Safeway (UK)


Safeway is a food wholesaler and a former chain of supermarkets and convenience shops in the United Kingdom. It started as a subsidiary of the American Safeway Inc., before being sold off in 1987.
Safeway was listed on the London Stock Exchange and was a constituent of the FTSE 100 Index, until it was acquired by Morrisons in March 2004. Most of its 479 shops were rebranded as Morrisons, with others being sold off. The brand disappeared from the United Kingdom on 24 November 2005.
In November 2016, Morrisons announced that the Safeway brand would be revived on a range of food products, manufactured in the company's own factories, for distribution through independent retailers within the United Kingdom.

History

Early years

The earliest origin of Safeway in the United Kingdom lies with the establishment of the Home and Colonial Stores, later renamed Argyll Foods, in 1883. By the start of the twentieth century, Home and Colonial Stores had become one of the largest retailers of groceries in Britain, increasing its market share through organic expansion and takeovers, including Safeway in the United Kingdom in 1987.
As a specifically identifiable brand, Safeway was established in 1962 in the United Kingdom by the American supermarket chain Safeway Inc., which opened its first shop in the United Kingdom in Bedford in 1963: it was then known as Safeway Food Stores. By 1987, it had 133 shops around the United Kingdom.

Acquisition by Argyll Foods

In 1987, Safeway Inc put Safeway Food Stores up for sale. Argyll Foods eventually secured it for the sum of £681m, with £600m raised through a rights issue that was three times oversubscribed. The merger of Argyll and Safeway was hailed by commentators as one of the most successfully integrated retail combinations in the United Kingdom, bringing together Argyll's experienced management team, with a strong but somewhat underdeveloped retail brand.
Argyll then began converting the larger Presto supermarkets to the Safeway brand. The Presto name continued on smaller supermarkets in North East England and Scotland for several years and even enjoyed a brief revival in the early 1990s, when several new Presto shops began to open and a range of Presto own label products was introduced. The last new Presto shops opened in 1995. The revival was short lived, as in 1995, many smaller Presto shops were sold to a consortium of Spar retailers.
Over the next few years, competitive pressures intensified. Pre tax profits fell by 13% during the year ended 30 April 1994, prompting a wide ranging strategic review known as "Safeway 2000", led by the then chief executive, Colin Smith, with assistance from McKinsey Consulting. This involved the sale of the Lo-Cost discount operation, and the re design of the Safeway shops to appeal to the family shopper.
In July 1996, Argyll conducted a share buyback, and then renamed itself Safeway plc. During 1997, several Presto stores were converted to Safeway, and by the beginning of 1998, the final Presto shops were either converted or closed down. All shops traded simply as Safeway, regardless of size.
David Webster, who had taken over as chairman in 1997, after the retirement of Alistair Grant, decided to open merger talks with Asda. These talks were called off after a few weeks following a leak to a Sunday newspaper, and then briefly revived in the early months of 1998, before breaking down again.
The outcome, if the negotiations had been successful, would probably have been the disappearance of the Safeway name, and the emergence of a stronger Asda, still focussing on discount prices, but with a bigger volume to support it. This might have achieved a more secure future for Safeway, than continuing the struggle to keep up with Tesco and Sainsbury's.
Safeway was the first of the large supermarket groups to introduce a loyalty card, which it launched in 1995 and called ABC. As this was initially only introduced into selected shops on a trial basis, however, Tesco is able to claim the title for the first nationwide introduction of a loyalty card, with Clubcard.
Safeway, in 1999, started a rail container flow carrying goods to its far north shops, some as far as Inverness, Nairn, Elgin and Buckie. The train consisted of van wagons and containers. The train was operated by EWS.

"New Safeway"

By the early months of 1999, Safeway was coming under renewed criticism from investors. Its shares had under performed the food sector over the previous five years; it had been pushed back into fourth position by Asda and it did not have enough shops of adequate size, to offer a comprehensive non food range. In July 1999, Safeway announced the appointment a new chief executive, Carlos Criado-Perez, who had held senior posts in Wal-Mart's international division.
The problem was how to distinguish Safeway from Tesco and Sainsbury's, and how to minimise its scale disadvantage. According to estimates made by the Competition Commission, Tesco was able to negotiate significantly lower prices from its suppliers than Safeway – averaging about 3% on big selling branded items.
Criado-Perez's response was to introduce selective deep discounting, the so called high/low pricing formula, which was later branded as 'substantially discredited' by Morrisons management, making deep price cuts on a limited set of products for a limited period. Criado-Perez also abandoned Safeway's loyalty card, arguing that these cards were no longer an effective marketing tool. This project was branded 'New Safeway'.
The new approach to pricing was one of the four pillars of Safeway's strategy, the others being "Best for Fresh Foods", "Best for Customer Service", and "Best for Product Availability". Criado-Perez envisaged a five-year programme of developing the shops along these lines, to be completed by 2004.
In 2002, Safeway was the fourth largest supermarket chain by sales in the United Kingdom. However, it was growing more slowly than other large chains in the United Kingdom, and this was reflected in a share price below the values of the group's assets, leading to the various takeover rumours that circulated during 2002, indicating the City was unconvinced with the Criado-Perez strategy.

