It’s been two years since Budgens announced it was to sell off its corporate-owned stores to pursue a delivered wholesale-based operation. But despite more than a third of stores being run as franchises and a timeframe to secure the sale of the remaining 128 company-run stores by the end of 2007, Budgens is already looking to branch out.
Musgrave Budgens Londis MD Mike Taylor believes it now has the strategy in place to open 25 new stores a year for the foreseeable future, allowing it to become a truly national operator, potentially as large as the 2,038-strong Londis symbol group. “Londis stores stretch from the Highlands to Cornwall, but you can draw a line from Humberside to the New Forest and all Budgens stores are pretty much south of it,” he says.
There’s clearly an opportunity to expand Budgens beyond its southern heartlands, believes Taylor, who last week opened the first store outside of England in Tonteg, Wales. As it continues to refocus the business as a wholesale operation, it is also in the final stages of creating a streamlined supply chain, leveraging Londis’ national coverage and Budgens’ focus on fresh deliveries.
Taylor says: “As we align the Budgens and Londis supply chains, we’ll have natural opportunities to push Budgens further afield. But the point to emphasise is that this is not a race. We want to find the right retailers for our divestment stores as well as the right retailers and stores for expansion.”
According to Taylor, the rate of divestment is slightly more than one a week. As it stands, the chain comprises 210 stores, including 82 that have already been sold off to franchisees. However, the company
claims about 60 of the remaining 128 stores are already spoken for by independent retailers and is hopeful that those deals will go through in the coming months.
That leaves 68 that need to be divested by the end of next year in order to meet its internal deadline of Budgens becoming a pure franchise group before 2008.
In what he calls MBL’s “final push” to sell the remaining corporate stores, Taylor launched a one-off ad campaign this month to attract buyers to the Budgens’ business model. He says: “When we first announced the sell-off, we had interest from more than 1,000 retailers. It’s taken the best part of a year to meet with them and whittle them down to the 50 best. Until now we couldn’t have coped with any more applications, but we’re ready again. This final push will hopefully mean the sale of the remaining tranche.”
But with the average store size coming in at 4,500 sq ft, with about 30 of more than 5,000 sq ft and four above 7,000 sq ft, how easy will it be to attract independent retailers to take on a larger footprint?
“It will be harder than they think,” says Professor Jim Quinn, an expert in symbol group retailing and director of business studies and language programmes at the School of Business Studies at Trinity College, Dublin. “The stores are that bit bigger. The added challenge is finding retailers with entrepreneurial flair who are willing to be subservient to the disciplines of a wholesaler.”
On the other hand, Musgrave already has the competencies to run bigger stores, says Quinn, highlighting its franchise supermarket fascia, SuperValu, in Ireland. He adds: “They may also be bringing a new opportunity to many people in the UK who want to get into the grocery business but not a small convenience shop. Other symbols can’t offer that.”
Quinn remains cautiously optimistic about the expansion. “Musgrave wants to take Budgens into areas where the brand doesn’t exist; that’s always risky. But symbol operators such as Spar are quite fragmented under regional companies, whereas Musgrave is a centralised single company, which works better for areas such as store standards.”
Taylor is conscious of the challenges, but he believes a focus on community retailing will help Budgens and protect the independent sector from the march of the multiples. In February, the group’s first co-branded store, Warner’s Budgens, opened in the Cotswolds, with a greater focus on local sourcing. “Our intention is to open lots of co-branded stores,” says Taylor. “People within a village environment want a local shop. This isn’t fake corporate; this is about independent retailers in their communities.”