Building momentum

...In the year ahead, we will further improve our customer offer through lowering prices, providing better service and great new products.

We will be Morrisons. Making great quality fresh food in our factories and shops. Selling at low prices. Market Street is Morrisons. Our unique craftspeople butchers, bakers, fishmongers, greengrocers are Morrisons.

If we get all the everyday small details right, more customers will shop with us more often.

And more customers mean more sales, which will ultimately mean more profit to invest back into improving our customer offer even further...

Overview: We are adapting to the changing demands of our customers...

Who we are

We are a value-led grocer, British born and bred, focused on fresh food. High quality, fresh products are at the heart of everything we do. We have our own manufacturing production facilities that supply our stores to ensure that we sell only the best products. Our vertical integration gives us both control over the provenance of our supply chain and the flexibility to meet the demands of customers. We have adapted to the changing demands of our customers by launching a multi-channel offer that gives the same great supermarket experience to customers in our convenience stores and online business.

Key

This data is based on internal reporting regions and excludes our store in Gibraltar.

Great Britain map

The market context: and market conditions have been challenging...

The market

Customer confidence

Consumer confidence has started to recover in recent months, however, savvy shopping continues, with customers expecting, and seeking out, great value for money by shopping around. The reductions in oil prices and low interest rates are likely to sustain this growth in confidence. However, real disposable income has a way to go to regain pre-2008 levels, and customers tell us that they are unlikely to return to old shopping patterns in the near term. Shopping around for the best value will continue. We saw a notable drop in food inflation through the year, and we expect downward pressure on prices to be a feature for some time.

This shift in shopping behaviour, alongside societal trends such as an ageing population and more single person households, continues to result in customers making more frequent grocery shopping trips. Kantar Worldpanel has the average UK household making 4.9 grocery shops each week across all channels and formats. The days of a once a week big shop are over, replaced with several trips and possibly one larger trip for the weekend. Consequently, the importance of fresh food continues to grow for customers.

Customer confidence
Customer confidence graph

Market share and growth

The 2008 recession enabled rapid growth of the 'Discount Sector' causing a structural shift in consumer behaviour as they searched for best value from multiple retailers. We have reacted to this shift by investing heavily in price during the year, starting with the 'I'm Cheaper' campaign. During October we launched Match & More, our new price match and points card.

Combined market share
Combined market share graph
Sales, Volume and RSP Growth in the Market
Sales, Volume and RSP Growth in the Market graph

Shopper trends

What customers wants

Unsurprisingly, customers continue to tell us that price remains the biggest driver of store choice. Importantly, they want more trust as too many retailers are putting prices up at the same time as shouting about prices they've put down.

Research also shows that customers want more than just cheap prices. Other factors such as range, quality, ease of shop and service all play a part in a customer's decision making process when choosing where to shop.

Our strategy, set out on the following pages, addresses these trends. Alongside our price investment activity, we launched Match & More during the year, price matching Tesco, Sainsburys, Asda, Aldi and Lidl ensuring that price is never a reason for customers to shop elsewhere and gives them the trust they demand, which has been very well received. We have seen an improvement in volume per basket with Match & More playing a part in this.

Highlights: but weve accomplished a lot this year...

Financial highlights

Cost saving achieved 224m

£ M

Final dividend 9.62p

p

Total stores opened in 2014/15 68 of which 57 were convenient stores

Operational highlights

Number of customers who visit stores per week 12.1m

M

Stores across UK, of which 153 are convenience stores 667

60% of the fresh food we sell we make ourselves

%

Number of colleagues, over 117,000

Online orders, over 1.1m

M

Our business model: and we are making the most of what makes us different...

We make things

  • We are the second largest fresh food manufacturer in the UK.
  • We own, operate and control a greater proportion of our fresh food supply chain than any other major grocery retailer in the UK.
  • Every day we make more than half of the fresh food we sell in store and online.
  • Our vertically integrated supply chain gives our customers assurance over the provenance, quality and safety of our food.
  • We buy direct from farmers and have the ability to process whole animals or crops, therefore we utilise more of what we buy with less wastage.
  • We employ qualified butchers, bakers, fishmongers and greengrocers in store, allowing our customers to tailor quantities and cuts of meat and fish to suit their preferences.
Cow, carrot, chicken

And we buy things

  • We pride ourselves on buying as much fresh food in the UK as we can - 100% of our Morrisons own brand fresh meat is British sourced, supporting British farmers.
  • We work with our suppliers through the Morrisons farming programme to ensure British farming remains competitive and sustainable.
  • We are committed to sustainable supply chains through purchasing our products ethically.
  • We have made our supply chain shorter by dealing direct with more of our suppliers.
  • We insist on high manufacturing standards from our suppliers to ensure the integrity and quality of our products.
Bottle of milk, banana, can of tomatoes, apple

