Morrisons became the UK's #4 supermarket retailer in 2004 as a result of the acquisition of larger rival Safeway. That deal elevated what had previously been a regional company into a national player alongside Tesco, Asda and Sainsbury. Originally an offshoot of the US group of the same name, Safeway was established as an independent company in 1987. Its fortunes were bumpy to say the least over the next ten years, but the group finally found its feet in 2001 with an emphasis on fresh food and aggressive pricing. In a bold move to become a national operator, regional group Morrisons agreed to acquire Safeway in 2004 despite fierce competition from a number of other, more powerful buyers. Yet integration of the two businesses proved far more difficult than Morrisons had anticipated, forcing the group to issue an almost unprecedented total of five profit warnings in just the first six months of 2005. Morrisons was back on track by the end of 2006, and delivered strong growth through the subsequent economic downturn. However, trading has been rather more challenging since Christmas 2012, not lease as a result of expansion by discounters Aldi and Lidl. There is no significant threat just yet to Morrisons' position among the Big Four but the market remains challenging.
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Adbrands Weekly Update 12th Jan 2017: Unlike their US counterparts, who mostly suffered a grim holiday trading season, several British physical retailers reported solid performance over Christmas and the New Year. Perhaps the biggest surprise was a rise in apparel sales at Marks & Spencer, for only the second time in 23 quarters. Like for like sales of general merchandise rose 2.3% in the quarter to December, compared to a 5.8% decline in the year-ago period. However M&S warned that the uplift may not hold in the current quarter because of sales and a late Easter. Sainsbury's claimed a "record" Christmas week, helped by the contribution from newly acquired Argos, and better than expected trading over the holiday period. Despite widespread price cuts, its like for like supermarket sales were up marginally, whereas a decline had been forecast. Tesco too was up, by almost 2%, and Morrisons reported its best Christmas for seven years, with a near-3% uplift in November and December. Aldi did even better with a claimed 15% increase in December alone.
Adbrands Weekly Update 24th Nov 2016: UK supermarket Morrisons is to resurrect the Safeway brand as the umbrella for hundreds of new private label fresh and shelf-stable food products. These will not be sold in Morrisons' own stores, but made available to independent retailers, especially convenience stores, through wholesale channels. Morrisons has itself largely exited the convenience sector, but sees an opportunity "to leverage its sourcing and unique food maker skills to give independent retailers' customers access to great quality products". Morrisons already has one of the biggest inhouse food manufacturing networks of any of the major supermarkets. It processes and packs the majority of its own fresh food inhouse, whereas competitors tend to contract out those services. The project also offers Morrisons a chance to exorcise bad memories associated with the Safeway brand. The 2003 acquisition of what was then the separate Safeway supermarkets business elevated Morrisons from a regional retailer into one of the Big Four national supermarkets, but the struggles involved in integrating the two businesses created years of poor trading and management turbulence.
Adbrands Weekly Update 7th July 2016: Another UK retailer has entered administration with the collapse of My Local, the convenience store chain founded earlier this year by the spin-off of supermarket group Morrisons' smaller outlet. Around three-quarters of the chain's 125 stores have closed, with 32 still open pending a hoped-for sale. Though it no longer owns the business, Morrisons has pledged to take back staff from closed outlets or help to find them work with rival supermarkets.
Adbrands Weekly Update 3rd Mar 2016: UK supermarket Morrisons bolstered its own-label manufacturing operations by agreeing a landmark partnership with Amazon. This will allow the ecommerce giant to launch a full rollout of its hotly anticipated grocery offer in the UK, sourcing all fresh, frozen and ambient groceries from its new partner on a wholesale supply basis. These products will be available initially only to Amazon's Prime Now and Pantry customers.
Adbrands Weekly Update 14th Jan 2016: Publicis London regained its presence in the UK supermarket sector for the first time since it lost Asda in 2007. It was confirmed this week as the new agency for #4 chain Morrisons, taking over from what is now Mullen Lowe London (formerly DLKW Lowe).
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Free for all users | see full profile for current activities: US supermarket group Safeway took its first steps outside North America in the 1960s, acquiring a small chain of 11 supermarkets in the UK in 1962, followed by other outlets in Australia later in the decade. The UK operations in particular performed well, expanding to more than 120 outlets by the mid-1980s.
However the international operations never represented more than a fraction of the parent group's sales, and even with 120 British stores, Safeway was only ranked 6th among the UK's food retailers. In 1985 the Australian shops were sold to local retailer Woolworth. A year later, following a management buyout of Safeway in the US, the British chain was sold to fast-expanding supermarket and spirits group Argyll. That company's founder James Gulliver had served as chief executive of UK supermarket operator Fine Fare during the early 1970s, and he subsequently established low-cost wholesaler and manufacturer Oriel Foods, which he sold in 1978. The following year he set up Argyll Group as an investment shell to buy into Manchester-based butcher Louis Edwards. In 1981 Argyll bought back Oriel, together with its Lo-Cost supermarket chain; the following year the group acquired Allied Suppliers, a substantial retail group assembled by corporate raider Sir James Goldsmith, which included supermarket chains Presto, Lipton, Templeton and Galbraith. This was followed by the purchase of manufacturer and retailer Amalgamated Distilled Products (ADP), which owned a small portfolio of whisky and other drinks brands, as well as off-licence chain Liquorsave.
