Safeway PLC

views updated

Safeway PLC

6 Millington Road
Hayes
Middlesex UB3 4AY
United Kingdom
Telephone: 44 20 8848 8744
Fax: 44 20 8573 1865
Web site: http://www.safeway.co.uk

Public Company
Incorporated: 1977 (as James Gulliver Associates)
Employees: 92,000 (2001 est.)
Sales: £9.4 billion (US$14.4 billion) (2001)
Stock Exchanges: London
Ticker Symbol: SFW
NAIC: 445110 Supermarkets and Other Grocery (except Convenience) Stores

Considering its current annual sales of £9.4 billion, Safeway PLC has a remarkably short history. In 1987, just short of celebrating its tenth birthday, Argyll became the fourth-largest grocer in Britain, when it purchased the 133 U.K. Safeway stores from their U.S. parent, Safeway Stores, Inc. The Safeway purchase gave Argyll a place in the upper echelon of British retailing and encouraged the company to begin the conversion of its largest Presto stores to the widely recognized and well-respected Safeway name.

Gulliver Starts Small

James Gulliver is the person most responsible for Argyll’s rapid rise. Gulliver was born in Cambeltown, Argyllshire (hence the Group’s name), in 1930, and graduated from Glasgow University with a degree in engineering. He spent several years with the management consulting firm of Urwick Orr. In the mid-1960s, he joined the supermarket chain Fine Fare, then a division of Associated British Foods. He quickly became chief executive, and in a matter of seven years had more than tripled sales from £60 million to £200 million. One newspaper honored Gulliver as its “Young Businessman of the Year” for 1972, but he resigned shortly thereafter, along with Alistair Grant, then managing director at Fine Fare.

Gulliver promptly bought a significant minority share Oriel Foods, a wholesaling firm doing about £10 million annually. Together with Grant and David Webster, an investment banker, Gulliver acquired management control of Oriel. Within a year, Oriel was bought out by RCA Inc., which was then trying to build a European food division. The three men stayed on, multiplying Oriel sales ten-fold by 1977. That year, Gulliver, Grant, and Webster left Oriel and formed James Gulliver Associates. After a first investment in a home improvements company, they began building their own grocery conglomerate, starting with the purchase of two food companies, Morgan Edwards and Louis C. Edwards, a Manchester meat business.

By 1980, the new organization had adopted the name Argyll Foods and made significant inroads into the U.K. grocery trade. Over the next few years, Argyll made several major acquisitions. Chief among these purchases were the 1981 acquisition of Oriel Foods for £19 million from RCA, which had apparently tired of the grocery business; and the June 1982 purchase of Allied Suppliers from James Goldsmith, for £101 million. Between them, these acquisitions gave Argyll a nationwide range of operations, but one concentrated in northern England and Scotland. Presto, the most important of the new holdings, was a chain of 136 large grocery stores. Argyll also now owned Templeton, a line of 84 medium-sized supermarkets in Scotland; Liptons, with some 500 supermarkets in England and Wales; Lo-Cost, which, as its name suggests, occupied the lower end of the price spectrum; and Cordon Bleu, a 125-unit chain selling frozen foods. Along with some limited food wholesaling activity, Argyll also owned a biscuit, tea, and coffee manufacturer and an oil refining business; both had been divested by 1987.

In 1983, Argyll Foods was merged with Amalgamated Distilled Products (ADP), a liquor company Gulliver and his associates had controlled since 1979. ADP produced Scotch whisky and dark rum, and ran a 300-unit discount liquor chain called Liquor-Save. It also owned Barton Brands, a U.S. liquor producer and distributor, which it had acquired in 1982.

Argyll’s Failed Bid for Distillers Company

In 1985, Argyll began a major reorganization of its food division, realizing that if it was to become a major force in British groceries, it would have to simplify and streamline its collected holdings, many of which were old, small, and out of touch with recent trends in marketing. The company therefore began converting all of its stores to either Presto or Lo-Cost, according to the demographics of each store. At the same time, the directors put a great deal of energy into lowering costs by taking advantage of the Group’s greatly enhanced purchasing power and improving its distribution network. This reorganization, which was completed in 1986, put Argyll in a strong position to integrate its 1987 Safeway acquisition smoothly and efficiently.

