Stores close and heads roll as UK supermarket crisis deepens
The recent publication of trading figures for the UK’s “big four” supermarkets shows just how badly the competition from the discount chains Aldi and Lidl, plus the changes in consumer shopping patterns, has affected sales in the run up to Christmas, traditionally their busiest time of the year.
So much so that the country’s No. 1 chain, Tesco, and the No. 4 chain, Morrisons, have both announced that they are closing stores, which will have implications for seafood sales, while the No. 3 chain, Sainsbury’s, is cutting 500 head office jobs.
Tesco sacked its chief executive last autumn, while Morrisons’ chief executive has just been asked to leave.
Tesco is not only closing 43 unprofitable stores, but also its headquarters in Cheshunt, just north of London, while Morrisons has announced that it will be closing 10 loss-making stores during 2015.
Dave Lewis, Tesco’s new chief executive, also said that he intends to close Tesco’s defined benefit pension scheme (one of the most generous in the country), sell the analytics business behind its loyalty card, scrap the dividend payout to shareholders and slash 30 percent of the retailer’s central costs. This plan to start to turn the business around neatly illustrates why he has been nicknamed “Drastic Dave.”
Lewis, the first “outsider” to take up the reins at Tesco, replaced Philip Clarke in September last year, a month earlier than planned, after some of the worst sales and profit figures experienced by the country’s biggest retailer. Now Morrisons’ chief executive Dalton Philips is following Clarke out of the door after five years in charge.
In fact, it is all change at the top at Morrisons as the supermarket has appointed a new chairman, Andrew Higginson, who moves in on 22 January. Higginson was formerly finance director at Tesco, which may not be a good sign given the accounting scandal that engulfed that supermarket last year.
A significant proportion of the 43 stores Tesco is closing are its Express convenience shops, which will affect sales of branded seafood products. However, Tesco is also scrapping plans to build 49 new stores, primarily large Tesco Extras, and this will affect sales growth in both branded seafood products and fresh fish.
Tesco hopes to boost its performance further by cutting the price of 380 core branded products by an average of 26 percent. Price cutting is always a benefit to customers, but it must be remembered that suppliers are expected to contribute to these lower prices, which will eat into their profit margins. Recent research states that more than 100 food and beverage suppliers are at risk of collapse because of the price war among British supermarkets.
Fortunately seafood doesn’t seem to rate as a core product for Tesco, although there are seafood product promotions listed on its website. There are also two major price reductions listed for its fish counters with cod fillets and whole mackerel on sale at half price. Presumably supplies of both species are no longer in danger as far as Tesco is concerned.
Morrisons is yet to announce what type of store it will be closing, but certainly branded seafood will be affected. Morrisons is unique among the big four chains, in that it has its own in-house fish processing facility in Grimsby. This enables it to supply its fish counters and retail packed seafood shelves, plus its new online service.
The plant portions, fillets and packs a range of seafood including salmon, haddock, cod, smoked haddock, smoked cod, cold water prawns, mussels and surimi. Morrisons has been investing heavily by purchasing new equipment and technology for the factory during the past two years, so it is to be hoped that any store closures will not affect this part of its business.
The big four supermarkets are being squeezed between the higher end of the market and the discount chains. Figures from Kantar Worldpanel showed that Waitrose — generally reckoned to be at the top end of the market — Aldi and Lidl increased market share in the 12 weeks to 4 January, while Morrisons, Tesco, Asda and Sainsbury’s all lost ground.
Aldi and Lidl have grown by 22.6 percent and 15.1 percent to finish the year with market shares of 4.8 percent and 3.5 percent respectively. More than half of all British households visited at least one of the two retailers during the past 12 weeks.
Now all the fish trade has to do is to persuade the German discounters to stock more seafood!