The stuff of legends: grocery's giants reflect on their defining moments

We’ve chosen the Frontline Club as a venue for this gathering - it’s a private members’ club for war journalists. When I think about the war in the grocery industry there have been some intense rivalries - so I want to start by talking about that. John, how would you sum up the nature of the rivalry with Tesco?

John Sainsbury: In my early career, the old hands didn’t recognise the significance of Tesco. We overtook it very considerably, and when I retired we were still accelerating away from it. Our biggest head-to-head with Tesco was over the so-called ‘stamp war’. We wanted nothing to do with it. We just advertised more, promoting the fact we were honest-to-goodness traders. It worked for Tesco for a short period, but our anti-stamp policy worked better for us over the long term, and one of Ian [MacLaurin]’s most important decisions [in the transformation of Tesco] was to drop Green Shield Stamps.

And then, of course, Tesco overtook Sainsbury’s again. You must have been distressed.

JS: I never wanted to be the biggest, I only wanted to be the best. So I wasn’t distressed by Tesco being No1 in terms of size. It was about being the best, and I’m very impressed with the current leadership team’s [turnaround and management of the business].

Rivalry in the independent sector has been every bit as competitive, hasn’t it, Colin? When you split from Spar to set up Costcutter, how did they take it?

Colin Graves: Not very well. They tried to put every obstacle they could in my way, certainly in the first three years. They made it very difficult to have relationships with suppliers. When I joined Peter and Dudley as a Nisa member, that gave me the route to expansion for the whole of the UK, because before that I was just in Yorkshire - I wasn’t known outside that area.

So the opportunity was in realising how fragmented Spar was?

CG: Back then, Spar was very parochial. I started off at Spar when I was 20 and it had 43 wholesalers in the UK - it was such a fragmented organisation, with the head office the dominant part. But my issue was over prices. John Irish was very much behind the early stages of convenience, on the basis of a limited range of products and high prices. In Yorkshire we had a lot of regional multiples that were very strong as supermarket operations. Our retailers were in competition with these guys, so when Spar went down the route of limited range and expensive prices, I disagreed with it. That’s why I left.

How long did they carry on with their high prices and limited range policy?

CG: It took them about 10 years to realise they’d missed the boat. Nisa picked up a lot of large Spar members who saw the same thing I saw.

Dudley Ramsden: We used John Irish to advertise Costcutter-Nisa. John was advocating Spar retailers put 10p extra on things because people coming into Spar shops were making distress purchases and would pay anything. When Costcutter joined Nisa we came back straight away and said [to Spar retailers] you could go out with prices in line with the multiples.

Obviously there was a rivalry with Spar and you were a breakaway from that. But in the case of Nisa, clearly the tactic was to club together to face a bigger adversary.

DR: We had to focus every member’s mind on the fact that together you get a better deal. But we also had to make sure we didn’t get too hung up about another independent and ignore Tesco and the other multiples. If you remember, Tesco had a 7.8% market share when we started. So we had to work against companies who started to get market share by buying up competitors and focus purely on getting more volume to get better buying prices.

CG: The big difference then was that the majority of deliveries were direct from suppliers - so you were buying from United Biscuits and Rowntree’s. The manufacturer liked that way of trading. As central distribution evolved, so did a whole new ethos.

Chris Haskins: You’re not wrong: 40 years ago, manufacturers got up to things you would go to jail for today, particularly in dairy. But Unigate and Express were there for the taking. We thought the southern dairy companies incompetent. We only got in with M&S because they were so inefficient. They were our greatest help. I once turned up to a conference and there were three Rolls Royces outside, all belonging to Unigate directors.

Wing, you identified a niche opportunity to service an ethnic audience. Did you have a sense of a rival?

Wing Yip: Everyone is my competitor and no one is my competitor. Everybody who sells food - sandwiches through to fish and chips - is my competitor. But nobody is my competitor because no-one has put so many oriental foods under one roof.

What about shortbread, Jim? How cut throat was that?

Jim Walker: We never came up against the same cut and thrust as other people around this table, because we came into a very small niche that had been neglected. We were just very fortunate there was a gap. When we started off, the price of butter rocketed and all our competitors started using margarine and substitutes and it was relatively straightforward for us - sticking to our guns. Fifty years later, we’re in the same position, with butter prices shooting up.

