Similarly, employees at convenience groups T&S and Alldays cannot be blamed for feeling anxious as they wait for their respective new parents Tesco and the Co-operative Group to announce future plans for their recent acquisitions.
Most of the thousands of staff working at store level for any of these three companies should be able to rest easy for now, but the consolidation taking place in the grocery trade means middle and senior managers at each head office are nervously awaiting calls from their human resources department. Managers and directors in key areas such as buying, merchandising, category management, marketing, sales and public relations could find their skills surplus to requirements as roles are duplicated.
No-one’s officially giving any figures, but from the three deals about 1,000 middle to senior managers at the three head offices are expected to lose their jobs over the next few months.
The 1,200 employees at Safeway’s headquarters in Hayes, Middlesex, are perhaps most concerned about their future. Whoever eventually takes over the company will want to slash costs by rationalising management numbers. The main questions are how big a saving will the new parent demand and what will happen to Safeway’s recruitment in the meantime?
A source at Safeway’s head office told The Grocer: “Morale here is at rock bottom. People are frantically searching for other jobs. But if they leave, who will replace them, given the uncertainty? How much job security would anyone new have and will Safeway even bother to employ anyone new in this climate?”
If Morrisons’ proposed £2.5bn merger is eventually recommended and approved it is almost certain that management positions will switch to Bradford. The head office is also almost certain to shut if Sainsbury’s, Tesco or Wal-Mart succeed with any of their bids. Yet should US buy-out firm Kohlberg, Kravis Roberts or retail entrepreneur Philip Green emerge victorious they would need to keep Hayes operational and would want to retain many existing managers, initially.
One retail insider believes that only about 25% will be able to find similar work in the grocery sector. “The likes of Sainsbury and Tesco don’t have enough vacancies to take up the slack, even if some very qualified people come onto the market. These people may find work at companies such as Somerfield, Iceland or Budgens, but many of the remaining 75% will probably end up leaving grocery altogether. “
Safeway has been a client of recruitment consultant Retail Human Resources for 14 years and RHR managing director Peter Burgess says all managers at the chain are apprehensive about their immediate future. “There are good people at Safeway and those in middle and senior roles who do lose their jobs will be snapped up elsewhere in the industry I am sure, but that does little to reassure them now,” he says. “If Morrisons or Wal-Mart wins, you have to ask yourself how many of Safeway’s London-based people will want to move to Yorkshire?
Probably, not many because of family commitments. Yet Morrisons would need to expand its head office team in Bradford to absorb the Safeway operation.”
Edward Whitefield, MD at retail strategists Management Horizons Europe, says any grocer acquiring Safeway will be able to make significant savings on staff costs. He estimates that head office expenditure at Safeway represents about 4% of its £8.7bn turnover, which is about £350m.
“When two companies get together there are big savings to be made in operational overheads.Cuts usually start at the top and work their way down, although staff at store level should be largely unaffected, unless a shop closes, because each branch will still need its own manager and team to maintain customer service levels.” He adds that in a takeover, nine out of 10 times the new owner will install its own managers.
Professor John Dawson, professor of marketing at University of Edinburgh, who runs the Postgraduate Certificate in Food and Grocery Industry Management, says Tesco and the Co-operative Group face months of re-skilling following their deals, and whoever acquires Safeway must also allow for a period of re-training from store to head office level.
“There can be different thinking relating to merchandising and category management, for instance, and Safeway middle managers who remain with their new employer may have to get used to different pricing structures and promotional ideas,” he says. He claims Safeway buyers who keep their jobs will have to improve their negotiating skills, especially if Wal-Mart buys the chain. “Suppliers are always telling me how much tougher Asda is to negotiate with than Safeway,” says Dawson.
Some managers will choose to leave because they do not like the new culture being imposed. This happened when Wal-Mart acquired Asda and it is possible that talented Safeway, T&S and Alldays managers will decide the same way.
Those who do leave should be able to transfer their abilities quite easily. Many retailing skills are generic, such as customer communication and customer service.Those who want to remain in grocery but are unable to move to another multiple may have to adapt their skills to meet the demands of the thriving high street convenience sector instead. The IGD predicts that the convenience retail market has the potential to grow to £26bn by 2006 following the wave of consolidation seen last year, including not only the Tesco/T&S and Co-op/Alldays deals but also the Musgrave/Budgens agreement.
A Tesco spokesman insists the company will run T&S as an independent subsidiary, leaving head office and distribution in tact. However, the IGD expects buying responsibilities for T&S stores to be transferred to Tesco which will probably lead to a reduction in buying jobs. However, at store level Tesco says its will create around 1,400 jobs over the next three to four years.
The Co-operative Group refuses to discuss its plans for Alldays staff or its stores. The debt-laden convenience store operator employed 10,500 staff across its 600 stores and at its head office in Hampshire.
Opinion is divided on what effect the flood of management job seekers on to the recruitment market will have on salary trends for top jobs. Some think companies will still have to pay well to attract the best and others think increased demand for the top jobs will give retailers an opportunity to rein in pay rates at their head offices.
Whatever happens in the next few weeks there are likely to be many managers studying The Grocer’s jobs pages even more intently than usual.