One reason for Argyll’s interest in Safeway was the debacle of its 1986 bid for the Distillers Company, Britain’s largest producer and distributor of Scotch and other liquor products. Gulliver hoped to use Argyll’s relatively minor liquor business as a springboard from which to enter the liquor market in a much more dramatic fashion.

In a carefully planned attack, Argyll made its bid for what Gulliver described as a once-great Scottish concern lately become moribund, offering to its shareholders a higher-than-mar-ket price for their stock and the prospect of fresh managerial expertise. Financial analysts heavily favored the proposed merger, which Gulliver and Alistair Grant hoped to consummate for reasons of Scots pride as well as profitability, but Distillers eventually rejected Argyll and accepted a possibly illegal bid from Guinness, the well-known British brewing conglomerate. The complex legal issues involved have not been fully sorted out, but it was clear that the failure of Gulliver’s year-long struggle was a great disappointment to him. Although he remained at Argyll long enough to consummate the Safeway deal, he stepped down as chairman in September 1988.

Post-Gulliver: Argyll Becomes Safeway

Gulliver’s successor, and the chief architect of the Safeway deal, was Alistair Grant. For many years Gulliver’s closest adviser, Grant was an experienced food retailer who commanded great respect in London financial circles, as evidenced by the case with which he placed the £621 million worth of new stock needed to pay for the Safeway stores. (The total price of £681 million was made up with a £60 million interest-free loan from seller to buyer.)

It has been Grant’s job to oversee the integration of Safeway and Argyll. The two companies were well matched; while Argyll’s strength lay in the north, Safeway was predominantly a southern chain, though it had a significant business in Scotland.

In addition, Safeway, despite its size and high per-unit profits, was widely believed to have a weak purchasing policy, an aspect of the business that Argyll had honed to a fine art. In general, the merger brought together the old and the new: Argyll’s older and smaller stores, closer to the English tradition of the independent shopkeeper, with Safe way’s more efficient and more fashionable stores. Argyll essentially has set out to capitalize on Safeway’s appeal by adopting not only its name but its merchandising concepts as well.

To that end, Argyll converted some 57 of its Presto stores to the Safeway logo in fiscal 1988 (and seven the year before), in addition to opening 19 entirely new Safe ways. To supply its vast network of outlets in an efficient manner, Argyll continued to upgrade and consolidate its warehouse distribution centers, most recently adding a 510,000-square-foot facility in Bellshill, Scotland. In accordance with Argyll’s policy of operating only in those markets in which it can be a major player, the Group sold off all of its liquor holdings, except its retail operation, Liquor-Save, after failing to capture Distillers. Argyll then became the third-largest grocer in the United Kingdom. The market analysts who once were suspicious of Argyll’s unlimited ambition are now the company’s most enthusiastic backers, predicting continued success under the Safeway logo and the likelihood of further acquisitions in the coming decade.

Safeway’s Expansion Program

In 1991, Argyll accelerated its Safeway superstore opening program, opening 18 new stores, with a total of 503,00 square feet of sales area. The completion of nine Presto conversions to Safeways in 1990 added an additional 158,000 square feet. The company’s intent was to open 20 to 25 stores a year, each with an averages sales area of 28,000 square feet that could include a cafeteria, a dry cleaner, and a gas station. Safeway’s expansions over four years came to an investment of £568 million for store development, with an operating profit growth of £225.5 million, an increase of 40 percent.

In 1992, the Argyll group surprised everyone, especially Sainsbury’s, who was down to the wire on signing for a 13-acre site in Glasgow, when the property was “swiped from under its nose,” as was reported in Super Marketing, for a rumored £22 million. Safeway was criticized for its “outrageously aggressive manner” by Sainsbury’s in being kept out of Scotland. In the meantime, Asda, a Scottish Co-op, remained Scotland’s number two food retailer, while Tesco was not seen a major threat because of its concentration of stores in the south of England.

