Mills Group has launched an intense focus on quality fresh food in an effort to fuel growth.

At its annual conference in Newcastle-upon-Tyne this week, the independent retailer announced that the category would be its core focus for 2007 because it offered a high profit margin, was an important footfall driver and its popularity had increased in line with the growth in healthy eating.

"It's the hardest category to get right, with the greatest failure record, but it's central to the wishes of customers, so you have to learn to manage it profitably," said company MD Nigel Mills.

Mills said he wanted to ensure all stores had sufficient space devoted to the category, with a complete range of quality products at the right price point. He also wanted managers trained up to police the fixture.

And he urged Mills Group store managers to reject poor quality produce when it arrived at shops, regardless of availability or waste issues.

"The higher the sales, the lower the waste in percentage terms and the higher the net profit. And customers will walk if they see poor quality produce, so you'll lose out even if it is available."

Launching new planograms and cutting ranges to concentrate on top sellers had grown fresh food and other core categories, he said. Mills Group plans to use a 3,000 sq ft former Somerfield store in Filey, North Yorkshire, opened on 4 September, as a test bed for further category management initiatives.

Revamping key categories and cost-cutting measures, including installing energy-efficient chillers in several stores, had slowed Mills Group's store redevelopment programme, said Mills. Consequently, the retailer's three store formats, Mills Metro, Mills Local and Mills Newsagent for the CTN estate, would be rolled out gradually.

At least 12 full-blown refits and eight lesser refurbishments are planned for 2007. The Filey store is currently the only Mills Metro outlet. Four Mills Local outlets have been opened so far. At last year's annual conference, Mills had said he hoped to apply the new formats to half of the company's 75 stores by now.

However, he said he felt it was more important to ensure stores had the basics right before implementing more radical changes.

Mills Group was ranked 19th in The Grocer Top 50 last January, with sales of £53m.