In 1985 Argyll mounted its biggest most ambitious acquisition bid, an attempted £2bn takeover of Distillers Company, the maker of Johnnie Walker whisky, Gordon's and Tanqueray gin. At the time it was the largest takeover bid in British history. But Distillers was also being stalked by Guinness Breweries (now Diageo) and a bitter battle ensued, eventually won under controversial circumstances by Guinness (see Guinness profile). Argyll abandoned any further attempts to become a drinks company, and instead used £681m from its Distillers war chest to acquire the UK Safeway operation. Gulliver subsequently retired as chairman (and died a few years later in 1996).
The Safeway purchase gave Argyll three major UK supermarket chains, Presto, Safeway and Lo-Cost, as well as a host of smaller brands and Amalgamated Distilled Products' Liquorsave off-licence chain. The majority of outlets were rebranded as Safeway, while Liquorsave and ADP's drinks portfolio was sold in 1991. However a fierce supermarket price war mid-decade created substantial problems for the group. In 1994, Argyll Group restructured, slashing 5,000 jobs as well as more than 100 under-performing outlets. Two years later, the group's recovery was aided by a joint venture with BP to launch a chain of combined supermarket-petrol stations, and a partnership with Abbey National to offer in-store financial services. The parent company dropped the Argyll Group name to become Safeway plc in 1996, and reported record profits for 1997. But the recovery was short-lived. The group came close to a merger with #3 chain Asda to form the country's biggest food retailer, but plans were abandoned after signs that the deal would be rejected by regulators. Following that reverse, Safeway unveiled a string of profit warnings over the next two years.
Light finally appeared at the end of the tunnel in 2000, following the appointment of Carlos Criado-Perez, recruited from Wal-Mart's international division. He launched an aggressive price-cutting campaign on leading brands, a major focus on fresh or ready-to-eat foods, better shelf availability and substantial cash incentives for all staff. In 2000, Safeway's 90,000 employees shared a bonus payout of around £30m, more than doubling the salary of many store managers. Criado-Perez also dropped the store's unsuccessful ABC loyalty card scheme. The strategy worked, and Safeway reported sales growth well ahead of even Tesco, attracting a million more customers into the store. In 2001 the group unveiled the first of 50 planned hypermarkets, and pre-tax profits jumped by a third that year. By 2002, however, growth had once again begun to slow.
In 2003, Safeway announced that it had agreed to be acquired by Morrisons, then the #5 supermarket group. This business had been founded in 1899 by William Morrison, originally as an egg and butter merchant operating from a market stall in Bradford, West Yorkshire. Eventually he opened two more market stalls and later converted them into counter service shops. The real impetus for growth came from the founder's son Ken, who took over the running of what were then just three small shops in 1952. Still in his early 20s, Ken Morrison opened his first town centre grocery in 1958, and went on to become a pioneer of British supermarket development during the 1960s. The company's first supermarket opened in Bradford in 1961 - Ken Morrison couldn't afford city centre rents, so converted a disused cinema on the edge of town. In a nod to the company's beginnings he introduced separate counters like market stalls within each store under the banner Market Street. Sales were beyond even Morrison's own expectations, and a string of other stores followed, also in sub-prime locations. Ken Morrison floated the company in 1967 and went on to deliver an unbroken record for sales and profit growth every year for 36 years. A key development was his decision to take full control of his supply chain during the 1980s, as he acquired or built factories to process and package all Morrisons' fresh produce. He was knighted in 2000 for his services to food retailing.
The Morrisons deal took most observers by surprise. Morrisons was less than half the size of Safeway, with revenues of £4.3bn (compared to Safeway's £9.5bn) and just 125 stores (to Safeway's 480). The rapid emergence of more powerful bidders soon made the Morrisons bid look unlikely to succeed, with most observers initially favouring a cash bid from Sainsbury's or Wal-Mart. By the time competition regulators began scrutiny of the bid battle in March 2003, it was entrepreneur Philip Green (owner of Arcadia) who had become the favourite to clinch the deal, helped by the fact that he had no existing supermarket interests. Following seven months' scrutiny of the market, British regulators ruled in October 2003 that Tesco, Sainsbury and Asda would not be granted permission to acquire Safeway. In November Philip Green also withdrew from the battle, leaving the way clear for Morrisons. But the prolonged wrangling had inflicted considerable damage on the Safeway business. Announcing his new offer of around £3.3bn in cash and shares, Sir Ken Morrison warned that trading at Safeway had deteriorated sharply and that the supermarket was losing market share.
Following completion of the merger in March 2004, Morrisons began to transfer larger Safeway stores to the Morrisons brand. The group was required by regulators to sell off 52 stores, and also disposed of a further 120 smaller convenience stores. These were acquired by a number of other buyers including Waitrose and Somerfield. As a result of the group's trading difficulties during 2004, the management team was restructured in early 2005. Bob Stott was appointed as chief executive, but later announced his retirement. Marc Bolland, previously an executive director of Heineken, was finally appointed as chief executive in 2006. See full profile for current activities
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