Sir Ken Morrison – A tribute

I never formally met Sir Ken Morrison, but he was always a bit of a hero of mine. Not only was he from the same city (Bradford), but he was a formidable force in food retailing, my chosen industry.

It’s a source of regret that I never managed to meet and have a discussion with him about stores, he thought those of my ilk (consultants if you will, although I have actually worked in stores, and do, allegedly know what I’m talking about) were an epic waste of money in any case!

But I’ve seen him at the AGM and indeed in store, he was there opening Victoria store in Bradford last year post their refit. An example of how he’d been brought back into the fold by Andrew Higginson and David Potts who are transforming Morrisons and putting together some impressive like for like sales on the way, they were very wise to use his experience and knowledge – I mean, why wouldn’t you?

His legacy will be the business he left behind at 375 stores (now 492) and hundreds of millions in profit, all from one, single market stall near the Victoria store in Girlington, Bradford. A business that has provided a living for hundreds of thousands of people and good quality food for millions of customers too.

There are so many tales I’ve heard 2nd / 3rd hand and/or read in the press in my earlier days about Sir Ken. He was just a force around the chain and missed nothing at all, he would regularly be seen in the local outlets on a Friday afternoon sorting the Peppers and ensuring they were all facing the right way, checking quality and speaking to customers as if he knew them personally.  In many cases he probably did…

He will be the only exec to have ever been seen and noted tidying Produce in the Grocer 33 as he was in the Yeadon store in about 2003… He was famous for putting £10 notes on every gap in the store (back in the days of filling gaps with nearby stock) and noting ‘that’s what you’re costing me lad’ as he left the store. With the manager running after him with handfuls of £10 notes.

Despite the wealth that his work brought him, he remained famously level headed, with his feet firmly on the ground. Speaking to all he met in store. He couldn’t understand the fuss when he won the Retail Week lifetime achievement award for example.

Ken and the wider business never got real credit for their integration of Safeway, or indeed the Morrisons business prior to that. The profit warnings and the ‘loss of control’ get all the headlines and perhaps rightly so. However the scale of work involved for a business that was 4 times smaller, and far less complex than Safeway was absolutely huge. They didn’t hire numerous consultants or outside help either, they got on with things in a methodical fashion and spent lots of money refitting the stores to the Morrisons standard.

Sandwiches are a great example; a classically Morrisons thing to do. In store sandwiches are unique to the market in terms of the ‘mass market’. Morrisons used to make sandwiches in all stores, even ex Safeway outlets who not only were refitted and rebuilt to fit in the expanded Market Street had more hours invested to enable the production of these lines in store.

The sandwiches were changed to be a factory produced – delivered model in 2013, before David Potts reversed the move and stores started to produce sandwiches in store once again. An example of how he’s taken Morrisons back to basics….

Safeway is remembered for the likes of the revolutionary St Katherine’s Dock and Plymstock megastore and not for the knackered old stores they left behind in other areas of the country. Those stores were the backbone of the estate but were worn down, hadn’t seen investment for c. 20 years and the fixtures, fittings but also equipment were beyond their useful life but had to be kept running.

Add into that a change in accounting system just before the integration and a buying system that relied on money up front, rather than Morrisons accumulating it all until the year end (like a savings account!) and it wasn’t a shock that the integrations and conversions were beset by issues….

Plus the Safeway promotional model was fantastically complex, with different offers in different areas of the country at the same time. The ‘mega deals’ were basically selling things like Pringles at 49p as a door buster, then hoping the customers would do the rest of their shopping too.

However as we know, customers aren’t daft and it quickly became apparent that customers were only buying the key deals then going elsewhere for their main shop.

The fact didn’t escape Ken, who was scathing about Safeway on one of the calls post the profit warnings. ‘Their busiest day was Wednesday, promotional changeover day’. He commented, citing that weekends were quiet as no one bought anything other than promotional items from Safeway, and that shelf prices were so high to compensate, Morrisons had to invest even more in price to bring them down to an acceptable level.

