Safeway results - Introduction

Engagement with RTTT

Safeway 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. Despite the uncertainty around Safeway throughout 2003 which has created a difficult environment for the company, it pressed on with RTTT data gathering, and submitted a full data set on time. The only part of the project which Safeway declined involvement in 2003 was the survey of suppliers. This was because of the corporate situation (ie take-over bids) which Safeway believed could colour suppliers’ answers.

Company overview

Safeway in its current form arose out of the acquisition of Safeway Inc’s UK assets by the Argyll Group in 1987. It is the fourth largest grocery retailer in the UK based on reported turnover, and has a market share of 9.2%. Safeway had 481 stores and some 92,000 full- and part-time staff as at 31 March 2003. Its stores are located throughout the UK. The company has been adding larger stores to its portfolio of relatively small supermarkets, but it still has ‘structural handicaps’ including a smaller size of its stores relative to Tesco, Sainsbury’s and Asda.

In 1999, in order to accelerate its sales and profit growth Safeway changed its pricing strategy from conventional  promotional pricing to aggressive ‘high:low’ promotional pricing. Turnover and operating margins then increased until 2002-3, when profitability and share performance began to be negatively impacted by the uncertainty affecting the company’s future.

Since 1997 Safeway has been seeking to merge with another grocery retailer, believing that it had inadequate scale to compete effectively. A deal with Asda in 1997 was called off when it leaked prematurely into the media. On 9 January 2003, Morrisons announced an offer to purchase the entire issued share capital of Safeway. Subsequently five further parties expressed an interest in merging with Safeway. The potential bids of Asda, Sainsbury and Tesco along with Morrisons’ offer, which lapsed as a result, were referred to the Competition Commission. On 26th September 2003 the Secretary of State announced that of these parties only Morrisons was cleared to make a bid for Safeway. Currently no offer has been announced.

Safeway’s emphasis on corporate responsibility has included environmental management, particularly logistics, transport and waste. The post of Environmental Manager was developed into Strategy Manager - CSR in early 2002, in line with a more integrated response to wider sustainability issues.

2003 results: overview

Safeway predictably excelled in the area where it has traditionally invested significant effort—environment (energy and waste) and was best in class. The company excluded itself from the opportunity to achieve best in class in the module dealing with trading relations with farmers by not subjecting itself to an independent survey of its suppliers. Safeway also clearly found the RTTT definition of local sourcing at odds with its own approach—data not being collated according to RTTT proposed definitions on the amount of foods sourced and sold as local or ‘locality’ foods. Scores in all other modules were high, and it was in areas such as structures for consultation with staff (which are not about pay and conditions), and policies on access to stores (eg to customers with special needs) which prevented Safeway from coming best in these categories.

Safeway’s many examples of good practice, such as its Nutrition Advice Service, and the company’s path towards engagement with civil society, may be reviewed in the event of a takeover/merger. Noting the lack of engagement in CSR by Morrisons, it is important that the eventual buyer should ensure that this good start is not abandoned in the name of reducing overheads and consumer prices.

Comments from Safeway

“Safeway has participated in the project throughout its life in a number of ways, not least through advising and commenting on key performance indicators (KPIs) suggested, in showing journalists some of our innovative practices including locally landed fish in Cornwall and outdoor bred pork activities, providing information and data during 2002 and 2003 and as a member of the Advisory Group. It is committed to stakeholder engagement and will continue that process with the links established as the project has advanced. It looks forward to disclosing material information on CSR activities and progress in the 2003/4 CSR Report. (View 2001/2 and 2002/3 reports at Click on Company information to find). You can also access information on other initiatives on the Safeway website including:

“We are delighted that our CSR strategy is recognised by a number of external rating agencies including DJSI, FTSE4Good UK Index, Morley Fund Management Sustainability Index. We were also delighted to be placed in the first quintile of performance in Business in the Community’s 2003 Corporate Responsibility Index.

“We believe that the development of KPIs and comparison of food retailers via the Race To The Top project proved difficult to achieve in practice. KPIs were at an early stage in some areas such as local sourcing whilst in other areas the project failed to recognise the achievements made by companies or to accept the commercial sensitivity of some data.

“Nevertheless the exercise has been a helpful one in forging relationships in a number of areas.”

Nicola Ellen, CSR Strategy Manager, Safeway

Download full results [PDF].

top Posted: 26-Nov-2003

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