One of the reasons for your success is that you didn’t just focus on the domestic market. David Cameron and Sir Terry Leahy have been talking about exports recently, but you were really in the game far earlier than anyone.

JW: Yes. I believed there was an opportunity in export. Nobody had taken shortbread seriously as a category before - now, exports account for half of our business. In the home market, we have the same challenges facing every manufacturer coping with the growth of the supermarkets. We always supported the independents and supplied Nisa and Costcutter. We sell to Waitrose, but we don’t sell to the big four under our brand.

CG: Have they put you under pressure to supply them?

JW: Yes, every year. But we’re going to try and stay where we are for as long as we can.

So you’ve eschewed the big four - but they’ve seen your success and produced alternative products, so they have competed. Why did you resist the tempta)tion to provide the product to the big four given how important they are?

JW: In my early 20s I went out and tried to sell to William Low, Fine Fare and Tesco, but nobody wanted to know me. They didn’t want niche products - they wanted aggressive pricing to undercut the independents. When I went to sell to the independents they welcomed me with open arms.

But a lot of companies start off satisfying the indie sector, then grow and build demand and then the supermarkets come knocking. So why, when they came to your door, did you turn them down?

JW: We do make private label for the better-quality supermarkets, but we don’t offer them our brand. It’s something we’re very quiet about because we don’t want to antagonise them.

DR: Let’s say Asda put a big shelf sticker on their own label: ‘Made exclusively by Walkers’. What would you do?

JW: We don’t supply Asda, but if they did that we would discourage them.

Talk me through the phraseology you would use.

JW: If you put our name on a product, it comes under a different pricing structure. Private label is something a supermarket has for themselves if they slash the price - they don’t kill the rest of the market. If our brand were being carried, we would just apply Walkers pricing, which is more expensive. We’d try to keep an orderly market.

What about rivals on the foodservice side?

Frank Brake: You’ve always got competition. When we first started, our major competition was Birds Eye, Findus and Ross. But because their main business was retail, they didn’t have the same eye on the ball for catering - and that left us an opening. There’s a multitude of smaller independent suppliers who do a good job - the loyalty they get from caterers makes it difficult to take their custom, but over the years we acquired a lot of independents and that was the best way to get their customers.

How to deal with competitors: buy them!

CG: I can remember when the wholesalers who served symbol groups were also foodservice providers. Joshua Wilson was a prime example in northern England. Something like 50% of the business was retail and 50% was foodservice.

FB: A lot of wholesalers used to do retail distribution and catering. It was a tough business supplying retail. More recently, the biggest competitor was what became 3663 - and it was very strong on grocery because that’s where it came from.

With so ‘experienced’ a group of people here, it’s tempting to talk about the good old days. Is it better today? Or was it better then?

JS: In terms of Sainsbury’s, it’s wonderful now in two ways. The first is the expansion of general merchandise and clothing ranges - we’re giving customers in our large stores something they’ve never experienced before. At the other end of the spectrum are the local shops, the convenience stores, which have grown hugely for Sainsbury’s, as they did for Tesco.

Peter Garvin: It was better in the old days because Mr Cohen only had a wheelbarrow. So he set off with a wheelbarrow and he did wonderful things with it and the rest of us didn’t do quite as well. We have seen the emergence of the best multiples in the world. They are fantastic. You can’t knock them because they’ve done a fantastic job. And if Asda and Morrisons start going for smaller stores, which they will, then we’ve got another problem coming.

CG: The big change I’ve seen is that 30 or 40 years ago you had competition on every street corner, but it was fragmented. You had a lot of regional retailers and they were all different and offered different ranges, but now you’ve got the big four on every street corner. They have deep pockets and they are making a hell of a lot of money to throw at everything.

Perween, your success has been interlocked with the growth of those multiples. What was better before and what is better now?

Perween Warsi: I wouldn’t say better or worse, I would say different. I started from my own little kitchen, so a lot of focus was on product launches and new ideas and fast-moving markets. It was exciting. Now it’s about new products and quality, so I’m lucky and grateful that we’ve managed to maintain the authenticity of the products even with the pressure on price.

JS: I think some products were better before. I don’t think sausages are as good as Sainsbury’s used to make. Nowadays, they think more meat is better - but it’s not true at all. My great-grandfather went into making sausages and pies because he didn’t like the quality. The present generation doesn’t produce anything as good.

