Morrisons should sell manufacturing sites as well as c-stores: analyst
Last week Morrisons ceo David Potts reaffirmed his faith in the retailer’s commitment to in-house food manufacturing, saying it offered an essential service to customers.
But analyst Julian Wild, head of the food team at Rollits solicitors, doubted that Potts’s comments on manufacturing were the “end of the story” as he tried to revive the supermarket’s flagging fortunes.
“I really don’t understand Morrisons’ commitment to own manufacture which makes very little commercial sense when there are scores of high quality focused food manufacturers with state of the art factories and plenty of capacity,” Wild told FoodManufacture.co.uk.
View on food manufacturing
“Why would you want to own your own factories which can only serve one customer and can’t be subjected to market pricing?”
- Julian Wild, head of the food team at Rollits solicitors
‘Only serve one customer’
“Why would you want to own your own factories which can only serve one customer and can’t be subjected to market pricing?"
“I don’t believe that most customers really know or care.”
Soon after Potts joined Morrisons in March this year, Wild said the ex-Tesco man would be wise to focus on being a retailer, not a manufacturer.
“I suspect he has bigger priorities than trying to outsource large chunks of production and sell off dedicated factories. But it will have to happen if Morrisons really wants to be competitive,” Wild said.
Potts has argued that food manufacture was a key point of difference between Morrisons and other big supermarkets and limited range discount stores.
Staff ‘bring features to life’
“Our staff really do bring these features to life,” he told BBC Radio 4’s Today programme last week. “Our customers do talk about that.”
Pott said Morrisons manufactures half of the fresh food that it sells, either through its manufacturing business or in its own store.
These assets have divided city opinion with Shore Capital’s Clive Black and Darren Shirley urging Potts to make food manufacturing a “weapon” in his battle against other retailers.
Last week Morrisons posted a nearly 50% fall in profits before tax and announced plans to close 11 stores and sell off its convenience business.
Last week at Morrisons
- Confirmed agreement to sell 140 convenience stores for about £25M in cash
- Published half-year results showing 2.7% fall in like-for-like sales and 47% drop in profits before tax
- Announced plans to close 11 supermarket stores, threatening 900 jobs