Lots of criticism came around technology too, I asked someone who was around in those times about the IT conundrum. That is Safeway were well known to have really advanced tech for the era, so why was it all switched off in favour of Morrisons older, manual ordering based system?

The answer was Ken and the board knew the tech was good, and that Morrisons were behind the curve. However they knew their systems and didn’t have the time to learn and work with an entirely new system. Decisions like that almost go against the grain of models designed by consultants and strategists, but it did make sense.

Safeway was hard yards for the chain but they got there, selling more stores than anticipated and slowing the depth of some of the refits / rebuilds towards the end, but they did it. It’s a shame they never get the credit for just what they managed to achieve.

They are far more than Northern Pie peddlers, and sales in converted Morrisons were always positive mid teens when they re-opened. The focus on deals, ‘over 100 buy one get one free’ etc.

Morrisons were in great shape pre takeover, turnover had grown some 87% and operating profit was up 76% within the 5 years pre takeover as customers flocked to the stores they were opening. There hadn’t been a real consolidation of space in the market but Morrisons knew they had to acquire someone, lest be the laggard of the industry with a heavy northern focus.

It was a brave call, and one that ensured Morrisons became a truly national player. You have to credit Ken for that, he was against debt and believed in free cash flow and cost conscious Ken didn’t settle with debt and interest payments etc.

Whilst some journalists and analysts will happily hide behind the fact he was a gruff, direct talking Yorkshireman who ignored corporate governance rules, didn’t have a face to face analyst meeting until 2004 (PLC since mid 70’s) and refused to listen to the market analysts who he felt had little idea about food retailing. He was a man for the long game, never, ever for the short term. Like for likes were always strong for Morrisons but it was down to the long term planning that ensured the growth and the plan continued apace. Tremendous foresight to both start and grow manufacturing as a business supplying Morrisons (and others, like McDonald’s and Booths) as they can control the costs.

The business is reaping the rewards now, with Amazon signed up and further deals always possible to push the volumes though the facilities. The foresight not just to build this supply chain, but to absorb costs and continue to expand for a small chain just shows how sharp he was, and how much he played the long game.

Pressure to move the central offices to a larger, metropolitan city and out of Bradford were rebuffed, he then built a new central office in Bradford. On the fringes of a council estate. The land was rumoured to have been acquired for very little from the council. Classic Ken.

Similarly he never gave way to the calls for the business to move into non food as analysts pointed to the yellow brick road over at Tesco, Asda and Sainsbury’s who were expanding their stores for non food at greater margins. He refused to be swayed; ‘we are food retailers’ he said.

Again, proved right. Morrisons do not have a glut of space and in many stores, there isn’t the space to add in expanding categories like Free From without a significant amount of re-merchandising work. Morrisons have a decent sized non food business that needs some development, but the core is the same as it ever was. There isn’t a need to repurpose stores due to loads of non food space and dead money.

The importance of Market Street is also noted, analysts saying that Pie Shops wouldn’t work down south; struggling to understand why you’d man the counters back in 2005 missed the point entirely. Pie Shops were a tiny element of the Street. Other areas like Butchery, Fishmonger and Bakery are as important today as they have ever been, it’s a positive differential versus discounters also.

David Potts has made Market Street and the food angles central to all the work that Morrisons do. That’s perhaps the biggest testament to Sir Ken – the CEO is making the business about heritage and the cornerstones are Market Street and the Morrisons supply chain.

Rich people love a bargain, but poor people need a bargain. That sums up Sir Ken, he saw retail very clearly, very focussed on the basics of good shopkeeping, good price and promotions and good customer service.

His legacy is Morrisons.

For a good insight into the Morrisons business as it grew (well, until I get around to writing a book!) Roger Owen – From Bricks to Beans is a brilliant read from the former property director.

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Grocery Insight provide market insight on the UK sector with a focus on individual retailers such as Tesco. This insight is useful to various stakeholders and due to my store based focus. Insight can be delivered to suppliers to focus on growth opportunities, analysts and investors to assess the business performance and long term outlook and retailers themselves to assess best practice.