Somerfield (UK retailer)
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Somerfield is a chain of small to medium-sized supermarkets operating in the United Kingdom. Operating as Somerfield Stores Ltd, the company is the fifth largest food retailer in the United Kingdom as of 2006, according to TNS Superpanel. It is part of Somerfield Ltd, formerly Somerfield plc, which also included the Kwik Save chain of discount food stores until February 2006. It is based in Bristol.
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[edit] Overview
Somerfield is the fifth largest food retailer in the UK with 977 stores (as of January 2007), following the sale of the Kwik Save unit and the closure or sale of unprofitable stores.
Somerfield's self-declared niche is to "be the leading small format retailer in the UK". For the 52 weeks ended 30 April 2005 Somerfield Group's turnover was £4.676 billion. Profit was £60.9 million before tax, and due to a tax credit it was £62.9 million after tax. These profits were up about a third on the previous year; the group has had very narrow profit margins for a number of years.
The four larger retailers are Tesco, ASDA, Sainsbury's and Morrisons, and they are the only ones that operate full size superstores. All of the others are niche players of one kind or another.
[edit] History
Somerfield's origins are traced back to 1875 when a small family grocery store was opened in Bristol by J H Mills. By 1900 it had grown to a chain of 12 stores. In 1950 the fourteen stores were renamed "Gateway" when Bristol finance house Tyndall took a majority shareholding. The new name was chosen due to the company's home town being the 'gateway to the West Country'. In 1977 Gateway was taken over by Linfood Holdings Group and combined with Linfood's 'Frank Dee' supermarket chain to create a group with over 100 stores, with the Frank Dee stores being rebranded as "Gateway" - a move which was completed by 1983 when the group was renamed "The Dee Corporation".
Between 1983 and 1987 a number of acquisitions and mergers were made, adding Keymarkets, Lennons, International Stores, Fine Fare and the UK operations of Carrefour to the group - all rebranded under the Gateway name. In 1988 the group was renamed "The Gateway Corporation" and a year later, was bought out by Isoceles plc, a private consortium. Consequently many of the larger superstores were sold to ASDA. In the 1990s, after falling sales and a poor reputation, the Gateway Corporation almost collapsed.
A decision was taken to rebrand the company's operations as Somerfield after a successful pilot scheme in 1990 and the company then built its success upon the new brand. A small number of stores were also relaunched under a new Food Giant discount brand, with the first store opening in 1991. Somerfield owned 24-7, the failed home delivery business. The name of the holding company Isoceles plc was changed to Somerfield plc around this time.
[edit] Kwik Save takeover
In 1998 the company took over the rival Kwik Save chain, with the remaining Food Giant stores being rebranded under that name. Kwik Save had over-expanded with a badly focused portfolio of stores, many in poorer areas, and the company was in a worse state than Somerfield's management had realised.
The original plan was to transfer all Kwik Save stores to the Somerfield fascia, but it quickly became clear that many outlets were not suitable for conversion, either due to size or location. Also, the downmarket wooden shelving and poor quality fittings used by Kwik Save meant that every conversion required a full refurbishment of the store - Simply changing the signage and uniforms would have risked dragging the carefully developed Somerfield brand downmarket. Instead, the larger Kwik Save stores were converted, some were sold or closed and the chain became a trading division of Somerfield Stores Ltd, sharing its supply chain and back office systems with Somerfield. For some years, the own-brand products in Kwik Save stores were Somerfield, although this policy was reversed once it was decided to keep the brand.
[edit] Sale of Superstores
The core chain began to divest its superstore portfolio in 1999 (including many of the re-branded Food Giant stores) and now focuses on small to medium sized stores on high streets and in local shopping centres.
[edit] New formats
Somerfield has changed its logo from a rectangular shape to a more contemporary design and opened a number of store formats, such as Somerfield 'Essentials' and Somerfield 'Market Fresh'. It has further changed its brand image by introducing newer own-brand lines such as "Best Ever", "Healthy Choice", and a new advertising strapline: "giving you what you want". A low-price own brand label called 'Simply Value' has also been introduced to compete with other low cost own brand products such as Tesco Value.
In August 2006, around 50 in-store delicatessen counters were closed as they had not been profitable.
[edit] Safeway Compact takeover
In October 2004, Somerfield acquired 114 Safeway Compact stores from Morrisons, which were subsequently re-branded under the Somerfield name. This deal was referred to the Competition Commission, which announced on July 27, 2005 that 14 of the stores might need to be divested in order to satisfy concerns over localised monopolies.
After completing its investigation, the Commission instructed Somerfield to sell 12 stores. In September 2005, Somerfield announced its intention to appeal against the decision, a process delayed by a takeover bid for the chain (see below). The Competition Appeal Tribunal upheld the Commission's decision in February 2006: [1]. Somerfield therefore had to proceed with sale of the 12 stores. However, the sale of Kwik Save in February 2006 is likely to have removed the potential clashes between some of the offending stores.
[edit] Somerfield takeover
Somerfield was subject to takeover speculation from 2003 onwards, a substantial part of the group's appeal to bidders lying in the value of its property portfolio rather than its trading operations, as this offered the potential to leverage its financing after a takeover.
Retail entrepreneurs John Lovering and Bob Mackenzie made two failed bids in 2003. In 2005, Icelandic venture capital group Baugur made an approach, while United Co-operatives and London & Regional Properties also expressed an interest, but both groups dropped out of the running. In October 2005 Somerfield's board accepted a bid of around £1.1 billion from a consortium of buyers. This was subject to shareholder approval, but was not referred to the Competition Commission as the buyer was not another UK retailer.
