Christmas 2017 - Morrisons
9 January 2018
We have a 'huge' Christmas report available soon
Express Checkout - Morrisons:
Their results encompass Black Friday and Christmas.
Morrisons were solid on Fuel and Black Five days in 2017.
A similar promotional package to 2016 on Spirits and Fresh Foods.
The Best range expanded with further products.
Availability seemed to be challenging in some areas on peak week.
Whilst we talk about the Asda ‘nadir’ of -6/-7% like for like sales, it’s easy to forget Morrisons were merrily recording a similar decline not too many years back themselves.
The business, after chasing the fresh format dream with misting Veg and a wider focus on Fresh had abruptly changed course, despite having sunk significant Capex in to the model, it was consigned to the bin as the market changed towards lower prices and discounters rose to prominence.
Christmas went badly wrong with the business grappled with price comparisons at the wrong time in 2014. Launching their new ‘Match and More’ in October was a sign of this.
This included discounters too, meaning customers were given multiple ‘Match and More’ points for others being cheaper despite not really understanding who was cheaper and on which products...
Added to the lopsided stores, over focused on Fresh as the ranges ebbed away due to poor sales and it was of little surprise that Christmas figures ended up being so poor. It’s always such a crucial time for retailers, as the reality is that if you can’t grow at Christmas (inflation aside) then you are struggling.
David Potts has done a sterling job in steadying the ship with a technologically challenged company (to be polite) given their woes in ordering and other IT platforms.... Indeed, they are now 10 years in to a transformation project that would take 3 years under Marc Bolland.....
There is lots of talk about inflation, and as touched upon with the Tesco note, was inflation running at the 3% level in the sector over Christmas?
It’s difficult to measure as like for like comparatives on product are difficult, however, there was price competitiveness on Salmon (a real victim of inflation) that would mitigate alongside the usual raft of deals on Alcohol and Confectionery too.
It didn’t feel as though there was a great deal of inflation in the market around areas such as party food for example. With the price points and the deals remaining broadly the same, perhaps there were some price increases in Cream and other areas of Fresh.
Produce remained unchanged from the year before, in fact there was some deflation in the ‘big staples’ with Sainsbury’s (more to come) joining the party with some 25p price points on the key festive Veg.
Morrisons brought their 3 for £1 deal back and were far better on the supply viewpoint in this area, however availability was a challenge in other areas over Christmas.
Despite this, the shiny new ordering system looked to hold up reasonably well as Morrisons move towards being fully automated on ordering for the first time, well, ever….. Amazing for 2018…
Morrisons were not as cheap on the Christmas veg as some competitors in the market, but their larger pack sizes on items like Carrots, alongside the wider choice in the range meant customers still benefitted.
The Best is one of the private labels to return under Potts, reviving a former Safeway brand, alongside Eat Smart for health and also the Safeway brand itself - going in to McColl's stores imminently.
There were a number of stronger 'Best' lines in the range over Christmas, with some Good Housekeeping wins for products also, notably the 'Pork Garland with Onion Dip' no less.
The Best as a label is far more compelling than 'Signature' which never achieved any cut through for the business as a premium label.
Within this reporting period was the 'Black Fivedays' campaign which was strong for Morrisons once more, as they filled the store with various lines not typically sold by the retailer. A fuel promotion was also active with 10p off a litre with a £50 spend.
Lots of larger pack sizes which could have perhaps put some budgets under pressure, and a wide spread of products without a focus on non food, like other retailers.
Some giant products like the £57 Toblerone were a step too far, equally the 3l Spirits were a good idea on paper but £75 then became a stretch for the customer.
Their fuel deal was active twice in the period. Running for two weeks, (not co joined) offering 10p off a litre with a £50 spend and repeated activity versus last year.
As part of Black Five days and then another two weeks later saw fuel deals become part of the arsenal for Christmas.
Award winners are highly necessary in modern retail, highlighting them is equally necessary given the success of the discounters advertising their wares and changing perceptions.
Morrisons advertised a number of award wins around the store as they seek to change perceptions. It was notable that Tesco were obviously calling out award winners too.
A Wine award from Decanter World Wine was striking given the price points of both 1st and 3rd place. A big win and perhaps an unexpected one?
Another on pack win was noted for their large Chocolate Christmas Pudding cake, however as noted, this is a 'serves 16' product priced at £10.... Another higher unit price for the larger pack size - seemingly it sold well... But food for thought for next year perhaps(?)
Aggression on Spirits was noted, similar to last year, Morrisons were down at £15 on Spirits for the 1l bottles. Former years saw Andy Clarke proudly say Asda didn't have to do it, they did this year and had to in order to remain competitive.
Even Sainsbury's were involved, flagging their Spirits price point from November outside stores. They barely bothered on Spirits in 2016, so it was interesting to see them doing so in 2017.
Morrisons mixed their strong price point of £15 with a 2 for £22 deal to maximise volumes earlier in the period. A strong deal but one that relies on further trade being driven in the stores one would think.
The new non food ranges landed in stores in November and will also aid the wider assortment with a fair increase of range and product. Note that Salmon was down in price, badly hit by infestation issues which led to inflation given supply challenges.
Morrisons were strong on price, with every retailer doing their bit on Salmon to maintain competitiveness.
Always easy to take images of empty shelves near Christmas of course, but there were a number around the sector. Morrisons were hit too, which isn't what we're accustomed to given their former manual order pad and about 2 months stock in the warehouse...
However a new system was trading on its second year and with forecasts notably variable, sometimes the system can get caught out. Most of the store areas coped well, Spirits were hard hit but this looked to be price based, with trade clearly well above expectations.
However lightbulbs(?) Could well have been a supplier issue given the gaps, however a relatively standard, average category experiences huge uplifts in December as people turn all their lights on when guests come around.
MIxers / Tonic Water is another huge uplift, and it's whether the store just were caught out at peak times.. This can occur and are the hazards of trading at Christmas, anything goes wrong anywhere in the chain and there's just no time to react, given the volumes that are pushed out to stores.
It seemed isolated in some cases, but as ever, the retailers should always be asking themselves in true 'Bullseye' fashion - "what could you have won?"
Morrisons also suffered with some clearance exiting the event, although at better levels versus last year on Confectionery. They barely had any Tins left either post Christmas....
However some non food and pockets of product remain in gifting and other areas, clearance looks to be swift and certainly signposted boldly in store.
Even if a little 'doomsday' esque with 'final clearance' as a message.
Bakery saw Best Panettone, alongside a Christmas tree one as well. Festive(!)
So there we have a run down for Morrisons, much more of the same vs. 2016 but the results in early 2017 were surprisingly strong with over 3% sales like for like.
However this time, it won't be as easy given the seemingly worsening economic backdrop, the strength of Aldi notably but also Asda who were more rounded for Christmas 2017.
But Morrisons did a good job on their offer, with a strong package throughout on Spirits, Groceries felt a little light around deals and there's still a message to concoct around all the Turkeys that are hand packaged and crafted in stores too....
The overall offer was stable and would have done enough to attract customers in to store, especially work to push 'The Best' in to areas like Hampers, giant Pork Pies (how stereotypical) and award winning Chocolate Cakes also.
But whilst it may not be up at the 3% mark once again, Morrisons, trading against those strong figures should perform well.
The wider strategic moves around online, electronic ordering, in store online delivery and the emergence of their wholesale division provide a welcome boost to the mere trading of supermarkets.
Now, let's get some Safeway Lager from McColl's and party like it's 1998.
A 'huge' Christmas report is available soon - request info
From the Grocery Insight newsletter archive, first sent to subscribers on 9 January 2018. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.