LONDON (Brand Republic) - Somerfield has admitted it “made mistakes” in the way it handled its Somerfield supermarkets and Kwik Save discount store brands after the two companies merged in 1999.
The admission came as executive chairman John von Spreckelsen unveiled a massive 58% slump in profits from £218m to £70.7m for the year ending April 30. Turnover fell 7.3% to £5.4bn, with like-for-likes across both brands down 7.6%.
Von Spreckelsen said, “Much of the poor trading performance has arisen from confused marketing and a lack of focus on the retailing brands.”
He added that, within the Somerfield division, changes would be made to merchandising and promotional activities. “We will improve the effectiveness of promotions and price positioning -- we have seen what happens when we neglect competitiveness.”
Von Spreckelsen said consumers had been confused when 111 Kwik Save stores were converted to Somerfields.
“We will remove the uncertainty, by confirming our commitment to the brand and ending the store-conversion programme. We want to invest in the Kwik Save brand and heritage,” he stressed.
He said money would be spent on improving the image of the remaining Kwik Save branded stores.
Von Spreckelsen would not be drawn on future advertising and marketing strategy or projected spends. But he confirmed national TV ads would not be axed.
Somerfield’s “Annie the housewife” TV ad campaign has been under review since March, and a spokeswoman said new creative work was being developed. “National advertising is very important -- there are no plans to pull the plug,” she said.
Meanwhile, Somerfield continues to haemorrhage customers at an alarming rate -- equivalent to a 20% reduction in its market share in the last year.
Figures from research company Taylor Nelson Sofres show the stores now have a market share of 3.7%, compared with last year’s 4.8% figure.
Analysts remained dubious as to whether Somerfield could entice shoppers back through pure marketing. “It’s not dead, not bankrupt, but it’s not going anywhere,” said one. “They made a hash of buying Kwik Save and are not instilling confidence in consumers,” another added.
They dismissed rumours that northern supermarket chain WM Morrisons was looking to buy Somerfield. “That’s the last thing Morrisons needs,” an analyst said.