Somerfield
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Company logo (Courtesy of Somerfield Ltd). |
Somerfield is a chain of small to medium-sized supermarkets operating in the
United Kingdom. Operating as Somerfield Stores Ltd, the company is the fifth largest food
retailer in the
United Kingdom as of 2006, according to
TNS Superpanel. It is part of Somerfield Ltd, formerly Somerfield Group plc, which also included the
Kwik Save chain of discount food stores until
February 2006. It is based in Bristol.
Somerfield is the fifth largest food retailer in the UK with 1,039 stores, following the conversion of 102 former Kwik Save stores retained after the sale of the Kwik Save unit. In 2005, Somerfield re-branded half of Kwik Save's
Scottish stores under its own name and closed the remainder, thus removing the brand from the marketplace north of the border. Some other stores such as Buxton and Balham have been sold to
Waitrose and other retailers.
Somerfield's self-declared niche is to "be the leading small format retailer in the UK". For the 52 weeks ended 30 April 2005 Somerfield Group's turnover was £4.676 billion. Profit was £60.9 million before tax, and due to a tax credit it was £62.9 million after tax. These profits were up about a third on the previous year; the group has had very narrow profit margins for a number of years.
The four larger retailers are
Tesco,
ASDA,
Sainsbury's and
Morrisons, and they are the only ones that operate full size superstores. All of the others are niche players of one kind or another.
Somerfield's origins are traced back to
1875 when a small family grocery store was opened in
Bristol by J H Mills. By
1900 it had grown to a chain of 12 stores. In
1950 the fourteen stores were renamed "Gateway" when Bristol finance house Tyndall took a majority shareholding. The new name was chosen due to the company's home town being the 'gateway to the
West Country'. In
1977 Gateway was taken over by Linfood Holdings Group and combined with Linfood's 'Frank Dee' supermarket chain to create a group with over 100 stores, with the Frank Dee stores being rebranded as "Gateway" - a move which was completed by
1983 when the group was renamed "The Dee Corporation".
Between
1983 and
1987 a number of acquisitions and mergers were made, adding
Keymarkets,
Lennons,
International Stores,
Fine Fare and the UK operations of
Carrefour to the group - all rebranded under the Gateway name. In
1988 the group was renamed "The Gateway Corporation" and a year later, was bought out by Isoceles plc, a private consortium. Consequently many of the larger superstores were sold to
ASDA. In the 1990s, after falling sales and a poor reputation, the Gateway Corporation almost collapsed.
A decision was taken to rebrand the company's operations as Somerfield after a successful pilot scheme in
1990 and the company then built its success upon the new brand. A small number of stores were also relaunched under a new
Food Giant discount brand, with the first store opening in
1991. Somerfield owned 24-7, the failed home delivery business. The name of the holding company Isoceles plc was changed to Somerfield plc around this time.
In
1998 the company took over the rival
Kwik Save chain, with the remaining
Food Giant stores being rebranded under that name. Kwik Save had over-expanded with a badly focused portfolio of stores, many in poorer areas, and the company was in a worse state than Somerfield's management had realised.
The original plan was to transfer all Kwik Save stores to the Somerfield fascia, but it quickly became clear that many outlets were not suitable for conversion, either due to size or location. Also, the downmarket wooden shelving and poor quality fittings used by Kwik Save meant that every conversion required a full refurbishment of the store - Simply changing the signage and uniforms would have risked dragging the carefully developed Somerfield brand downmarket. Instead, the larger Kwik Save stores were converted, some were sold or closed and the chain became a trading division of Somerfield Stores Ltd, sharing its supply chain and back office systems with Somerfield. For some years, the own-brand products in Kwik Save stores were
Somerfield, although this policy was reversed once it was decided to keep the brand.
The core chain began to divest its superstore portfolio in
1999 (including many of the re-branded Food Giant stores) and now focuses on small to medium sized stores on high streets and in local shopping centres.