In the same article, Safeway’s Gordon Witherspoon was quoted as saying, “The number of times we’ve been in direct competition with Sainsbury’s for sites in Scotland are very few and far between. We saw an opportunity in Anniesland. I have to admit that if Sainsbury’s was not around, then I doubt we would have paid the same price.” Witherspoon stated that he had identified 38 potential development opportunities for Safeway in Scotland.

Company Perspectives:

We believe that building sustainable advantage over our competitors can only be done through Safeway people. We are creating a business culture in which our people are passionate about our products, our stores and everything we do; have an unbreakable will to compete, and; have the skills, knowledge and resources to do their best, every day.

The year 1992 also saw the celebration of Safeway’s 30 years in Britain, after coming to the United Kingdom from the United States in 1962, realizing that there was a need for higher quality food on a consistent basis and friendlier service. The Argyll Group purchased the Safeway chain in the United Kingdom in 1987; other stores owned by the group were Presto and Lo-Cost. In 1991, Argyll had record profits that were up 25 percent from the previous year. Given these profits, Argyll chairman and chief executive Sir Alistair Grant planned to open another 25 new Safeway stores in 1992, adding 650,000 square feet of sales area. The timing was right. Since Argyll had taken over Safeway, only two new Lo-Cost stores had been built, but there were plans to open five Presto stores, primarily in midsized Scottish towns, with the Lo-Cost stores to be placed in the Midlands, the south, and southwest England. As of 1992, the company had 212 Presto stores and 285 Lo-Cost stores.

In March 1993, Argyll split its retail operations into two divisions, Safeway Stores, and Presto and Lo-Cost Stores, with Argyll board director Charles Lawrie made managing director of Presto and Lo-Cost. Pat Kieran was made the new managing director of Safeway Stores. Super Marketing reported that Sir Alistair Grant stated in a memo, “The creation of Presto and Lo-Cost divisions is an important move which signifies our commitment to these important businesses and our wish that their direction and management should be given a strong specific focus.” When Argyll had acquired Safeway, it had planned to phase out Presto, but these stores were expanded because of strong customer loyalty in the north.

The year 1993 also saw Safeway move into automated sales-based ordering (SBO) for its dry grocery lines that not only reordered products to replace those sold but provided feedback from the stores to create sales forecasts. With 345 stores and 12,000 to 16,000 lines of products per store, the system ensured that the right products were delivered to meet anticipated consumer demand. The SBO system was centralized in Safeway’s main office. Individual store managers could not amend orders but could request a new order if he knew that local impacts would alter the volume of sales of a specific product.

Safeway vs. Costco

In late 1993, Safeway was criticized by consumers for its soaring profits, and found it difficult to please both shareholders and consumers. Profits had increased from 4 percent to 8.1 percent in ten years through own-label development and enormous investment in infrastructure. However, in the wake of Safeway’s rapid expansion to super stores, its returns were down 2 percent, Sainsbury’s were down 3 percent, and Asda’s were down 37 percent over a ten year period. David Webster, deputy chairman of Argyll, stated that this was due to increased price competition, which could increase still more if club warehouses came to the United Kingdom.

Indeed, in November 1993, Costco won a court battle against J. Sainsbury’s PLC, Tesco PLC, and Safeway, who had taken Costco to the British High Court in their attempt to stifle the opening of the first European club in Thurrock, England. The court’s ruling removed a major barrier to expansion of U.S.-style warehouse clubs in the United Kingdom. The food retailers wanted the Costco building site to be classified as retail, which would lead to more costly development and slim profit margins, perhaps discouraging other clubs from opening. Alas, Costco was granted wholesale status, even though 80 to 90 percent of the company’s sales would be to individuals.

The logic of the Judge Schiemann’s ruling was that Costco would be a wholesale operation focused on local businesses. As explained in HFD, The Weekly Home Furnishings Newspaper, the judge barred the three food retailers from the appeals process and required that they pay Costco’s court costs. The ruling opposed a recommendation from the British Department of Environmental that local councils treat warehouse clubs as retail sites for planning purposes.

