Morrisons tells suppliers 'we won't bury our head in the sand'

As this week’s Kantar numbers confirmed a continuing slump in sales, Morrisons has promised suppliers it will be the “growth ticket of the industry” this year.

At its National Kick-Off conference in Liverpool this week, the supermarket likened food retail to the airline industry, where once-dominant companies like British Airways have come under pressure from discount airlines.

However, unlike the airline industry, where the growth of companies like Ryanair has plateaued, Morrisons saw no sign of this happening in grocery.

Morrisons said it was left with three options - to bury its head in the sand, to become a discounter or to adapt and thrive. It ruled out becoming a discounter, but conceded it needed to change.

Setting out a vision to position itself as a “value-led grocer that is British born and bred”, the retailer said it would return to growth by refocusing its offer, getting closer to customers and becoming faster, simpler and smarter.

Group trading director Casper Meijer told suppliers Morrisons would be the “growth ticket of the industry” this year.

The grocer shared with suppliers some of the work it had done on customer segmentation and identified its core customers as “strivers and survivors” who had seen their spending power eroded during the recession. But it also said its customers included the time-poor and people who enjoy the good life and are looking for quality.

To better target these groups, it is developing store planograms that match local demographics and store locations.

It also said it had too many SKUs and needed to take a lot of range out. For example, Morrisons has 17 own-label olive oils, whereas Aldi has only three.

As Morrisons prepares to open 100 M Local stores this year, it revealed its convenience business was now generating an annual turnover of £150m. It added that online was trading ahead of budget.

CEO Dalton Philips acknowledged Morrisons was going through a tough patch but drew on the Stockdale Paradox for inspiration. James Stockdale famously survived as a prisoner of war in Vietnam by drawing on an unwavering faith that he would prevail, matched with the discipline to confront the harsh reality of his situation.

Philips also referenced the barrage of recent negative press headlines about Morrisons it has faced. He revealed he responded to recent negative press coverage by going for a run, sleeping a little more, and drinking a little less.

Suppliers gave the conference a mixed reception. “Morrisons still don’t know what they’re doing,” said one. “The latest strategy seems to be to emulate Aldi, but you won’t out-Aldi Aldi.”

Another supplier was more upbeat. “The range is wrong. They’ve listened too much to people who have delivered Waitrose-style products. This shows that Morrisons is at least moving in the right direction and finally starting to listen to its customers.”