Morrisons ‘warned’ to stick with manufacturing

By Nicholas Robinson contact

- Last updated on GMT

David Potts has now been at the helm of Morrisons for over a month
David Potts has now been at the helm of Morrisons for over a month

Related tags: Management, Marketing, Morrisons

Food manufacturing is essential to the future success of Morrisons, this website’s readers have ‘warned’ the retailer’s boss David Potts, following conflicting advice from City analysts.

Since taking over the beleaguered retailer last month, various opinions on what Potts should do to secure Morrisons’ future have surfaced.

Head of the food team at Rollits solicitors Julian Wild, in an exclusive interview​ with FoodManufacture.co.uk, advised Potts to sell the company’s manufacturing facilities and focus on food and drink retail only.

The story, which was read nearly 6,000 times and shared more than 230 times across FoodManufacture.co.uk’s social media platforms – including Twitter​, Facebook​ and LinkedIn​ – provoked readers to share their comments online.

“Morrisons’ vertical integration has historically allowed the business to maintain superb profit margins and swift reactions to market changes,” ​D Connacher wrote.

‘Whiff of premium’

“Potts should focus on reinvigorating Market Street and moving the concept towards convenience, quality and competitive prices and away from ​[Dalton] Phillip’s Fresh Market concept that had a whiff of premium about it – Morrisons’ manufacturing is integral to the Market Street concept.”

Another reader, who claimed to work for Morrisons, agreed with Connacher and wrote: “This​ [manufacturing] is Morrisons’ point of difference and what people love about Morrisons.”

Getting rid of the retailer’s manufacturing facilities would “rip the heart out of the company”, ​the worker added.

D Connacher:

“Potts should focus on reinvigorating Market Street and moving the concept towards convenience, quality and competitive prices and away from ​[Dalton] Phillip’s Fresh Market concept that had a whiff of premium about it”

A third reader, George Seward, urged Morrisons to use its vertical integration to boost its market share. “Morrisons has a great opportunity to differentiate itself from its rivals, especially in its meat operations,” ​he said.

Seward’s comments reflected those of City analysts Clive Black and Darren Shirley, who, on Potts’s first day at Morrisons, said he should “weaponise” ​the retailer’s food manufacturing​ capabilities.

‘A weapon that can be used’

“If it is a weapon that can be used to differentiate to customers the benefits ​[of shopping at Morrisons], then it is worthwhile,” ​Black and Shirley said.

Potts hasn’t revealed what he plans to do with Morrisons’ manufacturing facilities yet.

However, the former Tesco exec has made cuts to his senior management team​ in a bid to “speed up” ​the business and, according to some analysts, make it more like Tesco.

As part of the plans to reshape Morrisons’ operations, up to 25 senior bosses could face redundancy.

A Morrisons spokeswoman said: “Following the announcement of a reshaped management board, we have had a number of redundancy conversations with senior managers at the next level in our organisation. These are aimed at creating a simpler and leaner Morrisons.”

Other plans revealed by Potts to make Morrisons a better business included his initiative for head office staff to work on the shop floor over Easter, to persuade them to “listen hard” ​to customers and store colleagues.

Meanwhile, watch out for FoodManufacture.co.uk’s picture gallery round-up of Potts’s first month at Morrisons.

Potts’s plans:

What we know:

  • He will streamline the board
  • He wants senior management to “listen hard” ​to customers and store colleagues
  • He has bought £1M of Morrisons’ shares
  • Potts ditched an ‘intelligent’ queue system in favour of human judgement
  • He will close 23 underperforming stores
  • 380 store jobs will be lost

What we don’t know:

  • His plans for the firm’s manufacturing facilities
  • How many more managers will be exited?
  • Future of Ocado tie-up
  • Future of e-commerce

Related topics: Ambient foods

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2 comments

Morrison's manufacturing - in or out?

Posted by Clive Brazier,

To prosper, supermarkets need to buy their food at margins which allow for minimal profit for manufacturers.

Morrisons have first hand experience of the true cost of manufacturing so when they eventually move away from manufacturing, will they be more empathetic to manufacturers? It seems unlikely.

When Tesco became frustrated with the Milk Marketing system in the 1980s they attempted to become a liquid milk processor. They quickly realised that they could not manufacture liquid milk for the prices that they were achieving from the market place and they bailed out - quickly. Subsequently their dairy buying has been brutal.

So, Morrisons will have to ask themselves whether their customers will pay for products manufactured 'in house' or whether price competition will win out.

If we look at the history of the retail sector over the last 15 years, the latter always prevails.

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morrisons

Posted by bernardcurriei,

morrisons is not tesco it should keep its manufacturing as it gives best quality products of all supermarkets there quality of meat and fish to give just 2 are superb

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