Morrisons and Waitrose share a surprising amount of common ground, finds Clive Barker

It has been an interesting week in grocery, with the number four and number six players reporting full-year figures and telling, on the face of it, very different stories.

Morrisons has produced sector-leading growth in like-for-like sales (7.9%) and profit (13%). Waitrose, meanwhile, lost ground in like-for-like sales in the second half and turned in marginally lower profits.

So does this mean Morrisons is winning and Waitrose is losing in the grocery game? We don't think so: this is a war, not a battle, and success is measured over the long, rather than the short term.

That Morrisons is outperforming the market does not surprise us; it is using a clear brand proposition, effective communication and excellent execution to make up ground previously lost. We are also not surprised that Waitrose is under some pressure given its positioning, customer base and the economic environment. In fact, in the circumstances it is performing relatively well and is responding wisely to protect its franchise and customer base.

What is interesting is the similarities between these two apparently very different businesses.

First, their commitment to high-quality fresh and chilled products through their, albeit very different, approaches to the supply chain and product delivery. This makes them well positioned to capitalise on consumers opting to stay in and cook rather than eat out and should help them anchor main shopping trips.

Second, they have both been largely focused on mainstream UK grocery in mid-sized formats and have not been drawn into non-food or other activities in any significant way. It seems, however, they are now willing to invest in smaller stores in the search for space and market share, having acquired between them 57 stores from The Co-operative Group/Somerfield and Woolworths.

Third, their operating models are robust and their relative financial performance puts them, in our reckoning, ahead of Asda and Sains­bury's, which should mean they are well placed to compete on new sites and existing stores.

Furthermore, the companies have the financial strength, corporate confidence and the ownership stability to continue to invest in pursuit of their medium-term strategies.

In our view, they both have strong brand propositions and business models that mean they will continue to compete effectively against the larger players in the market for the foreseeable future and beyond.n

Clive Baker is MD of McQueen