Creating Efficiency and Customer Service

In January 1994, Safeway launched pilots of secret electronic card trials, following pilot launches by Sainsbury’s and Tesco in December. However, Safeway had already had air miles for its customers for more than a year on a trial basis. The card allowed customers to save more when using it. Throughout the United Kingdom, supermarket chains were technologically more advanced than those in the United States, with sales-based ordering very rare in the latter. Safeway introduced a customer-operated price scanning system in 1995, hoping to reduce checkout lines, a process that was already in use in the Netherlands. Customers could scan barcodes and obtain a printed receipt from the scanner.

Key Dates:

1977:: Argyll Group PLC established.
1987:: Purchased 133 U.K. Safeway stores from Safeway Stores, Inc. in the UnitedStates.
1988:: Safeway launches aggressive growth program, converting Presto stores to Safeways.
1992:: Safeway celebrates 30 years in the United Kingdom.
1993:: Company split into Safeway, and Lo-Cost and Presto divisions.
1996:: Symbol Personal Shopping System with hand-held scanners appears in superstores.
1997:: Near merger with Asda.
1999:: Carlos Criado-Perez comes to Safeway from Wal-Mart.
2000:: Safeway web site launched.
2001:: Online shopping Internet ventures ended.

The company also began to redesign its store layouts for ease of use by mothers with children, incorporating play areas and wider aisles. However, Safeway’s sweeping changes resulted in the closure and sale of some Presto, Lo-Cost, and Safeway stores and the elimination of 1,800 jobs, with a further cut of 3,000 anticipated. Argyll chairman Sir Alistair Grant was quoted in Super Marketing as saying, “Changing the way Safeway is organized and managed is vital to our aim of ensuring that the business becomes more effective and efficient in responding to the needs of our customers. The significant savings we are making are coming not from simple cost-cutting, but from completely rethinking the way we work. Our head office functions, our store and field management structure, and our logistics network and supply chain are being completely redesigned. Some the of the benefit from our efficiency improvements will be reinvested in marketing and in improving our service to customers.” The sale of ten stores to Iceland [food stores], seven in Scotland, and one in London was also announced.

Toward the end of 1995, shares of the top four companies in the highly competitive food retail market in Scotland were Sains-bury, 4.2 percent; Tesco, 16.5 percent; Asda, 15.7 percent; Safeway, 16.8 percent. Colin Massey, Scottish retail director for Safeway stated in The Grocer, “At the end of the day, food shopping is still about convenience, and retailing should be about convenience. The attraction to shoppers is what’s convenient to them, whether it’s a large superstore or an independent.”

By mid-1996, the Symbol Personal Shopping System, developed by Symbol Technologies, Inc., was rolled out in the Safeway superstores throughout the United Kingdom. The system that allowed customers to scan bar-coded products in the aisle as they shop had been very successful when tested in trials in 24 Safeway stores beforehand. The customer could pick up a Scan & Go card to remove a Portable Personal Shopper device, about the size of a telephone handset, from a dispenser rack, and scan each product’s bar code as items are placed in the cart. The “plus” key would be pressed as each item was scanned and added to the cart. If the shopper decided against a product already selected, pressing the “minus” key and scanning would remove the item from the total. A subtotal could be had at any time by pressing the “equals” key.

Facing Up

What led to this flurry of development, expansion, and customer service? As the competition between Tesco and Safeway increased in the early 1990s, it was not surprising that Safeway lost sight of some key points. While Tesco was focused on customer service and keeping prices down, Safeway leaned more toward customer service, and was shocked to discover in 1993 that its core customers, the “early nesters” were not able to afford its prices. Safeway was losing its over-thirty customers. As was pointed out in Management Today, it seemed that senior managers spent the majority of their time poring over the company’s accounts instead of trying to learn what customers actually wanted from the grocery store.

These unpleasant truths became evident in the midst of the company’s rush to develop superstores, and led Safeway to bring in McKinsey, a management consultant. McKinsey created Safeway 2000, a program designed to propel the retailer over the immediate hurdle and to keep it profitable in the long run. The first move was to learn which customers would be key to the company’s success, pinpointing products and services that these people would need throughout their life cycles. The ranges of products were also modified to direct them more specifically to families, shifting the focus of products from premium products to more economical, standard items. One example of this strategy was the development of well-received Safeway sub-brands—not to be confused with own-label brands—which could be sold at lower rates while giving the stores better profit margins.

