Adjusting to a world of mergers and mayhem

ANALYSIS: Trevor Sturgess
ANALYSIS: Trevor Sturgess

THE successful integration of apparently similar businesses challenges even the finest captains of industry.

Many a brilliant career has been dashed on the rocks of merger mayhem.

Somerfield, now the subject of a takeover bid, was nearly felled by its Kwik-Save deal. And it looked a doddle for Sir Ken Morrison to blend Safeway with his own supermarket chain, a company that had posted uninterrupted growth for umpteen years.

But buying a larger chain like Safeway, one with an apparently contrasting corporate culture, has given this proud Yorkshireman unexpected headaches.

His takeover was delayed by competition inquiries and when clearance was finally given, Tesco and his other rivals had been given a year to gear up.

The Safeway distribution depot in Aylesford has not changed its name. The store in Sutton Road, Maidstone, retained the same facia. Recently, the petrol station suddenly became Morrisons while the main store remained Safeway. Customers emerged with Morrisons bags from Safeway stores. All this caused brand confusion in the public’s mind.

Products changed. Fresh produce could only be bought in pre-packaged quantities.

Morrisons was a popular cheap and cheerful store in the Midlands and North. In the South, tastes are a little different – although that can be overstated.

Safeway was an upmarket brand that, while often expensive for non-offer lines, provided a range of more unusual products. That choice has now gone, although basic goods in Morrisons are cheaper.

The trick for supermarkets in the South is to offer basic lines cheaply while continuing to offer plenty of minority items.

Tesco has been doing that for some time – hence its success – and Sainsbury’s is belatedly catching up. Sainsbury’s recent sales improvement could be down to defecting Safeway customers.

Now Sir Ken faces losing control of his corporate baby. Merger skills are quite different from those of the entrepreneur and, in this case, a grocer.

Morrison should be an object lesson to those whose business hubris could prove their nemesis.

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