Morrisons' man from Canada

Last month, British newspaper The Telegraph ran a brief article on Morrisons, the fourth largest grocery chain in the UK but hardly one of the sexiest. The article pointed out that “Morrisons has confirmed its position as the fastest growing of Britain’s four big supermarkets.” For several quarters, the article noted, Morrisons had outperformed its larger and usually more innovative rivals–Tesco, Asda (the Walmart subsidiary) and Sainsbury.

Morrisons surge is in no small part due to its new president, Dalton Philips. An Irishman, Philips spent three years as chief operating officer at Loblaw Companies, where rumour had it he was being groomed to succeed Loblaw’s president Allan Leighton. But in 2010 Philips jumped across the pond, replacing Marc Bolland as Morrisons’ president. The hiring came as a shock to British grocery analysts. Despite a rich retailing pedigree that had taken him to 11 jobs around the globe in 14 years and seen his three children each born in a different country, Philips was something of an unknown in British retail.

Bolland left Morrisons in good shape, posting record profits. But questions remained over the lack of a wider strategy. Morrisons did not have an online business or a plan to open smaller convenience outlets like Tesco’s Express chain. Since taking the helm, Philips has moved to fix those weaknesses and put in place a strategy squarely focused on fresh food and low prices. He’s also hired an executive from Canada.

Six months after taking over, Philips announced plans to turn three existing stores into “labs” to trial new concepts. Morrisons doesn’t have a lot of non-food or clothing in its stores, nor does it use an electronic replenishment system, so there was a need to trial new ways of working in “live” stores. Philips wanted his supermarkets to be “unbeaten on fresh” and Morrisons is the only major UK supermarket to pack its own produce and meat in its packhouses. This vertical integration is seen as a real competitive advantage by some.

The fresh lab was set up at the Kirkstall store in Leeds, close to Morrisons’ head office and has evolved in the 12 months since launch. Aspects of the store like fresh produce have been changed, with the range increased and loose items displayed on ice beds to keep them fresh. Departments like flowers were expanded, resulting in a 42 per cent sales increase.

At the start of 2011, Philips announced the hiring of four new executives as he reshaped his management board to deliver the objectives he had set out in September 2010. Amongst these hires was Belinda Youngs who arrived from Canadian grocer Sobeys after a spell at Sainsbury.

Youngs’ job as brand director was to reshape the Morrisons private-label line, grow sales and increase market share. Morrisons only sells 45 per cent of private-label products versus 55 per cent branded, while its rivals enjoy the reverse split. The gap has now closed to 50/50.

Philips has also gone on an acquisition spree to shore up online and non-food business. Last February, he purchased Kiddicare, a UK-based children and baby products retailer. In March he bought a 10 per cent stake in New York online retailer FreshDirect, whose e-commerce expertise could be transferred to Morrisons when its online operation launches in 2013. In July, he bought floral supplier Flower World.

Further progress has been made adding a convenience format, with two trial stores launched in upmarket locations under the M Local banner. In these stores, the focus is also on fresh food, with larger Morrisons’ supplying hand-made fresh products to the convenience stores.

Philips seems hardly done yet. The new fresh concepts tested at Kirkstall are yet to be installed in many Morrisons outlets. And the entire private-label line is being relaunched in the coming months under Youngs’ guidance. In the most competitive grocery environment in the world, Morrisons may be the growth story for some time to come.