PW: There’s also a lot more red tape now. In those days, you went to present a product and it was approved and that was it - you were launched. Now it takes six to eight months. But great things have happened in terms of variety. When I came to this country I couldn’t get my spices and herbs - I had to travel to London and Manchester. Now you’ve got supermarket shelves full of exotic vegetables, herbs and spices - it’s an amazing transformation.

CS: It was a lot easier to make money in the old days. And the capacity to innovate was greater. You could invent 10 new products a week. Shoppers used to queue up to see what M&S was introducing every week. It’s much harder today because it’s all been done. The biggest innovator was Dr John Randall of Avana. He was a scientist, a brilliant innovator. He helped invent Nescafé - as I recall, he left Nestlé in a huff because they didn’t make him CEO. But he showed everyone the way.

William, you’re younger and you’ve innovated, built and sold two businesses and now have another business and farm operations. Do you feel any wistfulness for the past?

William Kendall: I feel a lot of wistfulness. I started life as a farmer’s son and some of the happiest moments of my selling life were taking bags of vegetables harvested that day and pouring them on to the shelves of the local Budgens or Fine Fare. We were getting a good price for those vegetables and the consumers were getting fresher produce at a better price, so everyone was winning. That’s almost impossible now, except in Waitrose and a few other places. So where’s the improvement? Things change and I’m interested in where the fractures are. In my time in grocery it’s become harder, not better. When we first went to the supermarkets with fresh soups, they all got it. They supported innovation.

Do you not think they are encouraging innovation today?

WK: No, I don’t think they are. I spend most of my life talking to younger people who desperately want to get distribution in the supermarkets because there aren’t many places to go. They’ve got great ideas, but the thing they’re finding hardest is just getting shelf space - and the fact that if they don’t deliver within a couple of weeks or months, they’re out.

How much time was New Covent Garden given?

WK: People were incredibly indulgent. We were in distribution that we should never have got. But the buyers knew it was going to work so they backed us, and it was the same with Green & Black’s. But your customers are looking for new products the whole time - and if you create an environment where it gets difficult to create new products, you push people into other sectors and push capital away. And I think that’s where we’ve got to now. It’s changed since the crash.

PW: It will be a shame if, as a result of economic pressures, we take our eyes off innovation, because innovation creates new markets and jobs and grows the economy. A very cautious approach can mean there are fewer innovations.

DR: Not now you have customers innovating with you - I read an article about a Tuscan fish stew Asda developed in conjunction with a supplier.

It’s very common. Suppliers are the unofficial NPD department of most supermarkets. Erik, if I were to ask our publisher Lorraine Hendle what was better about the old times, she would say our bacon category report. It was enormous - but the bacon and pig industry is in complete disarray at the moment.

Erik Trautmann: Yes, it is - but then it always will be. I still remember when I was sent by my company to Whitehall to be told rationing had stopped. Everybody went absolutely mad. During the war, the government had decided prices - but now people were free to make money.

In my own company we were reasonably successful, with very little cost to the Danish producers. We made them money, but then the Danish producers changed the product and they could do it themselves - so they went back to Tesco and Sainsbury’s and of course we were bypassed and we died in that process.

When you think about Tesco as an empire, can you see a situation in which it might fall? How is grocery going to change? Is it going to be an agent like Ocado or Amazon that has a different business model - or is it impossible to see a future that isn’t dominated by a small number of players?

CG: One of the things starting to happen is that you can’t shop anywhere else - it’s Tesco or Tesco, and people don’t like it. So there is some resilience against Tesco as a brand. We’ve noticed in some areas that small Tesco stores haven’t had the effect they used to on our stores - they’re starting to lose a bit of edge.

Frank, you bought your competition - and Tesco has done a lot of that very successfully. But in foodservice we’re seeing new competition emerging in Booker, which has come from nowhere and is now a very credible rival to Brakes and 3663. Can you see that happening on the retailer side?

FB: I’m not an expert on the retail side, but I think people do begin to hate dominance. People can rebel and that gives opportunities for all sorts of competitive boutique-y things. With Tesco’s tremendous power, it’s difficult to see that happening - but it could get to the point where it gets so dominant that, in spite of how good it is, new opportunities will come up.