Somerfield plc was acquired by the consortium consisting of Apax Partners Worldwide LLP, Barclays Capital and the Tchenguiz Family Trust with effect from 21 December 2005, when the name of the group changed to Somerfield Ltd.
The new owners have also made dramatic changes to operations at Somerfield. The aim was to simplify the business and attract new customers. The first move was the abrupt end of the SaverCard scheme in May 2006 with promotional deals becoming available to all customers. To compensate, prices were slashed on "The Core 500" - the 500 best-selling product lines - often significantly undercutting other supermarkets. Bold new point-of-sale was introduced to make promotions and price cuts more visible to customers. There is also a significant range review in progress which will see simplification and the removal of poorly-selling lines. Somerfield's three own-label brands have also been overhauled; the budget "Makes Sense" range has become "Simply Value", the healthy-choice "Good Intentions" range has become "Healthy Choice", and the premium "So Good" range has become "Best Ever"!
[edit] Kwik Save sale
In 2005, Somerfield re-branded half of Kwik Save's Scottish stores under its own name and closed the remainder, thus removing the brand from the marketplace north of the border. Some other stores such as Buxton and Balham have been sold to Waitrose and other retailers.
After the group was taken over, it was reported that the new owners found the Kwik Save chain was losing £40m per year, effectively cancelling out around 40% of the profits generated by the Somerfield division. As a result, it speeded up the conversion of stores from Kwik Save to Somerfield. On February 27, 2006, Somerfield Stores Ltd sold the Kwik Save brand and 171 stores to BTTF, an investment vehicle headed by Paul Niklas, for an undisclosed sum[2]. Somerfield re-branded the 102 Kwik Save sites it has retained under its own name and a further 77 stores were sold to other retailers, thought to include Netto and Aldi. Somerfield is now focused on a single brand.
Subsequent to the initial sale, a further 19 Kwik Save stores were acquired by BTTF, including some of those included in the Competition Commission investigation ruling into the Safeway Compact takeover.
[edit] Store rationalisation
In August 2006 a wave of store closures were announced as Somerfield's new owners continued their restructuring activity. Some of these were core Somerfield stores that were performing poorly, but most were converted Kwik Save sites that hadn't proved successful under the new fascia. A number were among 102 stores that were selected for conversion following the Kwik Save sale in February 2006, although most had only undergone a partial conversion with temporary signage and point of sale. These had been retained on a trial basis and a sales performance had been closely observed in the period since conversion.
Some stores were sold to other groups, including Kwik Save and Sainsbury's, which bought 12 with an average size of 11,000 sq ft, while others are being closed completely. This was done on a local, store by store basis and there was no official announcement of the process as an integrated restructuring programme.
With unprofitable branches closed or sold, attention has turned to revitalising the remaining store estate. Project Evolution began with eight trial stores in June 2006 and is now being rolled out very quickly across the store estate. The project plans to improve stores by altering merchandise layouts, removing weak product lines and adding hundreds of new products to each store. Accessibility is also improved in Evolution stores through lower top-shelf heights and clearer category signage. Stores are also being redecorated with new external signage and branding as well as interior improvements. In the future, the Market Fresh and Essentials formats will be dropped and all stores will be branded simply as Somerfield.
As part of this process, Somerfield is now in the process of integrating its co-branded Texaco and Jet forecourts. This will see the oil company signage dropped, to be replaced by a Somerfield branded food and fuel offering. The process which should be complete by the end of the 2007/2008 financial year.
In October 2006, it was revealed that 40 Somerfield stores, including many retained Kwik Save branches, had been sold to Kwik Save[3].
In November 2006, the company also sold a further 11 stores to Marks & Spencer to trade under the M&S Simply Food brand. These included stores in Blackheath, London, Petersfield Broughty Ferry in Dundee and Alton in Hampshire
[edit] Criticisms
Somerfield has often been criticised for neglecting its stores, allowing them to become run-down. While the refurbished, new format stores are generally attractive and on a par with those of rivals, many stores have not been refurbished since they were built. According to this, Somerfield no longer sell some popular products due to poor demand. The company has also been alleged to have"given up on ethics" after withdrawing from a voluntary ethical trading agreement, although this has been strenuously denied.
[edit] Staffing policy
Since being taken over Somerfield has made moves to change its 16 different sets of terms and conditions of employment (a result of successive takeovers) to just one. As well as new terms and conditions, staffing structures are also set to be optimised to remove unnecessary positions and create new ones where required. The broad aim is to cull excess supervisory and management roles to create room within budgets for more store staff.
[edit] References in Popular Culture
The branch of Somerfield in Wells, Somerset, England had featured promiently in the film Hot Fuzz and Somerfield branding was clearly visible. In the film the manager of the supermarket Simon Skinner played by Timothy Dalton plays a charming but sinister individual. The role the supermarket plays in the film includes a gun battle scene between police and staff members in full Somerfield uniforms. The reason the store was chosen was due to the director of the film Edgar Wright having formerly been a shelf stacker at the store.
[edit] External links
- Somerfield Ltd - Corporate information
- Somerfield Ltd history
- Somerfield.co.uk - Information for shoppers
- Company press release - Somerfield acquires 114 Safeway compact stores
- Independent.co.uk - Somerfield to take over small Safeway stores
- BBC report on Somerfield's board's acceptance of the takeover (14 Oct 2005)
- BBC report on the finalisation of the takeover (21 December 2005)
- Somerfield Ltd press release announcing sale of Kwik Save (27 February 2005)
Major chains: ASDA • Marks & Spencer • Morrisons • Sainsbury's • Somerfield • Tesco • Waitrose
Convenience stores: Budgens • Co-op • Costcutter • Londis • SPAR
