Some fresh thinking in store for Superquinn

Musgrave’s chief aims to reinvigorate the Superquinn brand by playing to its strengths

ON TUESDAY, Musgrave chief executive Chris Martin received his Superclub rewards card from Superquinn, the grocery chain he had acquired just a week earlier.

Given that he lives in Cork and Superquinn is predominantly Dublin-based, Martin probably won’t get much use out of the card but he’s confident that the addition of the 24-strong chain to the Musgrave portfolio will be the growth driver the grocery wholesaler needs in the recession.

At a stroke, this deal makes Musgrave the biggest player in the €14 billion Irish grocery market, with a share of about 24 per cent.

It also beefs up its presence in Dublin, where SuperValu, Musgrave’s biggest retail brand, has traditionally been weak. This deals doubles Musgrave’s share in Dublin to 22 per cent.

But there are significant challenges ahead.

Superquinn has been in decline for a number of years – since before Feargal Quinn and his family sold the business in 2005 to a group of seven property developers and financiers fronted by Simon Burke.

In its heyday, turnover “wasn’t far off €700 million”, according to Martin. This year it will be about €490 million and that’s with the addition of a handful of new stores opened by its most recent owners, Select Retail Holdings.

Earnings before interest, tax, depreciation and amortisation (Ebitda) last year were between €15 million and €20 million.

Remarkably, its liabilities were at a similar level to its revenues.

This week, figures from Kantar Worldpanel put Superquinn’s share of the “multiple” market at just 5.8 per cent.

It has been overtaken by German discounter Lidl, while Aldi is hot on its tail.

According to Martin, one in three light bulbs weren’t working in some stores and a number of fridges were on the blink. New uniforms promised to the 2,500 staff had never materialised.

Having been renowned for its innovation under Feargal Quinn, particularly for its fresh meats and baked goods, Superquinn became a “me-too multiple”, Martin adds.

As consumers became manic about prices and value in the recession and rivals upped the quality of their fresh offerings, the Superquinn brand lost its way.

“That is important to understand in the context of a brand that is clearly at the premium end,” Martin says.

“The market has shifted quite dramatically. The change in the Irish consumer in terms of what they can afford clearly challenges the Superquinn offer to be redefined.”

The Irish grocery market has declined in value by 7 per cent over the past two years. This year will be “just flat”, Martin says.

By contrast, Superquinn’s sales have declined by 5 to 6 per cent since Easter, largely because of the uncertainty around it being placed into receivership.

Martin says Musgrave paid just over €200 million to buy Superquinn, including 12 freehold properties. In addition, it set up a €10 million fund for suppliers who were left out of pocket by the chain going into receivership, and it has pledged to invest €20 million in the stores.

“We recognise that there’s an immediate spend that we need to do.” Martin also plans to redefine the brand. “The way the business was run, there was no reference to the consumer at all,” he says.

“The big issue for a retailer like Superquinn is getting the price equation right and we recognise we have a lot to do with that.

“We always built into our thoughts that there would be a period of time when we would need to get under the bonnet of the business to really understand it, work with the team in the business and also bring the scale of Musgrave to the support of Superquinn to make it more competitive in the marketplace.”

This is a reference to Musgrave’s significant buying power. “We can bring to the business the sort of scale that it’s never had before,” he says.

Musgrave last week appointed senior finance executive Tim Kenny as the new head of Superquinn, which has been put into a new vehicle called Musgrave Operating Partners.

Remarkably, Superquinn hasn’t had a trading director or a marketing director for some time. Musgrave will plug these important gaps.

Operationally, Martin says the Dublin stores trade better than those outside the capital.

“That has to be looked at and that’s where there’s an opportunity to flex the Musgrave brands,” says, hinting that some of these stores might end up with a different fascia.

The stars in the Superquinn chain are Blackrock, Lucan, Sutton and Rathgar in Dublin. Martin describes the Portlaoise shop as a “lovely store” but at the “wrong end of town”.

He says the group’s online service is “excellent”.

Martin believes Superquinn’s fresh offering is among the “best in the world”. “Getting investment into that and reinvigorating that across the chain is an opportunity for us.”

Musgrave is essentially a wholesaler, supplying goods to a network of stores owned by independent retailers. It operates a number of retail brands, including SuperValu and Centra in Ireland and Budgens and Londis in the UK.

“We’ve never run stores before,” Martin says. “We support independent retailers. For the next five-plus years, we see ourselves owning this. That could be even longer. There may be a role for the independent retailer in the long, long run but that’s a long way off.”

There will be no new Superquinn stores for the time being. “We’ve really got to work the 24 stores we’ve got. We’ve really got to bring in Musgrave support in terms of getting the right competitive offer.”

How will it do that? “We have to work on the strengths of the brand. Their passion for the business is very much linked to the fresh offering.

“So the role of the butcher, the role of the cheesemonger and the breadth of range within fresh – we are absolutely focused on that. The right level of service again is fundamental to the business.”