What we’ve witnessed in 150 years of The Grocer is massive consolidation. Some enormous fortunes have been built through the combination of a new business model - the supermarket - and the great zeal of entrepreneurs like Sir Ken Morrison. Does anyone feel we will see more legends of his magnitude - or will it be more incremental?

JW: It will be a different kind of legend and individual. Traditional innovation will become very thin on the ground, because it’s much more difficult for small companies to get started these days. There will be fewer new traditional brands built - but there will be different types of innovations and novel ways of doing business, and they will create the legends of the future.

CG: Those who’ve grown up over the past 40 or 50 years won’t be allowed to get near to creating something of the size they could have done in the past.

Will, you’re an entrepreneur. How do you feel about this?

WK: I’m optimistic. I’m always looking for fault lines. It’s interesting that you use the analogy of empires, because empires always crumble. Sometimes they crumble quickly and sometimes they take a long time. They tend to crumble when their physical assets become too big and the unifying fundamental idea has disappeared. Physical assets bring you down because usually, in the end, they’re in the wrong place. We’re seeing that happening on the high street. People change their habits all the time. The internet is changing the way people behave extraordinarily and I’m excited about it.

CG: In manufacturing there are opportunities as you create brands and markets. As a retail brand, I don’t think you’ve got the same opportunity any more.

So what you’re saying is we will get legends with a small ‘l’ coming through, they’ll create something that does very well very quickly, then get swallowed up?

CG: I think that’s the problem. New legends will get to a certain size and the big four will wave a magic cheque and buy them out. That’s already happening.

DR: We’re never going to have the name of the owner above the store again. Sainsbury’s and Morrisons - two of the big four - were until the last few years still controlled and influenced by the family, but that’s gone now and it’s never going to come back. When I was at school, I was always destined to go into the family business. It was never considered that I might go somewhere else.

But you’ve got your children there and they win awards at The Grocer Golds even though you’re not there. The fact that independents are still able to duck and dive is extraordinary. You’ve got Budgens taking on Tesco on price, you’ve got Ocado taking on Tesco on price and you’ve got Waitrose taking on Tesco on price. After all these years of consolidation, there is still strong competition from the independent sector.

CG: The one thing the independent sector has got is flexibility. It can dodge and weave and duck and dive and do things the multiples don’t want to do. Going back 30 years, we had stores in Hull that were operating on a gross profit margin of 11%. That’s how competitive it was. And you can still survive.

Do you feel optimistic about the future?

WY: We’re talking about prices all the time, but the other issue is time. If you want to buy bread, you’re not going to spend half an hour travelling to Tesco. You’re going to go to an independent, because you know what you want and you can be in and out quickly - so there’s always a chance there. Tesco is doing the right thing for now - but nobody can be right forever.

JS: The only certainty is that there will be change. Difficult times are testing - in rougher seas the good sailor fares better.

PG: It’s quite interesting that in all this discussion you’re ignoring the foreign discounters. In Germany and Europe, the discounters dominate the market. When I speak to retailers in those countries, they’re amazed they haven’t got the grip they have here.

CG: Yes, they’re a dangerous animal.

PW: And they’re doing better in this country as well.

We’ve asked people what was the defining moment in the history of grocery and clearly the number one has to be the supermarket - but the impact of the internet feels every bit as huge. With price comparison websites, I see more power transferring to the consumer. And with social media, I see giant companies more accountable for their actions.

FB: I think it’s a big opportunity for people starting up businesses with a focused range of products. To be a specialist.

WK: As a small supplier, working with Ocado is amazing. If you’re trying to work out who your next lot of customers are, you can buy them by house number.

CH: There is a question of how supermarkets manage online. Buying was always very inflexible - the consumer might now have a tiger by the tail. I can see them leasing space to local suppliers in the future. Booths is a fantastic, amazing business that the supermarkets could learn from. If David Cameron’s localism really took off, we might see more of that - but I doubt it.

DR: Ten years ago, Edwin Booth was keen on doing a specialist internet service for fine wines - but I read they’d shut it down. Ocado has a wonderful range. It’s not a specialist - I think that’s the secret.

Ocado has a wonderful range and it’s a specialist. Or that’s what it’s aiming to be. An emporium of food on a national scale.

CH: That’s what M&S set out to achieve 40 years ago.

Yes. But M&S didn’t sell 40,000 grocery products. Or deliver them to your door. Then again, perhaps it soon will. Ladies and gentlemen, thank you.