Admired frozen food discounter Farmfoods now heads The Grocer Top 50

Sean McAllister reports on the updated ranking for 2004

Farmfoods may be a bit bashful about talking to the press, but the new number one in our Top 50 this year is certainly not shy in coming forward when it comes to increasing sales and expanding business.
Two consecutive years of 40%-plus year-on-year growth have boosted turnover at the frozen food discounter to £350m and taken it to the top of our pile. MD Eric Herd isn’t one for blowing his own trumpet. But Alf Carr, director-general of the British Frozen Food Federation, has this ringing endorsement. “Farmfoods is a superbly run business in every way - good products, competitive prices and a very sophisticated supply chain infrastructure. Eric is a remarkable man surrounded with an excellent management team.”
Most of the Top 50 retailers joined Farmfoods in having a remarkable year in what is The Grocer’s third annual ranking to celebrate the diversity and success of the independent sector.
However, Farmfoods has earned its top spot. It has 277 stores stretching from Invergordon in the northern Scottish Highlands to Ashford in Kent, and on its website it advertises it is seeking for new stores of 5,000 sq ft in England, Scotland and Wales. The Scottish outfit understands that the bulk of its customers are from the lower socio-economic scale and so it sets its stall out for high quality products at competitive prices.
According to Carr, Farmfoods has become a flagship when it comes to demonstrating how to handle frozen foods. “Farmfoods proves that when a retailer takes frozen food seriously, there is expansion and profit to be made out of it,” he says.
Farmfoods is also admired by its suppliers. One says Farmfoods is an intuitive retailer and not dissimilar to Morrisons. “They’re a no-nonsense outfit. If they agree to do something, they do it, and as with Morrisons it is easy to get access to senior people within the company.”
Another says it is successful because it understands its target market and focuses on its strengths rather than being “different things to different people”. And they all say it is a very fair retailer to work with as it “affords suppliers with a margin but ensures customers get keen prices”.
Last year’s top dog Tates, which is owned by Spar’s biggest wholesaler AF Blakemore, shouldn’t be crying into its bowl. Its number one spot may have been gazumped by Farmfoods but its sales
were up 8.9%. Managing director Geoff Hallam puts this down to the continued development of Tates’ fresh offering - in particular food-to-go, chilled and fresh produce. The chain also replaced underperforming stores with 12 new stores.
This year Hallam plans to step up its refurb programme and push the total estate up to 200.
Preston-based supermarket chain Booths also had a good 2003 to leapfrog Unwins into the number three slot. Turnover was up 9% without adding the impact of new stores and chairman Edwin Booth predicts “robust growth” in 2004.
He admits his stores are akin to Waitrose in terms of the styling of offer but, he says, in some areas Booths is starting to improve on Waitrose.
Booth believes investment and improvements in his stores and the quality of the offer - particularly range, presentation and service to customers - have driven sales. “We have a high quality food and drink offer and we’ve become well known for our locally sourced food,” he says.
The success of Farmfoods, Tates, Booths and the other retailers in our Top 50 ranking goes some way to explaining why there has been so much corporate activity in this sector in recent months.
One of last year’s major takeovers was convenience and CTN chain Balfour, bought by the Co-operative Group in July for £30m. This year it looks as if London-based Adminstore will fall into the hands of Tesco after the multiple put in a £53.7m bid to buy 45 of its Cullens, Crispins, Harts and Europa stores. And London-based organic retailer Fresh & Wild has just been bought by US organics retail giant Whole Foods Market for $38m.
However, some of the Top 50 have been hunters rather than hunted. The biggest acquisition this year, which has not yet registered on our Top 50, is the purchase by Rippleglen of 121 Supercigs and Supernews outlets from Tesco. The multiple inherited the CTNs when it acquired T& S in October 2002 and in November Rippleglen announced that it had struck a deal. However, it doesn’t take over running of the stores until February 21 when it will get its hands on a batch of four stores before taking on 12 new stores each subsequent week until May 1. The acquisitions will add about £90m to Rippleglen’s annual turnover of £44.8m, which would propel it from number 25 into the top five of our ranking.
Mills Group was also on the acquisition trail and added 27 CTN stores and increased its turnover by nearly 50% by acquiring Morgam News, last year’s number 34, in September.
Alfred Jones purchased six stores from A&S Stores and added another 13, mostly forecourt sites, through the takeover of Jacques Loggins.
Scottish Spar wholesaler CJ Lang is currently negotiating a deal to buy 17 out of 18 stores owned by Spar retailer AJ Gillespie - our no 43.
But it should come as no surprise the Top 50 has become a wanted list for many retailers looking to expand. Just consider the statistics.
If you add them all together, The Grocer Top 50 employ more than 41,000 staff in 3,097 stores across the UK and, significantly, have an annual turnover of £2.8bn. And they are growing their sales - only six members experienced a decrease in turnover compared with last year.
Next year may see other flourishing operators get into the Top 50. At number 51 is Artgoal Supermarkets. Director John Ewens, who was at Circle K during the 1980s, opened five new stores last year, helping to grow turnover by 53%.
Ewens has grown sales at the acquired stores by introducing a strong chilled and fresh offering and will look to add a couple of new stores after a six-month period of consolidation.
But the biggest mover on the Top 50 is Costcutter. Best known as a symbol group, Costcutter also owns 86 of its own stores. Of these, it manages 34 while the rest are run under licence. In the last year it bought 32 stores, ‘Costcutter-ised’ them, and then brought in licensees to run them on a one to three-year contract. Finance director
Nick Ivel says it plans to be more aggressive with this strategy in 2004 and already has half-a-dozen new stores in the pipeline.
Our 2004 ranking also welcomes six newcomers. One of last year’s ‘Bubbling Unders’, JB Beaumont has just crept into the élite grouping at number 48 thanks to a 9% increase in turnover, achieved due to a new store opening as well as improvements to range and availability, according to director Louise Beaumont.
JB Beaumont has been a true family business since Beaumont’s grandfather opened the first store in 1887 - her two brothers are also directors. Now under the Costcutter fascia, Beaumont predicts a 5-6% uplift in sales this year and plans to refit one of the stores and look for new sites.
In at number 28 is the Northern Ireland retailer Wineflair with 40 stores across the province - 28 off-licences, six c-stores under the Mace fascia and six Mace/Wineflair dual-branded licensed c-stores.
And the future looks bright for the chain over the coming year. Operations director Christopher McKay says it will be opening new off-licences and refurbishing some of the existing portfolio. In some locations it will convert some more of its off- licences into dual-fascia Wineflair/Mace stores, which are experiencing 30% sales uplifts.
But the highest new entry at number 14 is the forecourt retailer Fuelforce, formed in December 2001 when the former MD of Burmah and chairman of Petrol Express, Rikki Hunt, bought the Jet company-owned forecourt sites from ConocoPhillips. The Key Lekkerland member has 170 sites, averaging about 500 sq ft, which operate in a ‘quasi-franchise’ model. This month Fuelforce has started a programme to directly manage the stores in order to have a more consistent offering.
Marketing controller Paul Bearman says under direct control, the stores will be refurbished and rebranded Village Store or Shop on the Move and stocked with bespoke ranges to suit localities.
The other newcomers in the rankings are Nisa members G101 Off Sales (29) and Metro Discount Stores (46) and hospital CTN/c-store chain United News Shops (36).