The Safeway 2000 program also re-evaluated the presentation of superstores that were being developed across England, Wales, and Scotland by Safeway. One innovation at a Safeway superstore in Camden, north London reflected the re-evaluation in that it had 30 parent and child parking spaces near the store entrance so parents would not have to struggle to get a parking space, then grapple with moving children and carts across expanses of tarmac. All of the combined changes helped Safeway attract back many customers, but it was uncertain whether the company would remain strong in the future.

A Proposed Merger And Other Innovations

In 1997, Safeway PLC, the newly renamed Argyll Group (1996), and Asda came close to merging, which would have pushed Tesco and Sainsbury’s into second and third places in market share. Alas, the aborted merger was viewed as a public admission that Safeway needed outside help if it wanted to keep pace with the rest of the industry. There was also speculation about whether a merger would have worked because the two stores had very different customer bases and store portfolios. Apparently, the government took a hard line on takeovers and mergers, which led one analyst to suggest in Marketing that “after the initial price flurry, things would have settled down to a cozy three-way cartel.”

Still on the lookout for new concepts, Safeway decided to replace 2,000 PCs with network computers (NCs). Safeway had found traditional client/server systems to be unreliable, costly, and hard to manage, and hoped that using centralized data management with mainframes, NCs, and Java would be a viable solution.

Unwilling to pass up any opportunity to please its customers, Safeway became the distributor for Teletubbies in December 1997 when thousands of these toys went into three stores: Brent Cross, London; Leicester; and Anniesland, Glasgow. Customers began to line up outside the Glasgow store at 3 a.m. When the store opened at 8 a.m., the Teletubbies sold out in three hours.

In 1998, Safeway announced that it would begin to supply stores in Scotland by rail in an effort to reduce costs and increase environmental awareness. This change would eliminate 3,000 truck deliveries per year between Glasgow and Inverness, although goods would still have to be transported by road from Inverness to stores at Nairn, Elgin, and Buckle in the outlying areas. The shift to rail shipping began early the following year.

In May 1999, Safeway installed a Hectronic Autofuel System for fleet of ten Compressed Natural Gas (GNG) vehicles. The controlled filling station was installed by Mobil and could complete the refueling process in six minutes while providing fuel that was cleaner than conventional diesel. Using this system reduced noise pollution, which allowed Safeway operate over a wider time scale. Because the site was less congested, exhaust emissions were also cut.

By December of 1999, competition among the giant food retailers was fierce for the sale of pre-paid mobile phones, with Tesco selling One2One mobile phones for £30 to £50, while Asda followed suit with Vodafone mobile phones that sold for as much as £50. Safeway then upped the ante by offering prepaid mobile phone units from four companies: Vodafone, One2One, BT Cellnet, and Orange, noting that they expected the cell phones to be “incredibly popular.” At about this time, Marks & Spencer also began to sell the Orange Just Talk package, later expanding to two types of phones. Research by Orange had shown that shoppers particularly liked the pre-paid phone packages as gifts, which made up about 80 percent of the mobile phone sales in December.

Wal-Mart Leader Comes to Safeway

Following a 20 percent loss in Safeway’s pretax profits for the 28 weeks prior to 16 October 1999, Carlos Criado-Perez, the former chief operating officer of Wal-Mart, was named as the new Safeway chief operating officer. He leapt into operations with the promise to give managers the authority to drive sales and the ability to earn profit-sharing cash rewards. In addition, a new bonus plan allowed 2,000 managers an extra 20 percent of their salary if they met or exceeded sales targets, plus a further 30 percent for hitting separate profit goals.

Criado-Perez stated his philosophy for developing a family environment Safeway stores in Super Marketing: “We want to bring out the merchant in everyone and help them realize their will to win in each local market.” He added that he wanted Safeway to be not the biggest but the best retailer by competitively taking market share from the other big grocery retailers, which would be achieved by making stores warmer and more interactive. Criado-Perez also shifted focus from national marketing campaigns to local markets.

