Whoever takes control at the top, in what direction must M&S take its food division? Elaine Watson and Anne Bruce report

And one analyst agrees that, in some ways, radical change isn’t needed. “I still think M&S sells the best food on the market. But it has got to differentiate itself even more and get its message out more effectively.”

Quote unquoteWhether or not Philip Green gets his hands on Marks and Spencer, big change is now inevitable in every part of the business. New M&S chief executive Stuart Rose made that much clear when rebuffing Green’s initial advances for the chain this week and outlining his initial thoughts on how to kickstart growth at the retailer. “We can identify some quick wins and we need to get the right people in place to sort things out,” says Rose.

Womenswear is obviously his priority - and there are some huge challenges there. But what about food? Although the M&S food business has consistently outperformed clothing in recent years, there is no room for complacency at the moment, with like-for-like sales in the past year up just 1.6%. That’s better than Sainsbury and Safeway, but slower than recent years, and leagues behind Waitrose, Asda, Tesco and Morrisons, who are increasingly playing M&S at its own game and winning, according to one source close to the company.

He explains: “Ten years ago, one thing was very clear about M&S food - it had to be bloody brilliant. The product developers had to provide a real wow factor. That has been eroded over the years. Everyone has moved into the same space: Sainsbury Taste the Difference, Tesco Finest - the list goes on.”

But focusing purely on the premium end of the market may be a mistake, warns PA Consulting’s Philip Dorgan, who says: “Gone are the days when the consumer aspired only to the superior quality of M&S’s foods. Consumers now buy an eclectic range of products in every category, at various prices, to meet different needs for quality and price at different times.”

If M&S wants its customers to keep coming back for more, says Dorgan, it needs to follow the lead of its supermarket rivals and differentiate ranges into a good, better, best hierarchy.

That would be a radical step for M&S - although there were reports last year that the company was looking to re-engineer the quality of some food products and pushing for keener prices. Other analysts point to more fundamental isses that need tackling, such as improving availability, speeding up the decision-making process and taking costs out of the business.

And one predicts that Rose will probably see food as ripe as clothing for some serious cost-cutting. “The first thing someone like Rose - or Green for that matter - might come in and say is ‘why do suppliers have to put the product in front of the world and his wife at M&S just to get it on the shelf?’ There are too many layers of management in the business before you get to the people that actually buy the product.”

Whether such changes will be made by the current management team at M&S, or whether Rose will bring in new blood, is a moot point. Rose would not be drawn on any specifics this week, saying only: “We have got lots of good people in this business and if I have to shuffle people around I will.”

But some analysts are already predicting that head of food Maurice Helfgott could be a casualty - even though he has only been in the role six months. Speaking at the M&S results presentation just days before Green dropped his takeover bombshell, Helfgott acknowledged the issues facing M&S.

He accepted the business needed to differentiate itself, and said it would do that, in part, by focusing on those areas where M&S was still seen as a destination store by shoppers: fresh and health, gastronomic adventure and celebration foods.

Helfgott also identified the threat posed by the premium ranges developed by the major supermarkets and the challenge from upmarket grocers such as Waitrose, adding: “We have to make our food even more convenient and even more special.”

The big issue for readers of this magazine is whether Philip Green understands the food business - despite his interest in Safeway. His famous line - that selling an apple is no more difficult than flogging skirts - will not reassure the trade.

One analyst says: “Green’s comment about buying food and buying clothes being the same makes a great quote, but it’s not the issue. He will bring in other people with the expertise to do that.”

Nevertheless, Green’s reputation for squeezing suppliers will make many food and drink firms wary. Not surprisingly, they were staying tightlipped about the events unfolding at M&S this week.
Philip Green has previously described food retailing as a tough nut to crack, but has always wanted to get his hands on M&S, having made an abortive bid for the company in 2000.

He hit the headlines again last year when his designs on Safeway were frustrated by competition issues which would have hampered future store sell-offs.

He has also been connected to Sainsbury in recent months and linked to former Asda boss Allan Leighton.

Green made his name acquiring Sears with the Barclay Family in 1999, before disposing of its retail chains and financial services businesses later that year.

He bought Bhs in 2000 followed by Arcadia in 2002. Since Green took over Bhs, it trebled operating profits to £102m in the year to March 2002.
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Rose knows M&S like the back of his hand, having spent the first 17 years of his working life there, eventually becoming commercial director of its European division.

He is also no stranger to bloody takeover battles, forcing GUS to substantially up its offer for Argos in 1998 and Philip Green to pay extra for Arcadia in 2002. As CEO at Booker, Rose led the company back into the black before overseeing its merger with Iceland in 2000.

He brings with him to M&S two loyal lieutenants: Charles Wilson, who has joined the board, and Steven Sharp. Readers will remember them for their time at Booker, where Sharp was marketing director and Wilson became MD following the Iceland merger. Known as “the enforcer” at Booker, Wilson has a reputation for ruthless cost-cutting and a keen grasp of operational issues.