We’ve had the biggest drop in incomes in a generation. Some mums are not eating just so they can feed their kids’. The recession is biting and, shockingly, leaving some families without the money for food. That’s according to the boss of one of Britain’s biggest supermarkets — and he should know. His business gauges the state of ordinary families’ finances on a almost daily basis. And in an exclusive interview with the Mirror, Dalton Philips, chief executive of Morrisons, warns, “Some mums are going without food so they can feed their children. “Others will go for pasta with just butter on because they can’t afford the sauce. The statistic is that one in five mothers on challenged budgets are skipping meals.” Bradford-based Morrisons has grown to become Britain’s fourth biggest supermarket chain, employing 1,32,000 people.
But after a long period of growth, including record profits last year, last month it saw its first quarterly drop in sales for seven years — although it claimed this was compared with an “exceptional” period last year. Against this depressing economic outlook, the chain is fighting back with measures including a TV advertising campaign starring Freddie Flintoff which hit screens last night. In it, the former England cricketer lays tables for a Jubilee street party which turns out to be in the store’s aisles. Perhaps it will raise a smile for customers suffering the effects of a five-year recession which Philips says has “been long enough to scar us and it’s deep enough to hurt us”. The chief executive, who took over in March 2010, says that 43% of customers now are dipping into their savings accounts, which is a huge proportion.
“A third of our customers get to the end of the month and they have nothing left over — nothing,” he adds. “And half our customers are picking up every single item that they put in their basket and checking the price.” He believes that the squeeze on household budgets will change people’s spending habits for years to come. “Today, you’ve had the biggest drop in household incomes in a generation. You have to go back to the 1970s to have a real appreciation of this. “For certain people, it is extremely difficult. There has been a paradigm shift in behaviour, regardless of what happens when the economy recovers.
“Now you’ve got a consumer who is having to work really hard to make their household budget stretch through the month.” He says that when it comes to food, “people are looking for value, wastage is massively down and people are storing a lot more. I think all those skills that people are re-learning will stay.” And those skills will be needed if, as he believes, the latest recession — which the country entered in the first quarter of this year — proves harder on families than that of 2008. “If you think of 2008, it is like there wasn’t a recession, relatively speaking,” he says. “The country was technically in recession but people’s household incomes were still going up.” Now Morrisons is using its customers’ real need to constantly watch the pennies to guide its business.
The supermarket has launched a value range of food — M Savers — which has proved a big hit, with sales up by 47%. And on fuel prices — the biggest issue facing families, Philips believes — they are offering 12p off a litre if you spend £ 60 in store until Sunday. It’s just one of the battlegrounds on which Morrisons is fighting an unprecedented war against competition from other supermarkets. “I am new to the UK — I’ve only been here two-and-a-half years,” says Philips, who was born in Ireland and started his career as a store manager in New Zealand, “but folk who I work with, who’ve been here a long time, say they’ve never seen anything like it.”
However, he clearly does not feel too threatened by the competition. He has branded his rivals’ stores “soulless sheds” in the past and claimed that big stores selling groceries along with non-food were a “blip in the history of retail”. Too many supermarkets also look the same, he says. “If you landed from Mars and went round the UK, you might find, apart from the colours, they are all quite similar. And what we are trying to do with our craft skills is to be different.”
Morrisons may have been criticised for not having launched online shopping yet and for being slow to open convenience stores. But the company claims that by waiting it can learn from others’ mistakes. The firm has bought a stake in a New York-based delivery business called Fresh Direct, which will be used as a template for the UK, and snapped up popular baby and toddler website Kiddicare.
Philips believes UK retailing faces a “seismic” shift. “What will remain on the high street is retailers who have got a real point of difference,” he believes. He agrees with those who predict a massive move to online shopping but denies the charge that supermarkets are killing off small shops on the high street. In fact, he says the reverse is true. “There is a fishmonger right opposite our store in Tunbridge Wells whose sales have gone up 20%,” he says. “There is a florist and her sales have gone up. We’re actually bringing people in.” Morrisons is also hiring 7,000 new workers this year. “It is a really hard time to be leaving school or university,” Philips says. “For us, it has never been easier to recruit. But in certain areas we’ve had stores where we have had to help people with their basic numeracy and literacy.”
He advises those struggling to get work to re-train or even up sticks. “There are jobs out there,” he insists. “You have to hunt them down. You may have to move cities. You may have to get up and go. You may have to start right at the bottom.” As for the outlook, the dad of three, who joined Morrisons from Canadian retailer Loblaw, is realistic. “We think 2012 will be very difficult for customers. We don’t see any respite in the next two years. I think we are at the bottom of the cycle and will bump along like this. “Therefore, as a big retailer, our job is to make sure we do our bit to ensure that budgets stretch further, which we are well set up to do.”