Morrisons chief executive, Dalton Philips, has conceded that Sainsbury’s joint operation with Netto is a good idea in the war against prominent German discounters. Philips drew a comparison between the big grocery retailers' current predicament to that of the airlines, where low-cost operators such as Ryanair and easyJet now control about half the market. He also pointed to one-time big corporate names like Kodak and Nokia, whose market dominance was wiped out because of their failure to accept that the industry had changed. Philips remarked it was possible that discounters could take up to 25% of the UK grocery market – which would make them nearly as big as Tesco is now. Philips said he took inspiration from long-term Vietnam prisoner of war Jim Stockdale, who survived years in a detention camp, because he realised "You have to retain faith that in the end you will prevail while the whole time confronting the most brutal reality of the state you are in. Retailers need to face that brutal reality. "You have got to be in the game on price. If you are not, customers will just leave you. It is not about being a discounter it's about getting to a level where customers will reappraise you." He stated that France's Carrefour had shown that retaliating against discounters was possible as the company had seen its market share grow after cutting prices. Within the context of massive structural change in the UK market, Philips said Sainsbury's decision to form a joint venture to bring Danish discounter Netto back to the UK was a smart move. "It's a recognition of the structural shifts in the market and a channel growing so quickly that you have got to be a part of it," he said. But he suggested that a joint venture could be quite difficult, as it depended on the record of the partner. © 2014 European Supermarket Magazine by Peter Donnelly
To sign up to ESM’s weekly e-zine newsletter, send an email with the subject ‘Subscribe ESM news’ to peter@esmmagazine.com.
