Sir Ken Morrison’s passing marked a sad day for retail, but his impact on the grocery sector will live on for decades to come.
The vision and strategy of the former Morrisons boss were years ahead of his time and helped to shape the grocery industry as we know it today.
Retail Week looks at how Sir Ken redefined food retailing.
Building a vertically integrated model
Undoubtedly Morrisons’ biggest competitive advantage in a fiercely contested market is its vertically integrated model, something that was championed and expanded under Sir Ken’s leadership.
Taking control of its own bakers, butchers and fishmongers gave Morrisons a unique visibility and ownership of its supply chain, allowing it to keep a firmer control of costs and improve availability in its stores.
Grocery Insight director Steve Dresser tells Retail Week: “In the old days, vertical integration was something they [Morrisons] did because they couldn’t get the right prices on produce from suppliers, so they thought they would do it themselves.
“That gave a lot of flexibility to the supply chain and they were very much on the front foot with that.”
But as TCC’s global insights director Bryan Roberts explains, the vertically integrated model quickly became much more valuable than that.
“Undoubtedly Morrisons’ biggest competitive advantage in a fiercely contested market is its vertically integrated model, something that was championed and expanded under Sir Ken’s leadership”
“It’s given Morrisons a unique competitive differentiation,” he says. “Replicating that requires lots of spending on M&A, but I think many retailers have been inspired by that.”
Roberts points to retailers in the US that are acquiring dairies and processing plants, and also gives the example of Asda purchasing a clothing factory in order to maintain control over its George label.
As well as influencing the strategy of Morrisons’ rivals, Sir Ken’s vertically integrated model opened up a new revenue stream for the grocer in the form of its supply deal with etail titan Amazon.
Dresser says of the tie-up: “It’s given them a firm foundation and wholesale clearly has a future, given what Tesco is doing [in buying Booker], so Sir Ken was very much ahead of his time with that.”
Developing Market Street
Another unique selling point born out of Morrisons’ vertically integrated model was its Market Street proposition.
The grocer has harnessed the skills of its butchers, bakers and fishmongers to deliver a level of expertise, retail theatre and customer service to its stores that its rivals have failed to emulate.
Particularly at busy trading periods like Christmas, the grocer’s Market Street counters continue to prove a key differentiator as customers seek inspiration and knowledge about the food they serve.
“The high service levels and craft credentials mean Morrisons doesn’t have the artifice we’ve seen from other British supermarkets in terms of them pretending to be butchers or fishmongers,” Roberts says.
“Most of its competitors rely on frozen bakery, frozen fish or centrally packed meat, which is then unpacked to make it look like it’s been prepared in store. Morrisons is the real deal and that genuinely shines through.”
The likes of Waitrose are now following in Morrisons’ footsteps by utilising their own farms and employing professional butchers for its in-store counters, while the likes of Costco and Whole Foods Market are looking into a similar direction.
Such moves in the market lead Dresser to conclude: “Sir Ken’s built something that, even in 2017 with all the changes in the industry, remains a cornerstone of the business and the envy of rivals.”
Focusing on the fundamentals
Sir Ken was steadfast in his drive to run a food business, sometimes at the dismay of the City.
Following the acquisition of Safeway in 2004, analysts were clamouring for Morrisons to branch out into general merchandise and fashion, much like their big four rivals Tesco, Sainsbury’s and Asda had done.
“Particularly at busy trading periods like Christmas, the grocer’s Market Street counters continue to prove a key differentiator as customers seek inspiration and knowledge about the food they serve”
But Sir Ken took a different approach to his biggest competitors, maintaining a stubborn single-minded focus on food.
“When there were calls for them to expand into non-food, Sir Ken was very much of the opinion that ‘we are food retailers, we’re not going to start diversifying’,” Dresser recalls.
“It was a very simple business and, despite the size they grew to, the fundamentals of the business remained the same.”
In contrast, Tesco, Sainsbury’s and Asda built bigger sheds to accommodate their ballooning grocery, clothing, electricals and entertainment proposition – stores that are now out-of-kilter with the habits of modern, time-pressed shoppers.
“Sir Ken’s been proved right,” Dresser states. “Sainsbury’s and Tesco are now over-burdened with big shops full of slow-moving non-food.
“He was of the opinion that ‘we don’t want none of that other nonsense, it’s about selling decent food at good prices’.”
It’s a mantra that, more than a decade on, rings true in the turnaround stories being told at Tesco and, indeed, Morrisons.
Working on the shop floor
Sir Ken’s work ethic arguably shaped the role of the modern chief executive.
A regular visitor to Morrisons stores, Sir Ken never shied away from getting his hands dirty and putting in a shift on the shop floor.
For Dresser, that created a family-like togetherness among staff and allowed Sir Ken to improve the business based on findings from the frontline.
“In food retail, you cannot rule it from the office. Every shop in the country is variable, so you’ve got to be sorting them out and I think that’s what Ken did really well,” Dresser says.
“If you look at any good retail turnaround, it’s always about the basics – availability, price, customer service, and make sure the shops are decent.
“The good CEOs now are the ones that are out in the shops a lot and see that in action. David Potts has always been a stores man. Dave Lewis and Sean Clarke I’m sure will be out in the shops a lot.”
Roberts suggests Sir Ken was the first retail chief executive in the UK to demonstrate that spending time out of the office and on the shop floor was “a real virtue”, prompting dozens of others to follow in his footsteps.
In that sense, Roberts compares Sir Ken to another retail great, the late Walmart founder Sam Walton.
“One of Sam Walton’s key management cornerstones was MBWA – management by walking around,” Roberts adds.
“Being visible to shoppers and employees on the shop floor is very underrated. Visionary retailers like that who are synonymous with their business have exhibited that willingness to get stuck in.
“A lot of modern CEOs, regardless of what industry they are in, could do with heeding that example.”