Morrisons “is between a rock and a hard place” after stepping up food manufacturing in recent years, warn City analysts.
The supermarket now produces a fifth of its own products, operating facilities including the former Rathbones bakery, purchased in 2005, four abattoirs, and a fish factory in Grimsby.
Clive Black from Shore Capital said: “In good times vertical integration gives you exclusivity and can be used to strategic and tactical advantage, as you can choose to promote a category when no-one else is. However, in an adverse climate it is a double negative.”
He added: “The consumer is in a difficult space at the moment. Morrisons has got to tough it out, it is between a rock and a hard place,”.
Julian Wild, food group director of legal firm Rollits, told Foodmanufacture.com: “The Morrisons strategy of vertical integration is pretty hard to understand. It is not employed by any of the other major retailers, there is already over-capacity in food manufacturing, why would a major retailer want to be involved?”
Morrisons' chief executive Dalton Philips said in March this year that the supermarket was on track to become the UK’s largest manufacturer of fresh food by 2015, overtaking Vion.