Part of the struggle to keep profits up was the staggering cost of capital investments involved in grocery retail. As reported in Super Marketing, food retailers in the United Kingdom led the way in capital investment, not only in the United Kingdom, but internationally, seconded only by the oil and gas industry. One of the culprits was the high cost of property and land. In a report from the Department of Trade and Industry Innovations Unit, it was stated that Tesco, Sainsbury, and Safeway were among the top ten food retailers in investing worldwide, with the top spender the French Carrefour. Wal-Mart was considered to be in a different category.

The report also noted that the total capital investment per employee by British supermarkets came to about £47,000, which was 20 percent higher than the international average of £40,000. This extra expenditure was deemed intelligent by Norman Price, one of the authors of the report. “These figures show that the retail sector is making the necessary capital investment to achieve innovation and competitiveness.” The biggest spender was Tesco, with an increased capital investment of 27 percent in 1998-1999, while Sainsbury’s capital investment increased by 6 percent. Safeway had capital investment increase by 15 percent, while Asda was reduced by 4 percent.

In January 2000, Safeway launched its Web site, providing a recipe finder tool, games for children, a fact sheet on appropriate foods for allergies and pregnancy, and a catalog of the store’s current promotions. Unfortunately, no online shopping appeared, nor did links to relevant related sites. Management Today expressed disappointment in the technology poor site, especially since Safeway stores provided cutting-edge technology with hand-held scanners and digital shopping lists. The article bemoaned the numerous unnecessary screens before “getting to the good stuff’ and the “decorative graphics of winsome tots, which slow the download of the most extraneous pages.”

Other more successful innovations for customers included an affiliation with the Automobile Association (AA) to offer discounted car breakdown services to customers holding loyalty cards. Customers could get a £20 discount off annual AA membership for 200 points, making the cost of AA’s Option 200 service £58. Safeway also offered a £15 shopping voucher for customers who change to Powergen for gas or electricity supplies, and offered 20 percent discounts at Best Western hotels through its affiliation with the chain. Safeway cardholders used their points for holiday purchases in December, for such items as 60,000 tins of Mars Celebrations and 6,000 bottles of Glenfiddich malt whisky. PlayStation games also began to appear for sale in stores in February 2000, following a deal with Cork International.

Online Shopping

By mid-2001, Tesco was spending $22 million for a 35 percent stake in Safeway’s online GroceryWorks.com in North America, which later relaunched under the Safeway brand name. The “store-picking” fulfillment model—which refers to employees rolling carts through the store to collect ordered groceries—was later expanded to 1,747 stores in the United States and western Canada. The alternative would have been a warehouse model with staff processing orders from a centralized location. The American Safeway stores, based in Plea-santon, California wanted to learn how Tesco created a successful commercial online shopping system in the United Kingdom. Tesco provided Grocery Works with help in all aspects of the business, including web site development and the shopping service in individual stores.

In the meantime, Safeway in the United Kingdom was forced to terminate its only online home-delivery shopping service. The company’s online partner, Madaboutwine, was purchased by the Australian drinks company Foster’s, and caused the closure of the service, deemed a major setback for Safeway by New Media Age. Tesco was launching its own wine warehouse operation in September 2001 in 20 stores that allowed customers to order wines by the case, a very popular online service. Safeway’s ending partnership with Madaboutwine came less than six months after the online shopping service was launched in April 2001, forcing the store to drop a planned major in-store promotion. Safeway Collect, the online service for ordering and collecting groceries was unaffected.

By November 2001, Safeway PLC was forced to end its two Internet ventures, returning its focus to tradition supermarket business. After running trials of Safeway Collect in eight stores, a service that allowed customers to buy groceries online, later collecting them at the store, Safeway decided that the service was too costly to continue. The company acknowledged that the venture was too ambitious. Other smaller rivals, Somerfield and Budgens, also had to abandon online operations. Tesco was clearly the leader in online sales, with sales of £1.46 million, a 77 percent increase over the same period in 2000.

Frenetic In-Store Promotions

Out of consideration for the country’s farmers following the foot-and-mouth disease, both Safeway and Sainsbury’s began offering tradition British meat dishes, such as shepherd’s pie, beef casserole, and cottage pie. In October of 2001, Safeway also began selling Nordstrom gift cards, which were on sale in 1,500 stores. The Seattle-based Nordstrom decided on the strategy to boost its lagging sales.

