"Horsegate" scandal at rivals was inevitable - Waitrose

LONDON Fri Jan 25, 2013 7:27am GMT

1 of 11. A shopper passes by branded bags in the Canary Wharf store of Waitrose in London, January 23, 2013.

Credit: Reuters/Neil Hall

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LONDON (Reuters) - Britain's "Horsegate" scandal, where horse DNA was found in beef burgers, was the inevitable result of major supermarkets squeezing their suppliers and could lead to a change in shopping habits, the head of upmarket grocer Waitrose told Reuters.

Managing Director Mark Price said Waitrose, part of the employee-owned John Lewis group JLP.UL, was confident of continuing to grow its record-high market share of just below 5 percent, and predicted that figure could double in a decade.

"Customers now have got the joke that cheap does not mean good value. Cheap just means cheap," he said in an interview at Waitrose's store in Canary Wharf, east London.

Last week, burgers were cleared from many British supermarket shelves - though not from Waitrose's - after the Food Safety Authority of Ireland (FSAI) found horse DNA in beef burger products sold by Tesco (TSCO.L), as well as budget chains Iceland, Lidl and Aldi.

Most of the affected burgers contained very low levels of horse DNA, but in one Tesco sample, supplied by Irish firm ABP Food Group, horse meat accounted for about 29 percent relative to the beef content. The discovery drew condemnation, including from Britain's Prime Minister, David Cameron.

"If you have a competition that says: Who can sell the cheapest stuff? Inevitably at a point in time you will get something like this," said Price.

"What you've seen in UK food retail is packs get smaller. There's less mint in spearmint gum, the taste of chocolate biscuits is not what it was 10 years ago because, guess what, there's less chocolate in it," he said.

"So if people are managing to a price point, people will change the specification and they will cheat to get there."

Price said Waitrose had bucked that trend.

"We've gone the other way," he said, noting that Waitrose's meat supply is 100 percent British, with the firm having its own dedicated supply chain and abattoir facilities.

ABP declined to comment on Price's comments, as did British market leader Tesco, No. 2 Asda (WMT.N), No. 3 J Sainsbury (SBRY.L), Iceland and Lidl. Aldi was not immediately available.

ABP said last week the source of the contamination was a beef based product bought from two third-party suppliers outside of Ireland. Food safety experts say horse meat products pose no added health risks to consumers.

Fast-food chain Burger King said on Thursday it had stopped using ABP's Silvercrest unit.

RECORD MARKET SHARE

Many of Britain's grocers are finding the going tough, despite their focus on essential goods, as consumers have been hit by below-inflation wage growth and austerity measures.

The 290-store Waitrose chain has managed to defy the gloom, benefiting from innovative products like salted caramel ice cream and its tie-up with top chef Heston Blumenthal, as well as the success of its lower-price "essential" range, and a pledge to match rivals' prices on over 8,000 branded goods.

A commitment to animal welfare and British food has helped, along with an online business that has grown sales 50-60 percent year-on-year in recent weeks.

Waitrose outperformed bigger rivals Tesco, Sainsbury's and Morrisons (MRW.L) at Christmas and market research group Kantar Worldpanel said last week its market share in the festive trading period was 4.9 percent - a new high.

Price is confident Waitrose can continue to grow like-for-like sales and market share in 2013 and beyond.

"On current plans we think the brand could stretch to nearer 600 shops. I'd like to see Waitrose's (market) share at around 10 percent. I think that 10 percent for a brand like ours would be a great place to aspire to get to over, say, the next decade," he said.

Price expects "a slightly improving trend" for the British economy. "I'm not expecting there to be any great bounce back but I see no reason why the economy in 2013 will be less good than it was in 2012," he said.

He is, however, concerned by food price inflation, given droughts in America and Australia, and would not be surprised if it reached 6 percent this year, up from about 4 percent now.

"We think we're in a strong position this year to absorb a lot of that cost on behalf of our customers," said Price, pointing out that in 2012 Waitrose's prices rose 2.1 percent versus overall input price inflation of 4 percent.

(Editing by Mark Potter)

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