supermarket and one of the top chains in the country.

At the end of the 1970s, Morrisons, while continuing to open new stores, began to make acquisitions of other stores. These included the ten-store chain of Whelans Discount supermarkets, purchased from JJB Sports head David Whelan in 1979. In 1981, the company made a new expansion with the acquisition of the Mainstop grocery store group. The companys roots in wholesale selling proved central to generating profits while maintaining low prices, as Morrison operated its own subsidiaries to provide products, packaging, and distribution to its stores. Meanwhile, the companys formata Market Street concept that reproduced the feel of the stalls and small shops of a typical High Street around the periphery of the Morrison storeappealed to customers.

Going National for the 21st Century

The companys growth during the 1980s brought it to more than 50 stores by the beginning of the 1990s. Meanwhile, the failing British economy of the late 1980s and early 1990s was bringing pressure on the company. Its competitors were leading a consolidation of the industry, through a wave of takeovers and acquisitions that created four giant supermarket chainsAsda, Safeway, Tesco, and Sainsbury. Morrisons competitors also began wooing customers with a series of promotions, loyalty cards, and other services, such as extended store hours, as well as launching aggressive ad campaigns. Morrison resisted temptation to join its rivals in this expensive competition.

Instead, the company clung to its discount formula and its insistence that all of its stores exhibit the same prices. Where its competitors prices varied from store to store depending on their locations, Morrisons single-price formula contributed in winning customer loyalty. Nonetheless, Morrison bowed to some of its competitors pressure when in 1993 it agreed to extend its store opening hours to include Sundays. The result of this move, however, was an increase in annual sales and profits.

Despite these moves, the company still faced a withering competitive climate and a continued economic crisis. By 1995, for the first time in 20 years, the company posted no new-store openings. Yet Morrison did not rest for long. With 81 stores by mid-decade, Morrison needed to continue building scale in order to compete with its giant competitors. The company returned to new store openings, including a growing number of superstores, modeled after the French hypermarket concept that extended traditional grocery lines into a wide variety of consumer goods. Morrison opened four superstores in 1996, while converting several other stores, during a £100 million expansion program.

The companys expansion also took it into new territoryfor the first time, the company began opening stores outside of its traditional northern stronghold, moving into the highly competitive southern regions of England. While these moves raised eyebrows, the companys new storeswhich shared Morrisons commitment to its single-price policyquickly proved to be among the companys top revenue generators.

In 1997, Morrison reached an agreement with Midland Bank to bring banking into its supermarkets, matching its competitors. Yet, as the larger supermarket groups lavished spending on services such as home delivery and Internet shopping, Morrison remained steadfast on its no-frills, low-price formula to help it compete. At the same time, Morrison stepped up the pace of its store portfolio expansion, opening or buying ten more stores in 1998. Aiding the companys profits was the opening of a second distribution facility in Cheshire in 1998, which helped the company control its transportation costs.

The company faced an entirely new level of competition when global retailing giant Wal-Mart announced its acquisition of the Asda supermarket group. That chains traditionally strong presence in the northern regions of England caused many analysts to fear for Morrisons future. Indeed, by then Morrison was one of the few remaining regional players in a market now entirely dominated by national supermarket groups, while the entry of Wal-Mart in the United Kingdom promised to force new globalization moves among that countrys largest supermarket groups.

Yet Morrison, which continued its own steady national expansion, continued to buck the trend, even showing steady profit and sales growth in the late 1990s. The companys control of its supply and distribution left it less vulnerable to the price wars raging elsewhere in the sector. Stepping up this end of its business, Morrison completed a new investment program in its Farmers Boy subsidiary with an opening of a new 180,000-square-foot processing facility. At the same time, the company continued to acquire stores, including three superstores from Cooperative Retail Services, based in London. Celebrating its 100th anniversary in 1999, the company opened its 100th Morrison supermarket. By mid-2000, the company had completed a new round of store openings and acquisitions, bringing its total store holdings to close to 110 stores.

Company Perspectives:

The very best for less.

Ken Morrison, nearing 70 years old, remained at the helm of the company as chairman. Yet the succession of the company began to be called into question. Despite having turned over the managing directors position to John Dowd in 1997, Morrisons hands-on approach to his fathers company remained an important factor in the firms ability to compete in the crushing British supermarket climate. Morrison continued to insist at the turn of the companys second century that he would remain with the company, as he told the Daily Telegraph, as long as I am enjoying it.

Principal Subsidiaries

Farmers Boy Ltd.; Farock Insurance Company Ltd.; Holsa Ltd.; Neerock Ltd.; Wm. Morrison Produce Ltd.

Principal Competitors

ASDA Group Limited; Boots Company Plc; Budgens Plc; Greggs Plc; Iceland Group Plc; J Sainsbury Plc; John Lewis Partnership Plc; Marks & Spencer Plc; Safeway plc; Somerfield Plc; Tesco Plc.

Key Dates:

William Morrison starts William Morrison (Provisions) Ltd.
Business begins retail counter service.
Ken Morrison joins company.
Ken Morrison is named chairman.
Company opens first self-service store.
First self-service supermarket is launched.
Company is listed on London stock exchange.
Wm. Morrison Supermarkets acquires Whelan Discount stores.
Company acquires Mainstop supermarket chain.
Company extends store opening hours to Sunday.
In-store Midland Bank branches are added.
Second distribution facility in Cheshire is opened.
Company celebrates 100th anniversary and 100th store opening.
Morrison Supermarkets opens 180,000-square-foot facility for Farmers Boy subsidiary.

Further Reading

Herbert, Ian, The Proof Is in the Pudding, Independent, September 29, 1999, p. 1.

Rankine, Kate, Plain Speaking, Plain Selling, Plain Sailing, Daily Telegraph, July 29, 2000, p. 31.

Wootliff, Benjamin, Morrison Wins with Shoppers, Daily Telegraph, September 22, 2000.

M.L. Cohen