The 'restless dissatisfaction' of John Dixon

John Dixon’s calm manner betrays little of the “restless dissatisfaction” that, say colleagues, describes his leadership style. Evidence lies more in the pace of development.

Over the past year alone, Dixon has overseen the launch or relaunch of 1,900 food lines at Marks & Spencer’s food division, and a 1000-strong extension of the total food catalogue to 7,000 introduced delis and bakeries into the food halls as part of the store refurbishment programme that began last November launched a new value range called Simply M&S while improving availability and boosting sales and profits.

To Dixon, these changes are an evolution of the plan he hatched in July 2008 when he returned to the food division after four years, as its new executive director of M&S Food. Back then, the division was in trouble. “Like-for-like sales were down 6%. The City was questioning the long-term viability of the food business.”

Today, it is a different story. Through four of the hardest years in living memory, Dixon has delivered steady and sustained growth. At 2.1%, the like-for-like sales growth M&S reported in May for 2011/2012 was on a par with Sainsbury’s, and better than Morrisons and Tesco - despite M&S refusing to dabble, as he puts, in “creative accounting”.

“Our like-for-likes are really simple. We’re the purest of the pure. We don’t include VAT, or extensions. And don’t let anyone kid you about soft comps. The year before our growth was 2.6%. So 2.1% is good growth. And we haven’t put on 4,5,6% in space like some of our rivals [store expansion has been running at around 2%], or had any help from the rapid growth of online.

“We have managed to get this business back in growth, and we’ve improved profitability. There are not too many food retailers who’ve done that.”

So how has Dixon done it? And what’s next in his quest for continuous improvement? Ahead of next week’s Q1 results, in a rare interview, Dixon outlined his journey to transform the M&S food business.

Surprises
Dixon’s first move was to change half his senior team. “It’s not what M&S was used to,” he concedes, “and as a lifer, I may have surprised a few people.” But Dixon felt it was necessary as he sought to get his 400-strong team thinking in a more customer-centric fashion.

One initiative that quickly resulted was regular in-store visits for Dixon and his team. (Even today, Dixon still makes a surprise visit, on a Saturday or Sunday, to two or three stores.) Backed up by quantitative customer research, the feedback showed value must be the priority. Within two months of Dixon’s arrival, M&S had launched its Wise Buys value range.

“That was our first foray into saying to customers, on everyday items, M&S can give fantastic value for money,” says Dixon.

Another key innovation was Dine-In for £10. “That is territory we own. Our competitors have all tried their own versions, but nobody else has made it stick. Here we are, four years on, still doing it for £10, which is remarkable when you consider food price inflation, and still delighting our customers.

“If you’re not careful customers get bored. So we use it as a platform to showcase new product. It keeps the offer fresh and helps sustain NPD. And we’ve flexed it in other ways: on Valentine’s Day, we charge £20 for a special romantic dinner for two. There’s been £15 versions for four people on Mother’s Day. And so on.”

Crucially, he’s turned Dine-In from loss leader to profit centre. “When we first launched it, it wasn’t profitable. But it was a fantastic footfall driver. So we finetuned the offer. Should it include a starter or a side? What type of wine? Asking these questions, we were able to improve, upgrade and adapt.”

Key to its success has been collaboration with suppliers. When Dixon returned to run the food side, supplier relations had grown strained, particularly following the introduction of Project Genesis. So Dixon brought his top 20 suppliers in, every quarter, for dinner.

“I wanted to hear their views, and get some long-standing suppliers on side. And one advantage I had was that I knew quite a few of them, so I could pick up the phone and talk to them on first-name terms. But those dinners were a great way, over quality M&S food and drink, to get all the frustrations out on the table.”

One result of those dinners was to “buddy up” suppliers with Dixon’s team. “‘Would you be prepared,’ I asked, ‘to get personally involved to find ways to improve our operations, so we can launch better products at a faster pace?’. Dine-In was a particular challenge because it was both massively popular, and new.

“You can’t suddenly expect a supplier, just like that, to be able to respond to the demand we were seeing. Once we had a track record, however, we could give better forecasts, so there was less wastage, and surprise surprise, what drops out the bottom is profitability.”

With the supplier base on side, it was easier to address the second key finding of Dixon’s customer research: focusing on what made the retailer different.

“We’re not a supermarket, we’ve never been a supermarket. We have got it into our customers’ psyche the idea that ‘if I don’t go into M&S this week, what will I be missing out on?’ But we had lost our way a bit.”

So Dixon set about accelerating new product development and M&S now renews about 25% of its range every year. But it’s not just a numbers game. With the introduction of ranges such as Simply Fuller Longer, Dixon has added what he calls “range authority”, while steering M&S away from its “indulgent, treaty food” image as exemplified by those infamous ‘Not just’ ads.

“When I came back, Count On Us - which I had launched in 1998 - was still the bestselling healthy own-label ready meals range, but I didn’t feel it had pushed on. Yet health was now even more important.”

