Somerfield results - Introduction

Engagement with RTTT

Somerfield plc was one of the first companies to sign up to the Race to the Top project in 2001. It has worked constructively with other project partners to develop and test the data collection methods used by the project. It has collected and submitted data for the project in 2003, although it did not take part in the supplier survey.

Company overview

Somerfield operates over 1,300 food stores under the Kwik Save and Somerfield names, and employs around 57,000 staff. It has 5.6% share of the UK food market. The company has been struggling to regain profitability after problems integrating Kwik Save (which accounts for 42% of sales), since its acquisition in 1998. Kwik Save and Somerfield fascias are to be run as separate but complementary business units. Operating profit in 2002-3 was £40 million on sales of £4.7 billion. The company was also recently the subject of a takeover bid.Like Safeway, Somerfield has a High-Low pricing promotional pricing strategy.

Small store size (820 m2 for Somerfield and 740 m2 for Kwik Save) and a mixed income customer profile means that, like the Co-op, Somerfield faces challenges such as restricted shelf space for ethical lines of produce, and a customer resistance to paying premium prices for Fairtrade organic or high-welfare niche produce. But unlike the Co-op, Somerfield’s plc status means that major investors are more concerned about financial performance than ethical or environmental performance.

2003 results: overview

Somerfield is to be congratulated for participating in RTTT during continued efforts to achieve profitability. Somerfield had always stated that RTTT participation was about assisting the company to set priorities in their CSR programmes. But analysis in 2003 was hindered by a lack of data. Furthermore, one of the areas where Somerfield was differentiating itself from the field — a project of local sourcing direct to store (‘Local Life’) — has not been given as much priority this year. We recommend that the Somerfield recovery programme could be greatly enhanced by investing the brand with a stronger emphasis on responsible and ethical retailing, including a differentiated local sourcing strategy.

Comments from Somerfield

The Company is developing brand values for both the Somerfield and Kwik Save fascias. Somerfield will develop its food culture and embed higher environmental and ethical values. Kwik Save will focus on range and good value with easy access and an opportunity to have some fun whilst shopping.

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top Posted: 26-Nov-2003

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