Making a fresh start

Although Musgrave Retail Partners managing director Phil Smith joined the group from National Lottery operator Camelot, you get a strong sense with him that nothing is left to chance.

Rather than making bold statements or seeking headlines, much of the activity from his first 18 months in charge has been behind the scenes, making the operation leaner, more efficient, and more focused on the challenges ahead. And now the ducks are in a row, retailers are in a much better position to benefit.

'Challenges' is a word that Smith uses a lot, to describe his achievements to date and the future agenda, as well as current conditions.

"The economic backdrop is challenging - but this actually helps," says Smith. "It's useful for focusing the mind."

He continues: "People are shopping more frequently, and buying in smaller baskets to cut down wastage. As a result, fresh food in a c-store format becomes a huge opportunity."

To capitalise, the group's fresh ranges have been completely reviewed - from the product specifications and suppliers right through to the warehouses and distribution networks.

The Budgens depot at Wellingborough has already been updated with a pick-by-line system replacing the quaint but outdated conveyor belt system, and upgrades for the Londis depots will be implemented this summer. An enhanced distribution fleet allowing more chilled distribution for Londis stores has been introduced, backed up by a new suite of supply chain management systems, and further investment has gone into new roll cages to make deliveries more efficient at either end of the chain.

And the best news for Londis retailers is the imminent introduction of a new 'Flow Through' system for fresh and chilled, whereby retailer orders are consolidated by suppliers before being shipped to the Londis warehouse, giving crucial extra days shelf life on products where the wastage risk is high.

"We're moving away from a booze and fags-based model to a more compelling one-stop, modern c-store offer, with good fresh and chilled food ranges and an array of promotions," explains Smith.

The promotional offer has been "really sharpened up" he asserts, pointing out a number of half-price and £1 fixed-price deals on Budgens lines. And the group's Good Value sub-brand now stands at 50 products, with more ambient and staple lines to join the established, predominantly fresh range. In addition, about 600 more Budgens own label lines will be introduced, revamped or overhauled this year, with a focus on improved product and origin information.

"Own label is a significant opportunity - it's good value for the customer and good margin for the retailer," says Smith. "It's early days yet, but consumer feedback for Good Value has been fantastic."


United front


The work in promotions and own-label development has been made possible by simplifying the trading structure, so that a single team now works across Budgens and Londis.

New systems and new ways of thinking often require new people to implement them, and the Musgrave GB senior management of 2009 is virtually unrecognisable from the one of two years ago. But the new faces have impressive credentials - as Smith runs through them by name it seems every one is 'ex-Tesco' or 'ex-Asda'.

"It has been a challenge (that word again) to build a stable leadership team, but we now have a very strong board line-up," he says.

But Smith is quick to point out that it's not about a top-down chain of command, and that retail members are more involved than ever before in decision-making.

"We need retailers' contribution, and we've successfully changed the focus from just talking among ourselves to focusing outwards on winning over the consumer. If we ensure that we have the right value-for-money proposition then all the evidence shows that people will continue to shop locally."

Under Smith, Musgrave has invested a lot in studying the consumer, enabling the group to tailor the offers for Londis and Budgens more precisely. But the nitty-gritty operational stuff is just as important. "We've brought the back office of the two brands together to make it easier to run. We've automated and simplified a lot of the activity such as credit control, direct debits, accounts receivable and so on. Even small things like attaching back-up information to statements, for example, will cut down on phone calls, and we've made customer services a single point of contact rather than being spread around the depots."

Although operationally the two brands are now more closely integrated, they remain separate and distinct in market positioning and retailer engagement.

"We'd like Budgens to be the leading brand for neighbourhood community food shopping, whereas for Londis our ambition is for it to be the leading wholesale symbol brand," Smith explains.

"Budgens is a partnership model, but Londis is slightly different. We will encourage and incentivise people towards partnership, but ultimately it is a wholesale symbol relationship. But what we can do is to create a position where the best can bring on the others."

For Budgens, this means acquiring new sites - it recently purchased 13 stores resulting from the Co-op/Somerfield merger - and matching them up with well-financed independent retailers, while for Londis the focus is on increasing loyalty.

"We are looking for long-term relationships," explains Smith. "Londis is about providing customers with all they need for everyday living. We will be working with retailers to map out a strategy of how we can bring it to life through customer service and the like.

"In the long term, we're putting retailer viability at the heart of our business, and in the short term this means focusing on delivering value for money and on efficiency and cost reduction in our operations, because this enables us to put more money into retailer support.

"We need to be a lean machine for 2009 and beyond. Then we'll have the means to invest in the brands, and after that it's all about choices."

And that will bring more challenges, but the groundwork has been done so that Budgens and Londis retailers can capitalise

on all the key opportunities for neighbourhood c-stores.