Somerfield has changed its logo from a rectangular shape to a more contemporary design and opened a number of store formats, such as Somerfield 'Essentials' and Somerfield 'Market Fresh'. It has further changed its brand image by introducing newer own-brand lines such as "So Good", "Good intentions", and a new advertising strapline: "giving you what you want". A low-price own brand label called 'Makes Sense' has also been introduced to compete with other low cost own brand products such as Tesco Value.
In August 2006, around 50 in-store
delicatessen counters were closed as they had not been profitable.
In October 2004, Somerfield acquired 114
Safeway Compact stores from
Morrisons, which were subsequently re-branded under the Somerfield name. This deal was referred to the
Competition Commission, which announced on
July 27 2005 that 14 of the stores might need to be divested in order to satisfy concerns over localised monopolies.
After completing its investigation, the Commission instructed Somerfield to sell 12 stores. In September 2005, Somerfield announced its intention to appeal against the decision, a process delayed by a takeover bid for the chain
(see below). The sale of
Kwik Save in
February 2006 is likely to have removed the potential clashes between some of the offending stores.
Somerfield was subject to takeover speculation from 2003 onwards, a substantial part of the group's appeal to bidders lying in the value of its property portfolio rather than its trading operations, as this offered the potential to leverage its financing after a takeover.
Retail entrepreneurs John Lovering and Bob Mackenzie made two failed bids in 2003. In 2005,
Icelandic venture capital group
Baugur made an approach, while
United Co-operative and
London & Regional Properties also expressed an interest, but both groups dropped out of the running. In October 2005 Somerfield's board accepted a bid of around £1.1 billion from a consortium of buyers. This was subject to shareholder approval, but was not referred to the
Competition Commission as the buyer was not another UK retailer.
Somerfield plc was acquired by the consortium consisting of
Apax Partners Worldwide LLP, Barclays Capital and the Tchenguiz Family Trust with effect from 21 December 2005, when the name of the group changed to Somerfield Ltd.
After the takeover, it was reported that the new owners found the
Kwik Save chain was losing £40m per year, effectively cancelling out around 40% of the profits generated by the Somerfield division. As a result, it speeded up the conversion of stores from Kwik Save to Somerfield. On
February 27 2006, Somerfield Stores Ltd sold the Kwik Save brand and 171 stores to
BTTF, an
investment vehicle headed by
Paul Niklas, for an undisclosed sum[
1]. Somerfield re-branded the 102 Kwik Save sites it has retained under its own name and a further 77 stores were sold to other retailers, thought to include
Netto and
Aldi.
Subsequent to the initial sale, a further 19 Kwik Save stores were acquired by BTTF, including some of those included in the
Competition Commission investigation ruling into the
Safeway Compact takeover.
Somerfield is now focused on a single brand.
Somerfield has often been criticised for neglecting its stores, allowing them to become run-down. While the refurbished, new format stores are generally attractive and on a par with those of rivals, many stores have not been refurbished since they were built. According to
this, Somerfield no longer sell some popular products due to poor demand. The company has also been alleged to have
"given up on ethics" after withdrawing from a voluntary ethical trading agreement, although this has been strenuously denied.
Since being taken over Somerfield has changed its 14 different sets of terms and conditions of employment (a result of many takeovers) to just one. This has caused outrage amongst some staff as time and a half or double time will no longer be paid for sundays or bank holidays.
*
Somerfield Ltd - Corporate information*
Somerfield Ltd history*
Somerfield.co.uk - Information for shoppers *
Company press release - Somerfield acquires 144 Safeway compact stores*
Independent.co.uk - Somerfield to take over small Safeway stores*
BBC report on Somerfield's board's acceptance of the takeover (14 Oct 2005)*
BBC report on the finalisation of the takeover (21 December 2005)*
Somerfield Ltd press release announcing sale of Kwik Save (27 February 2005)
