As British supermarket Morrisons continues its recovery under the stewardship of David Potts and his team, its vertical supply chain sets it apart from much larger competitors and could prove to be a major asset in a post-Brexit world.
Clive Black of Shore Capital issued a note this week on Morrisons’ new generation store format. As one might expect from the house broker it was fairly glowing, but with good reason. The accompanying pack of slides of the store in St Ives, Cambridgeshire showed a store that would be a pleasure to shop.
However, it also highlighted a key advantage Morrisons has over competitors, its vertical supply chain. Having a large supplier and manufacturing base in the UK, and good relationships with those suppliers built up over many years, will be a key advantage if, as other supermarket CEOs warn, we face lorry gridlock and imported food rotting before it reaches us in the event of a no-deal Brexit. This scenario has been strengthened this week after the government admitted that it is considering stockpiling food.
Meanwhile, Morrisons’ new format is getting the message across that it is different from its competitors. ‘Morrisons Makes it’ is a prominent message throughout the store. Though only number four in food & grocery market share (8.3% compared with leader Tesco’s 21.6% according to GlobalData), it is the single biggest supermarket customer for British farmers.
Morrisons’ own-branded fresh meat, milk and eggs are all sourced in Britain and it has been doing much over the past year to source products that fit the tastes and customer profiles of catchments from local suppliers, enhancing not only the ‘buying British’ message but also that of supporting local businesses.
It is also getting consumers used to a world where we cannot afford to waste anything with its Naturally Wonky, Naturally Wonderful, vegetables, and mixed weight eggs.
While the uncertainty over the outcome of Brexit is a major risk for UK retailers and Morrisons is still prone to risks, it is starting from a much more advantageous point than its competitors.