Does Stokes collapse signal the end of the greengrocer? The demise of the biggest chain has cast gloom over the sector, but smart players with a more modern approach may still flourish, says Julia Glotz.
The announcement last week that Stokes, the UK's largest greengrocer chain, has entered administration - closing all but seven of its 37 stores across the south west and Wales, and laying off almost 200 staff - has prompted inevitable soul-searching in the sector.
A full post-mortem is still months away, when the final accounts will be published, but there are obvious macroeconomic factors as to why stores like Stokes have had a tough time of late: the recession, for instance, or the decline of the great British high street, driven by the growing popularity of out-of-town supermarkets.
Figures from the IGD show that, over the past 12 months, 100 greengrocers have closed, taking the total number of stores from 1,865 to 1,765. Stokes may be greengrocery's most high-profile casualty, but it is far from the only one.
But that is not to say the relation between these external factors and the health of independents is always one of simple cause and effect. Some greengrocers have been flourishing because they are in the catchment area of a supermarket and benefit from the footfall, says Nigel Jenney of the Fresh Produce Consortium, who adds that independents with entrepreneurial spirit are doing well.
It is that notion of entrepreneurial ambition and nimbleness that has thrown up some of the most searching questions about the Stokes model. The company's administrator, Richard Hill at KPMG, says he suspects part of Stokes' problem was that its stores were too slow to react to the changing needs of customers.
STOKES PLC 2006/7 2007/8 SELECTED FINANCIAL DATA ([pounds sterling]k) ([pounds sterling]k) Turnover 18,582 14,264 Gross profit 7,330 6,134 Operating profit/loss -1,228 455 Profit/loss after tax -2,290 421 STOKES PLC 2008/9 SELECTED FINANCIAL DATA ([pounds sterling]k) Turnover 13,230 Gross profit 5,375 Operating profit/loss -593 Profit/loss after tax -635 Source: Companies House
The story of its flagship store in Bath is a good illustration of this. Stokes embarked on a major revamp of the store at the beginning of the year, giving it a more contemporary look and adding organic produce to its shelves in a bid to attract younger customers. The revamp worked, says Hill, but it came too late in the day to turn the company's fortunes around. By the time Stokes had hit on a more modern, up-to-date approach that boosted sales, it had run out of time and money to do the same with the rest of its estate.
"The company had made trading losses and that created a cash shortfall plugged by the shareholders injecting quite substantial sums of money," explains Hill. "But there's a limit to how much people are prepared to put in."
Greengrocers have to evolve to be able to take advantage of new consumer trends and "drag greengrocers into the 21st century", agrees Chris Bavin, who runs an independent greengrocer in Walton-on-Thames called Naked Grocer. Shoppers are increasingly interested in food's provenance, so independent greengrocers could, for instance, try to set themselves apart with seasonal, locally sourced foods, he argues.
There are also huge and largely untapped opportunities in building strong brands in greengrocery that Stokes could have exploited, Bavin adds. "Stokes should have been a status symbol. We sell Naked Grocer aprons, T-shirts and jute bags, and Stokes would have been able to do that on a tremendous level. It should have been a lifestyle brand."
Questions will also be raised over whether Stokes did enough to develop wholesale relationships with other local businesses. When he took over the company in early October, Stokes' outstanding business to B2B customers across all of its stores amounted to just [pounds sterling]27,000, says Hill. "It was a very small element of the business. The vast majority of sales were through the high-street outlets."
Other independents have made B2B selling a central part of their business model. Secretts, a grocer and farm shop in Surrey, has also diversified beyond its retail business and developed close relationships with a number of restaurants. "Some of our restaurant customers will actually highlight that they sourced certain produce from us, so their menus say 'with Secretts leeks', for example," says shop manager Adam Gill. "It's another opportunity for consumers to become aware of us."
As well as restaurants, Bavin says he is already working closely with c-stores and corner shops in his area and is even considering offering a Naked Grocer co-branded line to embed his business even farther into the local business community.
The Stokes administration also raises more fundamental questions about whether there is a place in the market at all for a chain dominated by the fresh food offering of the multiples on the one hand and countered by the entrepreneurial zeal and high street convenience of the sole traders on the other. Medium-sized businesses such as Stokes can sometimes fall awkwardly between two stools - no match to the firepower of the multiples but also no longer able to deliver the highly personalised service of sole traders.
Online reviews by Stokes customers suggest its customer service was held in very high regard, but the realities of employing hundreds of staff instead of just one or two create a risk that sole traders simply do not face; that specialist knowledge and passionate ideas held by those at the top might not always travel to every shop floor.
That said, the buying power Stokes enjoyed in its heyday was "awesome", recalls one trader. "It called the tune at Bristol Market." And that ability to build up significant economies of scale will remain a very powerful argument in favour of chains in the future, provided it can be combined with greater flexibility to react to changing consumer demands.
The fact that the first buyer of part of the Stokes estate - importer and wholesaler Premier Fruits (through a vehicle called Argyle 'trading Ltd) - committed to a group of five stores (in Bath, Brixham, Cowley, Dawlish and Paignton) underlines this.
Premier Fruits director Simon Harvey says the company will now "vertically integrate" the Stokes stores into its existing business, taking over their wholesale supply.
The stores are Premier Fruits' first venture into retail. The "ability to do business in-house" had made the stores attractive, he adds. "Some of the potential buyers have also said they would be prepared to take on some of the stores that have closed," adds Hill. If those deals come off, there could even be a chance employees at closed stores could get their jobs back.
Bavin, for one, is tempted. "If it were closer to me, I might consider buying it."
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|Comment:||Does Stokes collapse signal the end of the greengrocer?|
|Date:||Oct 30, 2010|
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