Booths - Back to the family - Updated
27 November 2017
Apologies for the relative radio silence in the past week, we added a baby boy to the ranks last Wednesday. Both Mum and Baby are doing well, and his 3 older sisters have spent most of the weekend clucking around him!
Normal service will be resumed with considerations for Sainsbury's half year, more thoughts on Booths and also, the madness that was Black Friday 2017....
Also to be covered in future months - thoughts on which new born Nappies are the best, and the state of the Baby changing areas in supermarkets up and down the land.
Introduction
This email was sent way back in June, considering the future for Booths post the managerial changes at the top with former CEO Chris Dee departing.
My belief has always been that they were struggling in store via their hours cuts and attempts to be more 'productive' which led to the various images of stores, bereft of stock and indeed, any colleagues too.
Of course, flooding in their heartland, recent inflation via Brexit and the discounters et al have all contributed to this. But if you don't control your controllables inside the 4 walls of the store. Then it's irrelevant to a large degree what your rivals do, as you're not providing enough for the customers in the first instance.
Their expansion is another question, they ended up building new stores to replace older stores that were sold (thus bringing in a competitor) made things harder. Plus new locations for the chain like Hale Barns near Altrincham were testing, customers were clearly underwhelmed with the store standards and without the equity of the chain, are then unlikely to return....
It's a bit of a perfect storm and the banks are now actively looking for investment, be it by way of purchase, or indeed, investment to enable the family to continue running things.
There has been an uptick in fortunes in recent months around the stores, but further improvements have to come via investment as taking colleague hours out becomes very expensive to put them back in.
A fuller piece later this week will consider who may be the runners and riders for the business, of course Amazon will be mentioned, but the relatively regional chain wouldn't aid any particular ambitions around retail dominance for me.
The usual suspects like Waitrose will be mentioned, it would be an ideal purchase for Waitrose, but whether they can afford to go down such a route given the economic conditions and stated ambitions to concentrate on their own fortunes by way of refits and revamping existing stores.
Sainsbury's could be interesting, given their pulling back from the Nisa deal, which seemed to be one that they were confident in doing. Were they saving their money for a deal such as this?
There are other potential suitors too, we shouldn't rule out private equity either as the chain is ripe for a focus on the right product mix, service and a consistent approach in stores.
Whoever buys the chain inherits a good business fundamentally and one that has significant equity in terms of the brand name. Does the buyer, if a retailer keep the brand name going in some way? Risky to run another chain with a different banner given the need for trust and transparency...
Whatever happens, it's sad that a great chain of stores is having difficulties, they do a lot for local economies and smaller producers too. Anyone buying the chain has a lot to consider along these lines too.
It was always said that if Booths ever wanted to sell, it would be near impossible given the complex structure of the chain, multiple (hundreds) of shareholders would make it near impossible to reach consensus..
However with the banks involved, it looks almost inevitable that things will change, but in what way.... Who knows? Given 2017 with Tesco/Booker and Amazon/Whole Foods - who knows what will occur.
A fuller piece later in the week will consider the runners and riders for the business and also what has lead to this at Booths..... Some thoughts from June are below!
Booths had a management change last month, with the first CEO from outside the family, Chris Dee leaving, rather unexpectedly.
However results have not been good for the chain, with profits wafer thin, rising costs impacting the chain and their attempts to achieve maximum disruption by opening 3 new build stores and divesting their old units appear to have worked against them.
The floods are oft-used as an excuse for some poor performance, however the reality is that their attempts to make things more efficient haven't worked.
Booths aren't Asda, efficiency needs to be found in the back of house operation, logistics and developing IT. Reducing hours in the way they have has left virtually no presence on the shop floor, standards have fallen and in a small chain of premium esque shops - you need a different level of service.
Sure, the economy isn't easy, competitiveness is on the increase and inflation is back but there's a place for Booths. Outside factors aside, what else is going on in store?
They have some great work inside their own label ranges as you can perhaps see on a core line like Milk. Focus on bright, clear packaging and a bit of Waitrose imitation.
However if we start at the front, you can point the fingers at inflation, commodities, rivals and the like. But all too often, it starts in store, within those 4 walls.... Get as much as possible right, then build out from there.
It's always about how the retailer presents themselves to the customer, and the perception the customer then gets. Some customers may only give a retailer one attempt, before deciding that particular store is no good.
The loyalists will be far more forgiving but you cannot afford to send anyone packing, over to a discounter. Once they convert a bit of shopping, you're suddenly left looking for a the rest of the shop and volumes fall away....