As part of its nationwide store upgrade, Safeway prepared to open 40 Mediterranean style “Cafe Fresco” restaurants in the following two years, and installed CD listening posts, DVD preview screens, and provided wine experts in its stores. In addition to these changes in the stores, Safeway hired Newton 21 public relations firm in a departure from its previous reliance on in-store promotions.

The Safeway magazine, which had been around for five years and was initially developed to support the loyalty card, was editorially enhanced by emphasis on the everyday needs of shoppers and the use of more tips and advice. The improved caliber of the photography and design emphasized Safeway’s “Best at fresh” philosophy, expressed in 84 instead of the previous 100 pages.

In 2002, Safeway launched a chain of a series of sandwich outlets that marketed its own label Eat Street to compete with fast food restaurants, such as Pret A Manger. The range of items to be sold included wraps, juices, sushi, sandwiches, salads, and cakes that would be kept in heated cabinets. Eat Street followed Eat Smart, the company’s own-label low calorie brand of 150 products, none of which contained more than 3 percent fat.

One slightly different promotion was Safe way’s demonstration of its interest in home entertainment, emphasized by its support of the second music benefit for the Prince’s Trust charity. Working with Capital Gold, the Capital’s Party in the Park format featured a Safeway Picnic 2002 in Hyde Park on June 29, 2002. Featured entertainers included Shirley Bassey, Gabrielle, Ronan Keating, Diana Ross, and Rod Stewart. The 2001 concert that had featured Pavarotti earned £500,000 for the Prince’s Trust. Safeway sold tickets in its stores and on its web site for £20. Capital Gold featured ticket give-aways and special artist days, and broadcasted from the event.

In Spite of Promotions, Receipts Fall

By May 2002, Safeway was looking for a company to provide TV advertisement, a strategy it had abandoned years before as too costly and ineffective. However, receipts that had increased following the arrival of Criado-Perez began to wane, falling to 10.7 percent over the year. Asda’s improved performance since its purchase by Wal-Mart in 1999 contributed to the loss, plus the tendency of Safeway customers to selectively zero in on the special offers only. Safeway evaluated its promotional and press ads, debating whether to return to television ads—which had ceased in 1999 when Safeway was criticized for using talking toddlers in its television ads.

What Lies Ahead

As of mid-2002, Safeway was still the United Kingdom’s fourth largest grocery retailer, with the market as intense as ever. Safeway had four core styles in its stores: convenience, supermarket, superstore, and mega-store, all carrying the Safeway name. The Presto and Lo-Cost names no longer existed.

The five mega-stores sold much more than food, including health and beauty, electrical, home wares, and pharmacy goods, as well as cameras, TV sets, VCRs, DVD players, DVDs, videos, books, and CDs. Customers could also fill their gas tanks with diesel fuel. As ever, Safeway was attempting to draw customers away from other chains, but had not lost sight of the importance of its food products. The company stated that it is “Best at fresh” and has a Fresh to Go initiative, which let customers have their food cooked for them in the store.

The own-label brands, such as Eat Smart, indicated Safe-way’s future direction. Judith Batchelar, who was recruited from Marks & Spencer in 2001, worked with a team of 40 for new product development. She noted in Marketing that new vegetarian and snacking products would be available in 2002. Safeway also appointed Roger Hart, an ex-Seagram and Mars marketer, as its own-label brand manager. The company continued to be committed to its locally driven marketing strategy and wanted to be the best grocery retailer in the 484 areas where it had a presence. Safeway was beefing up its marketing capabilities; marketing chief Karen Bray drafted Comet marketer Martin Pugh to oversee the day-to-day running of the department as director of marketing, and operations chief Jack Sinclair became the group director for trading and marketing.

The market shares for grocery retailers in the United Kingdom as reported in Marketing in May 2002 by Taylor Nelson Sofres were: Tesco, 25.3 percent; Sainsbury’s, 17.5 percent; Asda, 15.3 percent; Safeway, 10.5 percent; Morrisons, 5.7 percent; Waitrose, 3.1 percent; Iceland, 2.6 percent, and Kwik Save, 2.4 percent.