THE FRIDAY INTERVIEW Chris Martin, chief executive, Musgrave GroupTHE DOTS on the Competition Authority's retail map of Ireland show Musgrave's muscle is building. Although the wholesale group and its retail brands may not have the might of Tesco, they are becoming more powerful.
Chris Martin is the Yorkshireman at the helm of the group as it flexes its considerable strengths in local markets. In many small towns throughout Ireland, independently owned but Musgrave-affiliated SuperValu outlets are the largest grocery stores serving the community, and that is the way Martin likes it.
The group has just been identified as one of "10 to watch" retailers from around the world by grocery consultants IGD in a list that also features such retailing giants as Ikea and Lidl.
Musgrave also gets frequent mention in the Competition Authority's two Grocery Monitor reports, which declare that there are "bottlenecks" in the sector at the wholesale end of the market - 80 per cent of which is held by Musgrave and [ Spar franchise owner] BWG - that require ongoing monitoring.
"The Grocery Monitor reports at least gave us a better understanding of the market," says Martin. And it is a fully competitive business, he stresses: "The consumer is getting a choice."
The Competition Authority's drive-time analysis showed SuperValu was likely to have fewer competitors within 10 and 20 minutes' drive time of an outlet. "But we still have an average of 14 competitors within a 20-minute drive time," Martin says.
Every major retailer is expanding their floor space and packing as many profit-tastic goods as possible onto their shelves. Last year, ribbons were cut at nine new SuperValu stores. Among its other franchises, a further 47 Centras graced the streets and 33 new Daybreaks saw the light of day.
Musgrave Group's own sales were €4.9 billion in 2007, up 6 per cent. Despite the more "challenging" economic environment, pretax profits jumped 16 per cent to €94 million.
The group's nine retail brands have a combined turnover of €7.2 billion, up 7 per cent on the previous year. Some €3.9 billion of this was in the Republic, where sales grew 12 per cent last year.
With sales of €2.5 billion last year, SuperValu is the daddy of the brands controlled by Musgraves. But "food-on-the-go" convenience store brand Centra (advertising slogan: "Bright Ideas for Everyday Living") is no slouch, with sales of €1.6 billion.
"We do have confidence for 2008 and more importantly we are sensing confidence from our retailers, but it is in the context of a challenging market," says Martin.
Reinvigorated product lines are the reason for this optimism, according to Martin, who has overseen the behind-the-scenes work on SuperValu's "Real Food, Real People" tagline. As well as beefing up its fresh food credentials - extending delicatessen and bakery counters and relaunching the fish counter - SuperValu now has a premium own-label range, SuperValu Supreme.
"We've got some good momentum on that," says Martin. Own-label now accounts for 28 per cent of sales at SuperValu, while Centra's own-labels are taking off.
"In our market, we can't stand still," he says. "The public interest in food has really taken off over the last two to three years, and there is a real focus on obesity, labelling, nutritional content and so on."
Some €2.9 billion of the €7.2 billion turnover chalked up by Musgrave's retail brands is sourced from Irish suppliers, including the bulk of its ready meals. Other retailers have complained that they can't find an Irish supplier to provide prepared meals to both the standard and scale they want. Martin concedes this may have been a difficulty two or three years ago, but that Irish suppliers are now meeting demand for locally sourced food that is both high quality and microwaveable.
In an era of global agflation, food prices also remain a key focus of attention. The Central Statistics Office's Consumer Price Index shows that as world food shortages hit home, food prices in the Republic are rising at an annual rate of 9.3 per cent. This may pick up over the next few months, but by the end of the year, Martin believes the rate of food inflation will start to ease.
Retailers have done a good job on behalf of consumers in containing the effects of both agflation and economic slowdown, he says. "There is no doubt that the consumer is finding it more challenging and that is why we have to bring value to the consumer."
SuperValu is now, as Martin puts it, "mimicking the behaviour of Tesco and Dunnes" by setting a national price policy with a recommended maximum price, a development that has been noted by the Competition Authority.
Perhaps more pleasing to Martin is that Ann Fitzgerald, chief executive of the National Consumer Agency (NCA), has welcomed SuperValu's emergence as a "real competitor" to the VI multiples.
"Our price promise got good feedback from the NCA survey," says Martin. "We do compare prices on key lines with our competitors."
But the NCA's honour for cheapest own-brand retailer went to the discounter Lidl, prompting the argument that such surveys do not compare like with like. "They're always snapshots, but they do give some guidance. Ultimately, it is what the consumer sees in the stores week in week out that counts. And I think there is a danger with some of these surveys because the sample is small."
Centra's prices are 6 per cent higher than SuperValu's, according to Martin. This is the price of convenience. And unlike SuperValu, Centra has a menu of recommended prices based on the store's size and location. Consumers frequenting a high-rent store in Dublin will pay more for their food.
Martin says Musgrave's retailers have acted responsibly since the abolition of the Groceries Order, the most visible effect of which has been below-cost selling of alcohol by supermarkets - a retailers' version of happy hour, except it lasts all day.
"We have some competitors who have done silly things," says Martin. He believes behaving responsibly and "not getting greedy" stems from Musgrave's status as a family business, which started life in 1876 when Thomas and Stuart Musgrave opened a shop on North Main Street in Cork.
Last year, the group and its retail partners invested in its Irish stores and the infrastructure and logistics that keep business ticking over. Martin expects a similar investment this year, with an additional £40 million going into the Londis and Budgens business in Britain. He estimates there will be a similar number of store openings in the Republic as in 2007, but he can't know for sure, as it all depends on the "local entrepreneurs" that open stores.
Martin believes that catering for people's needs on a local basis should take priority over the building of supersized out-of-town stores, which his competitors are fond of doing. He has seen first-hand from his UK retail experience what happens if communities are ignored.
"When I started in Asda in 1985, the whole focus was to build large out-of-town developments. We were a Yorkshire company pushing down south. But the closure of the high street had a terrible impact," he says.
Now major retailers, such as Tesco through Tesco Express, are coming back to the UK high street, he notes, and Irish planners need to learn from the British mistakes.
"We need to be very careful with the planning regime and make sure the process is there to support communities."
ON THE RECORD
Name:Chris Martin
Age:47
Position:chief executive, Musgrave Group.
From:Born in Yorkshire, he now lives in Oysterhaven, near Kinsale, Co Cork.
Family:Married to Jo. They have two children, John and Natalie.
Background:Armed with a degree in economics from Newcastle University, Martin has worked in retail for 23 years, starting off at supermarket chain Asda in 1985. He is a former chief executive of Mothercare and was finance director at Musgrave for 18 months before taking over as chief executive in 2005.
Something you might expect:As a Yorkshireman, he is a keen follower of cricket - a fact that led to a deafening silence when disclosed in a crowded Munster pub full of new colleagues shortly after his arrival at the Musgrave group.
Something that might surprise:He was a music scholar in his youth, singing and playing the flute and piano.
