Morrisons ‘must sell its manufacturing sites’ to thrive

By Nicholas Robinson contact

- Last updated on GMT

City opinion is divided on what Potts should do with Morrisons' manufacturing assets
City opinion is divided on what Potts should do with Morrisons' manufacturing assets

Related tags: Vertical integration, Management

Morrisons’ food manufacturing assets have divided city opinion as analysts gauge the early steps of the beleaguered retailer’s new ceo David Potts.

Potts, who is in his third week as the head of the retailer, would be wise to sell off the manufacturing facilities amassed by Morrisons in recent years, said head of the food team at Rollits solicitors Julian Wild.

The former Tesco exec had set about shaking up the business’s senior management in his first two weeks, but it was now time to consider Morrisons’ future as a manufacturer, said Wild.

“Selling its ​[Morrisons] manufacturing facilities would allow it to be more competitive on price and, most importantly, it would allow it to focus on being a retailer and not a manufacturer,” ​he added.

Shore Capital’s Clive Black and Darren Shirley, however, urged Potts in his first week on the job to make food manufacturing “a weapon” ​in his battle against the other big retailers and the hard discounters Aldi and Lidl.

Full potential

Morrisons' vertical integration should be used by Potts to realise the supermarket’s full potential, Black and Shirley said.

“We sense that Potts will seek to extol the vertical integration, ‘Market Street’ and Morrisons’ Yorkshire and British heritage to maximum effect,” ​they added.

But such a model wasn’t appreciated by consumers, Wild retorted. “It’s going to be interesting to see whether Potts sticks with the vertical integration model that Morrisons has employed,” ​he said.

I think he should get rid of that model, though.

“It’s a huge part of the business, but I wouldn’t be surprised if Potts comes to the conclusion to sell off its factories and behave more like a retailer.”

Julian Wild:

“It’s a huge part of the business, but I wouldn’t be surprised if Potts comes to the conclusion to sell off its factories and behave more like a retailer.”

If Potts did decide to ditch Morrisons’ vertical integration model, it would dramatically change the business, Wild added.

Find new suppliers

The firm would have to find new suppliers to buy from, as well as buyers for its manufacturing facilities, “but I think they will be able to do that”, ​he said.

Selling its manufacturing facilities would also take a lot of assets from the firm’s balance sheet and free up some capital, Wild added.

“There are big companies out there, such as 2 Sisters, who would be prepared to take on the factories,” ​he claimed.

Meanwhile, Potts could be set to lose up to 25 senior managers​ and board members, following an internal shakeup.

Today (March 30), it was revealed up to 20 senior managers could be axed from the business.

Last week, it was announced five board members were to leave the company​ in a move to “speed up” ​the business.

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3 comments

What Nonsense

Posted by George Seward,

Morrison has a great opportunity to differentiate itself (which has historically failed to do)from its rivals, especially in its Meat operations. Time for it build market share.

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Couldn't Disagree More

Posted by D Connacher,

Morrisons vertical integration has historically allowed the business to maintain superb profit margins and swift reactions to market changes (note early recession 2008).

Potts should focus on reinvigorating Market Street and moving the concept toward convenience, quality and competitive prices (as under Bolland) and away from Phillip's Fresh Market concept that had a whiff of premium about it.

Morrisons' manufacturing is integral to the Market Street concept.

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No way!!!

Posted by M worker,

This is Morrisons point of difference and what people loved about Morrisons.
Doing this wld break the business and rip out the heart from the company.

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