Partnering with Aberdeen University, the resulting launch of Simply Fuller Longer tapped into a new opportunity. “Count on Us was diet. Simply Fuller Longer was more broad, and applied just as much to blokes like me. But the thing that surprised us was how complementary it was to Count On Us. Simply Fuller Longer has become the no 1 healthy own-label ready meals range, but Count On Us is no 2 [Kantar 12/we 10 June]. Our food market share is less than 4%, so to have that shows how far we’ve come and puts the M&S business on a stronger footing.”

With the arrival of new CEO Marc Bolland, Dixon’s evolution has continued. “Marc pretty much leaves me to get on with it,” says Dixon. “Before he got here it was pretty clear we had turned the food business around. It didn’t need a radical overhaul or rethink.”

And despite Bolland’s reputation as a hands-on manager, he appreciates his management style. “Nobody has a monopoly on good ideas,” he says. “Marc is inclusive and has helped and supported us in clarifying our position as more of a specialist food player than a supermarket.”

Brands
In particular, that’s meant dialling down the importance of brands. “We did more customer research on that than anything we’ve ever done. You were either very supportive or not. It was a Marmite moment, a big decision for the company. And when I took the proposal to the board, we were very clear that it would be a very carefully edited range. We did trials, and put a ceiling of no more than 400 products in our largest store, and it was typically going to be 100, and then there was this ongoing discussion about the choices we made and what was the optimal number.

“When the customer is telling you ‘I’m trying to do a bit more of my shop here, and I’m sorry M&S, you can’t do Marmite’ you’ve got to listen. So if there was a hero product that we could never emulate, we’ve stocked it. But in some cases we’ve realised we can we do something better ourselves. So where we’re at today is 100-150 SKUs. Then, on top of that, we’ve launched about 100 international brands that you won’t find in any other food retailer - olive oils from Italy, Spanish nougat, biscuits. So we’re probably back at 250 brands, but they’re different.”

With the major pieces in the jigsaw in place - the suppliers, speed of innovation, brand architecture, store refurbishments - the process of continual improvement is ongoing. Of the packaging overhauls, Dixon says: “We’re always changing our packaging. We don’t publicise the constant development. The role of product development isn’t just this fantastic first-to-market-innovation, but also restless dissatisfaction.”

“It’s not a case of wanting shoppers to do a full shop. But even one extra item in the basket makes a difference”

John Dixon

A good example, he says, is the prawn sandwich, launched last summer, with 40% more prawns. (It won the chilled food to go category in The Grocer’s Food & Drink Own Label Awards in May.) “Upgrading is as important as innovation. Most retailers think value is just about promotions and cutting costs, but to us and to our customers, it means always improving.”

The latest example of this process is the launch of Simply M&S last month. In 2011, Dixon and his team began work to refresh Wise Buys. “The difference between Wise Buys and Simply M&S was that Wise Buys was a case of needing to do something very, very quickly. It was delivered in weeks. Whereas we spent months thinking about and developing Simply M&S.”

With a new name, new packaging, and 150 new products in the now 500-strong range - complementing the extension of the total food SKU count by 1,000 last financial year - M&S is giving loyal customers the opportunity to do a fuller shop. But it is not, says Dixon, an attempt to take on the supermarkets.

“We found there were a lot of customers who wanted to do a more weekly shop with us,” says Dixon. “And value and range are important, but so is NPD. It’s not a question of wanting shoppers to do a full shop. We don’t have the space for that. But even one extra item in the basket makes a difference.”

Some innovation works better than others, Dixon concedes. “Some stays for a year or two. But it’s all about what our customers want, and trying to be one step ahead.” Recent innovations have included “a really good new Spanish range” the relaunch of its Italian range and “a fantastic new Asian range”. Dixon is also pleased with the progress M&S has made to catch up in gluten-free. “It’s another important health trend. From a standing start in March 2010, it’s now a 200-strong range.”

So what of the future? As well as rolling out the new store format, one area that still needs to improve, Dixon concedes, is availability. “It’s been a bit of an Achilles heel for us,” he says.

Within months of his arrival, he introduced a fundamental overhaul of its 20-year-old IT systems, with new ordering systems, and range planning systems that are “two thirds rolled out”. That work has dovetailed with Bolland’s pledge to improve availability by 5% over three years. “After one year it’s already improved by 2%, but there’s obviously more to do,” says Dixon.

Bolland’s involvement of Dixon elsewhere in the business has also been appreciated. Soon after his appointment, and knowing that Dixon had spent three years working for M&S in Paris early on in his career, Bolland asked him whether M&S should return to the French capital. The answer was a resounding ‘yes’. The two men stood on the Champs Elysées to announce in fluent French M&S’s return to Paris on 1 April last year.

“It was a surreal, back to the future moment to stand up in Paris and make that presentation, having worked there 20 years earlier,” he says.

What is selling well there today are the same quintessentially British foods - the teas, biscuits and the preserves - that were a hit back then. In Britain it is a different story. To keep ahead M&S has to keep bringing something new to the British consumer.

“It’s like a fashion business. Our job is to bring emerging trends to customers, sometimes for the first time in the UK,” he says. Whether it involves scouring restaurant and street food menus or globetrotting, it is part of the M&S DNA and, even in recessionary times, it’s vital to the restless evolution of the business.