Morrisons takeover

On 9 January 2003, the much smaller Morrisons, with around 119 shops largely located in the North of England, made a surprise offer to purchase the chain, offering 1.32 new shares of Morrison for each share of Safeway, with the co operation of the Safeway board. However, this served only to start a stampede of other potential buyers. Sainsbury's, Asda, KKR, Trackdean Investments Limited, and Tesco all said they were considering making offers.
They were all asked to make submissions to the Office of Fair Trading for approval under the Fair Trading Act 1973. On 23 January, Safeway's board dropped its recommendation of the Morrisons offer. Kohlberg Kravis Roberts later dropped its proposal.
On 19 March, the remaining proposals except for Trackdean's were referred to the Competition Commission by the Trade and Industry Secretary, Patricia Hewitt. The report of the Competition Commission was made public on 26 September.
A takeover of Safeway by Sainsbury's, Asda or Tesco was "expected to operate against the public interest, and should be prohibited". However, a takeover by Morrisons was held to be acceptable on the condition that fifty three shops of the combined operation be sold, due to local competition issues. Patricia Hewitt accepted these recommendations.
Philip Green announced on 30 October that he was not proceeding with a takeover bid, on the basis that it was not clear whether approval could be obtained to sell off individual shops to other chains. On 15 December, Morrisons, the only remaining bidder, made a new offer of one share of Morrisons, plus sixty pence for each Safeway share, again with the cooperation of the Safeway board.
On 11 February 2004, shareholders of both Wm Morrison and Safeway voted to approve the merger of the two companies, subject to the result of two High Court rulings later in the month.

Shop disposals

Originally, fifty-two shops were to be compulsorily divested after the takeover, but this was reduced to fifty after one shop in Sunderland burned down, and the lease ended on another in the city centre of Leeds. John Lewis Partnership purchased nineteen to be part of its Waitrose chain, while Sainsbury's purchased a further fourteen, and Tesco bought ten in October 2004.
Unlike other operators, most notably Tesco, Sainsbury's and the Co-op, Morrisons had chosen not to move into the convenience shop sector. Further to this policy decision, it was announced in October 2004 that the 114 smaller shops of Safeway Compact were to be sold off to rival supermarket chain Somerfield, in a two part deal worth £260.2 million in total.
In Northern Ireland, Morrisons sold former Safeway shops to Asda. These included a shop in Bangor, which actually opened after the takeover by Morrisons, in June 2005.
Morrisons continued to sell and close shops not covered by the Competition Commission ruling, which it felt did not fit with the scale and layout of its format of Market Street. In total, 254 shops were sold off by October 2005, which left the chain with around 367 shops by November 2005. In all, seventy two shops were sold that were neither part of the original Competition Commission ruling nor part of the Safeway Compact portfolio.
One of the largest single purchases in 2005 was that of five shops by Waitrose in August. On 18 July 2005, a further six shops were sold to Waitrose, including the former Safeway shop in Hexham, Northumberland, which became the most northerly Waitrose branch in England.
In May 2005, Morrisons announced the termination of Safeway's joint venture forecourt shop petrol station format with BP. Under the deal, the premises were split 50/50 between the two companies. Five sites were subsequently sold on to BP, while Morrisons sold the rest of its sites to Somerfield and Tesco, which both maintain a presence in this market sector.
Morrisons also sold Safeway's Channel Islands shops, in Guernsey and Jersey, to CI Traders, where they continued to trade under the Safeway brand name, despite selling products from chains such as Iceland. In February 2011, CI Traders sold the Channel Island Safeway shops to Waitrose, and the Safeway brand disappeared from the Channel Islands.
On the Isle of Man, the Douglas shop was sold to Shoprite, and the Ramsey shop was sold to the Co-op. The shop in Gibraltar was originally marketed for sale, but was then converted. In November 2005, plans were submitted for the extension and redevelopment of the shop, in order to introduce the full Morrisons format.
In September 2005, the company announced the closure of former Safeway depots in Kent, Bristol and Warrington, with the loss of around 2,500 jobs. The Kent depot was later sold to upmarket rival Waitrose, whilst Warrington was sold to frozen food rival Iceland. Part of the Bristol depot was sold off to Gist. The shop conversion process was completed on 24 November 2005, when the last Safeway fascia disappeared from the United Kingdom.

Partial brand revival

In November 2016, Morrisons announced a revival of the Safeway brand, on food products that it manufactures for independent retailers. However, these products would not be sold in Morrisons. Morrisons, which is also the fourth largest food producer in the United Kingdom, is seeking to utilise more of the capacity within its food manufacturing sites, and sees Safeway as the ideal brand to front products for sale through third party retailers.
In August 2017, McColls signed an agreement to stock Safeway-branded products in its nationwide chain of small-format convenience stores. Items have since gone on sale and a new Safeway website has been launched.