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Chief Executive’s review | ||||||||||||||||||||
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| I am more convinced than ever
that the way forward for Safeway is to remain Best at Fresh, Best at Availability,
Best at Customer Service and to continue to deliver the best offers and promotions. All our fresh lines have shown dramatic improvements in our ranges and in-store presentations and we continue to pay close attention to detail and focus on every single local market. Our people are better trained, feel proud of what they do and the company they work for. Last year we fully implemented a very ambitious compensation package that will continue to drive performance. We are aware that we owe our success to our clients and this is reflected in the way that we treat them. We have a talented and motivated workforce who strive to ensure that every client has the best shopping experience. This is our culture. Our stores, our business In a market like the UK you need to compete locally. You have to adapt your range, service and promotions to suit your local clients. And the people who are in the best position to know what will beat the local competition are the store manager and his team. We will continue to drive forward with our strategy of decentralisation and giving our managers the tools, skills and information they need to run their stores as businesses. For well over a year now they have been getting daily profit and loss accounts for their stores. All of them now have full control over the key fresh product ranges for sales forecasting and ordering and many are also able to manage their stock in real time. Decentralising decision-making authority to our stores, backed by a performance incentive plan enabling store managers to double their salary, is creating the kind of working environment and opportunities our people have been demanding for a long time. Developing new formats The diversity of our store portfolio is one of our greatest assets. We have the opportunity not simply to operate big and small stores but also to develop different formats. We currently operate with three formats – convenience stores, supermarkets and superstores – and we will shortly be adding a fourth format – that of hypermarket. We have successfully tested our new supermarket format in our store in Lewes, Sussex, and our new “Fresh to Go” concept in our store at St Katharine Docks. Between January and the beginning of April we rolled out these new formats and ideas to 51 supermarket and convenience stores in London and the South East. Since the end of the year we have opened our first new supermarket concept at Wimbledon and the first new superstore concept at Woking, which both include the full “Fresh to Go” offer. Other new ideas we have been developing and trying out include our first in-store restaurant, Café Fresco, as well as our new photo processing and dry cleaning facilities. All of these opened at High Wycombe at the beginning of April 2001. We believe there is a lot of potential in these three concepts and their initial results justify an ambitious roll-out programme. All three of these concepts will take retail services well beyond that which is currently offered today in the UK. The new format work we have done so far has had a big impact on the sales performance of the stores which have been refitted. Many of our stores in the South East are now achieving double digit like-for-like sales increases, with particularly strong growth in our fresh food sales. Over the next few years we will be rolling the new formats out across the entire portfolio. |
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| Building
customer loyalty Our 10 million clients – over one million more than in the autumn of 1999 – are now very familiar with the Safeway flyer which is delivered through their letter-boxes every week. Our flyer is now delivering by far the most attractive food offer in the market. When we launched our promotional strategy 18 months ago the consensus in our industry was that “everyday low pricing” was the way forward. Since then our competitors have seen for themselves the big increases in sales volumes and like-for-like growth which our flyers are delivering. Indeed, in recent months our competitors have started doing promotions and distributing their own flyers – some of which look remarkably like ours! It will, however, as they will soon learn, take far more than a look-alike flyer to match our strategy and achieve the same results. Having achieved our initial goal of attracting more clients into our stores, the challenge for us now is to encourage them to become regular main shoppers and build their loyalty to Safeway. Our priority, therefore, is to drive forward with our goals of being best at fresh, best at availability and best at customer service. The rest of this Annual Report focuses on the progress we have made with each of these goals during the year. Driving Safeway forward The first phase of our strategy was completed during the second half of the year. It was aimed at attracting new clients into our stores and laying the ground work for a longer-term programme to build their average basket size and their loyalty. The second phase has now begun. This will involve the rapid transformation of our store portfolio, as the new convenience, supermarket and superstore concepts are rolled out. We will also extend a selected number of superstores and run some of them as hypermarkets. In this second phase we will carry on with everything we are currently doing to be best at fresh, best at availability and best at customer service, while upgrading our non-food ranges and rolling out our new-style in-store photolabs, dry cleaning shops and restaurants. Our people have achieved a huge amount over the past year and I believe our momentum is now irresistible. By the end of phase two, the transformation of Safeway will have been completed and we will be the first choice retailer in the market. I want to give a very big “thank you” to everyone in our company who has worked so hard to deliver what we have achieved but also to our suppliers without whose trust and support this would not be possible today. Safeway still has a lot to do. There is only one way to the top and there is no stopping if we want to get there.  Carlos Criado-Perez 23 May 2001 |
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