Booths are not immune to this, despite their higher prices and more affluent, specialist based range and locations. If anything, there is a need to differentiate on service, which makes their efficiency drivers understandable, but ultimately - fundamentally flawed.
Nice couple of signs in the doorway as one approaches, good focus on seasonality.
The quality guarantee was always a surprising one, you expect this at discounters perhaps, where customers may expect to find poorer quality Produce.
Not at Booths; the quality is the one thing you can almost guarantee and the prices should therefore support that. Again it's a staffing issue, you expect folk around to be turning the Fruit/Vegetables and ensuring the best Produce is on display.
Perhaps not here though; beyond poor in reality. Customers who see that suddenly start to question what they can't see. Backs of counters, is all the Produce like this? What about the prepacked etc?
No loose Limes / poor quality loose Limes mean the customer starts to root through the prepacked ones... A tell tale sign of quality issues.
Sorting the source of the problem is better than a quality guarantee which goes without saying.
Top shelf stacking of Raspberries is no way to treat product, they'll just end up squashed, likely develop mould and then just get worse on shelf. Juice everywhere.
Note that the pack on the right has a poor quality, rotten Raspberry in the middle. Not great at all, the quality barometer is set in Produce.
Couple more examples, but on we go. This is one store sure, the other 30 odd might be ok, but one store is too many.
Produce is something most of the retailers get right, particularly discounters who can put a lot of their growth down to a major focus on Produce, bringing prices down and demonstrating such a price gap on Apples versus major retailers.
If you're charging Booths esque prices, the quality just has to be there. It's the whole purpose of the chain.
Nice work here; their locality means they can offer things like this and work with the independent local suppliers. Very strong work and makes sense. A real differentiator.
People like to support local, it isn't just about the fact they're local, it's the small business element too. Supporting a local company versus evil corporate giants.
This is great, however then you see the poor quality Chillies and the like and it becomes a real challenge sadly. A confusing message.
They love a deal or two do Booths; although it was a little calmer on the ambient side of things, usually they have several deals which confuses the offer entirely.
On this visit (Sunday) they struggled to fill up the space, so their doorway space is given over to the meal deal and other such value based promotions. Empty shelves here.
BBQ was nicely executed on shelf with the fins etc, that worked well coming from Produce to a well stocked area for BBQ based lines. Decent Wines offer at 3 for 2 also noted.
The Bakery was also missing a trick to say it was nearly midday on Sunday; not much stock here which equates to missed sales.
Bakery is an opportunity in many retailers really; but Booths seemingly more so than ever.
It isn't all bad news, their work on own label has impressed with a number of lines redesigned with clear colours on pack, strong, bold blocking and some decent growth in these areas too.
Their Free From range has been expanded to a significant assortment and features a number of lines both sourced locally and nationally which puts Booths on the pitch alongside the other, larger retailers.
But their operation continues to frustrate, it isn't just basics in store as outlined above, but also clearance. There is no way in May that both Easter lines, and even Halloween disposable Cups are still on sale. Why are these not long gone?
So that's Booths; a difficult couple of years for the chain despite favourable (certainly versus now) economic conditions. Their store update programme was a big task given the size of the chain, but this is now completed and they must now try to fire on some cylinders to progress.
The challenge for them is that they acknowledge themselves that efficiency improvements have come at a cost, this is the issue with the various consultants who exist in the industry, always trying to find a way to save money.
Plenty exist, but it's the wooden dollars that are then attached to the task being eliminated, savings that aren't true savings. The slack has to be picked up somewhere and usually the customer suffers a poorer shopping experience.
It's easy to show how much you can save by filling shelves on a night for example, reducing the day staff accordingly. But it's basically impossible to show what impact it has on customer service where day staff are reduced, what do customers think about that?
How many move their shopping away as service is worsened, these customers disappear, they don't write in and complain, they don't fill in the checkout surveys, they just disappear.
For the future; Booths need to be competitive sure, but people are not just motivated by price and price alone. There is an element of value in quality and Booths stocking harder to source lines is attractive for customers.
There has to be a need for them to differentiate in a way around service and their ranges, given the smaller size - meaning they can do things a little differently. Locally sourced lines for example, and being closer to the growers.
It's a hard market, even harder for independents but woe betide any retailer who loses their way in store - whoever you are and wherever you are - things are too competitive not to look after the shop.
From the Grocery Insight newsletter archive, first sent to subscribers on 27 November 2017. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.