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Retail

Britain's Marks & Spencer Targets More Regular Food Shoppers

By Reuters
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Britain's Marks & Spencer Targets More Regular Food Shoppers

In Britain, a Christmas trip to the food aisles of Marks & Spencer is as much a treat as presents under the tree, with millions of shoppers ditching their regular supermarket to visit the upmarket retailer over the festive period.

The challenge the 139-year-old group has faced is that a lot of those shoppers then return in the new year to the likes of market leader Tesco, No. 2 Sainsbury's or the German discounters Aldi and Lidl, which have driven a retail revolution in Britain.

After decades of failed reinventions, M&S has entered this festive period in a stronger position, having used savings from a rebuilt supply chain to become more competitive on price and invest in new ranges. Its shares have more than doubled this year.

M&S's grocery sales in the 12 weeks to December 2 increased 12.8%, only topped by Aldi and Lidl, according to data from market researcher NIQ. Now it is targeting a bigger slice of Britain’s £229 billion grocery market.

Reshaping The Business

Ian Lance, fund manager at Redwheel, M&S's second biggest investor, said management's drive to reshape the business was paying off, and an effort to retain Christmas shoppers could further boost market share and revenue.

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"A big opportunity for M&S’s food business is to convert the occasional shoppers, such as those who use them at Christmas, to more regular shoppers that use them all year round," he said.

Last year, M&S CEO Stuart Machin set a five-year target to increase its share of the UK grocery market by 1%.

It held a 3.4% share in the latest 12-week period, according to NIQ. But that typically hits 5% at the start of December and around 10% in the final days before Christmas.

Machin's Approach

M&S's chances of retaining some of those customers have been boosted by a strategy struck by Machin, who took over the food business in 2018 before becoming group CEO, with control of its fashion and homewares too, in 2022.

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Often seen as an upmarket food option that provides lunches for city workers, a posh ready meal or a special occasion steak dinner, he is trying to broaden its appeal to weekly shoppers.

M&S now sells 200 essential lines at prices it says are in line with mainstream rivals and by April 2024 plans to have introduced 1,400 new lines, 20% of its total range. More than 1,000 have already launched.

It also plans over 1,000 quality upgrades, equating to 15% of the range, with more than 800 done so far, including for steaks and cream cakes, with sales volumes up 20% and 23% respectively year-on-year.

It is expanding product ranges where its presence has traditionally been weak, such as in frozen and homecare, where its market share is just 1.3% and 0.8%, according to IRI data.

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At the same time it is opening bigger stores – including in out-of-town retail parks – and refreshing old ones, while further developing the online joint venture it forged with Ocado in 2019.

Read More: M&S Cautious On 2024 Outlook After First-Half Profit Beats Expectations

Improved Efficiencies

Data from polling company YouGov shows the strategy is starting to pay off, with consumers' perception of the value and quality of M&S's food up 30% and 12% respectively since Machin launched the strategy in 2018.

Better prices are being funded by supply chain efficiencies, including annualised savings of £60 million (€69.25 million) following last year's purchase of logistics operator Gist and annual buying synergies of £60 million with Ocado.

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Alex Freudmann, M&S's managing director food, said results from recent full product category upgrades were "very encouraging", with biscuit sales up 43% versus last year and soft drink sales up 13%.

He said the overall strategy was creating "the beginnings of a virtuous circle which is winning us new customers and enabling us to operate more efficiently".

"There is so much more to go after," he told Reuters.

If M&S is to grow its regular monthly customer base from the normal 5.5 million households to the festive 8 million, it needs to persuade people like financial services worker, Bev Griffiths, 45, who usually shops at other supermarkets because she wants the major brands that M&S doesn't sell.

But she had a near full trolley of festive goods when shopping in an M&S Foodhall in east London last week.

"We largely only come to M&S for the Christmas shop, they do the best turkey and accessories," she said.

Additional reporting by ESM

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