Then we move them

  • We operate seven regional distribution centres and one national centre, servicing our supermarkets, and three convenience distribution centres.
  • Our fleet consists of over 545 tractors and 1,606 trailers that cover over 97m kilometres per year.
  • We've streamlined our fleet making it more efficient in terms of delivery time and frequency of deliveries, reducing the amount of kilometres travelled in comparison to the volume we transport year-on-year.
  • Our scale allows us to reduce costs and increase efficiency throughout our operations, therefore reducing carbon emissions.
  • Our secure supply chain to store allows us control over the freshness and availability of products.
  • Morrisons.com home deliveries are supported through our service agreement with Ocado, allowing us to use technology and distribution operations that are first class, thoroughly tested and adaptable so they can be rapidly expanded.
Morrisons delivery lorry

And sell them in our stores and online

  • We provide a distinctive shopping environment, showcasing our focus on fresh food and the skills of our colleagues.
  • Our product ranges include Morrisons own brand, giving our customers the flexibility to choose the right product at the right price.
  • Our industry-leading Match & More card provides a price comparison tool in our customers' pockets, neutralising the need to choose any other supermarket based on price alone.
  • Our convenience proposition is tailored to meet local needs with a significant proportion of sales space dedicated to fresh food.
  • Our online grocery business also showcases our expertise and experience in fresh food, including a doorstep freshness check and virtual craftsmen.
Morrisons van, shopping bag and shopping basket

And this is how we do it differently

Fresh

  • From field to fork in hours

    Controlling food provenance, safety and quality. Getting food onto our shelves fresher and faster.

  • Prepared by us

    Making more fresh food than any other supermarket.

  • Consistently excellent

    Delivering our fresh-focused customer experience in stores and online.

  • Monitoring to our standards

    Through our Ethical Trading Code and Manufacturing Standard.

Value

  • Passing savings on to the customer

    Our vertical integration model allows us to take cost out of the supply chain to pass on to customers.

  • Honest, clear pricing

    Transparent promotions and clear shelf edge pricing are complemented by our Match & More guarantee.

  • Quality

    If a customer is not 100% satisfied, neither are we. We offer refunds and replacements on products prepared by us.

  • Reducing our waste

    Buying whole animals and crops direct from farmers and processing through our own operations eliminates needless waste.

Service

  • Friendly customer service

    Our warm customer service provides enhanced perception, engagement and loyalty.

  • Skilled colleagues

    Our in-store skilled colleagues tailor portion sizes to suit customers personal preferences.

  • Availability

    In store, our operation allows us to react quickly and efficiently to customer needs, catering for local demand.

Strategic objectives: while we focus on growing our core business.

Invest

We will invest 1bn over three years through:

  • Lowering prices on a permanent basis
  • Offering fewer but more impactful promotions
  • Making Morrisons own brand a competitive advantage
  • Continuing to improve quality and range
  • Making our stores easier and more pleasant places to shop
  • Rewarding customers through Match & More
  • Delivering focused, consistent customer communication

What we did in 2014/15

Awards achieved for Morrisons products nearly 200
Launched Match & More
Invested in chill chain to improve produce quality 20m
Launched I'm Cheaper campaign cutting 1,200 products by an average 1,200 products by an average 17%
Improved customer experience in-store  removed trolley locks, extended opening hours 1,200 products by an average

Save

Unlock 1bn of savings over three years1 allowing us to invest in our value proposition:

  • 300m improving our end-to-end supply operations
  • 200m indirect procurement and loss prevention
  • 500m promotional investment and sourcing

What we did in 2014/15

Improved systems and focused on reducing shrinkage, waste and mark down costs and indirect procurement 50%
Items on promotion reduced in second half of the year by 10.6%
Range reduction  SKU count reduced by 10%
Productivity savings delivered through our vertical integration, including transferring beef cutting and packing from stores to production site 79
1st phase of store restructure completed
Plans to introduce sales-based ordering are on track

Grow the core business

and accelerate our presence in new channels

What we did in 2014/15 - Core: 60m of the fresh food that we sold, we made ourselves
Over 13,000 skilled colleagues serving customers on Market Street
What we did in 2014/15 - New channels: UK households with access to our online proposition nearly 50%
What we did in 2014/15 - New channels: M local stores opened 57

Generate cash

  • Generate at least 2bn of free cash flow over three years1 by adhering to strong financial principles

What we did in 2014/15

Reduced capital expenditure to 520m
Improvement in working capital 206m
Property disposals generated proceeds of 448m

1 The three year period comprises 2014/15, 2015/16 and 2016/17.

Downloads: Reporting 2014/15

Financial Report

Corporate responsibility report 2014/15

Download options

  • This report will be available later this year