Nearly a quarter of a century later, Lancaster’s turnaround skills are once again in evidence. Since 2006, when the down-to-earth Yorkshireman became top dog at Netto – the retailer famous for another top dog, Scottie – he has transformed a business whose operating profit had tumbled 60% from £8m to £3.2m that year into one that last year posted a profit up 191% to £9.3m. This year, Netto’s operating profit has already more than doubled while turnover is enjoying close to double-digit growth, claims Lancaster. And as the deteriorating economy continues to play into the hands of the discounters, there will be more to come, he assures The Grocer at the opening of a £2m new store in Wigan. Just don’t mention TNS to him.
Last month, the market researcher suggested Netto’s sales had fallen 0.4% in the 12 weeks to 10 August, compared with sales uplifts at Aldi and Lidl of 19.8% and 12.3% respectively. Netto immediately responded that Nielsen data showing a 5.3% increase in the four weeks to 9 August provided a “clearer sales growth picture”. Netto’s own figures for the first six months paint an even rosier picture of closer to 10% growth. “I know what our till roll is and we are doing well,” says Lancaster.
One indisputable fact is that Netto has opened 11 stores this year, bringing its estate to 188, and a further nine are on course to open by Christmas. The expansion, funded by parent company Maersk, is set to continue, with a further 25 stores due to open in 2009. Lancaster also reveals plans to open a third distribution centre, near Manchester, by this time next year at a cost of £25m and is currently extending its main depot at South Elmsall. In total Maersk will invest £100m of capital into Netto’s UK business in 2009.
Name: Richard Lancaster Age: 44 Born: Wakefield Lives: Brough, near Hull Career: Built up the family convenience store chain, Escasave, which he sold after 11 years to Jackson’s. Marketing director at Day & Nite stores, Preston. Trading and marketing director at Jackson’s. Marketing director for Sainsbury’s Convenience. UK MD at Netto Hobbies/interests: Season ticket holder at Manchester United. Going to the gym. Playing golf (handicap 13). Spending time with family Personal: Lives with his partner Dawn and two daughters – Kaden (5) and Rhianna (seven months). Also has two daughters from previous marriage Retail philosophy: “It’s all about getting to know your customers. Get close to them, give them what they want, and you’ll succeed”
It’s all a far cry from Lancaster’s humble corner shop days. After taking up the reins at his dad’s shop, Lancaster built up a chain of six stores in the Wakefield area, eventually selling them to independent retailer Jacksons Stores. After that, he rose through the ranks at Jackson’s, Day & Nite and Sainsbury’s before decamping for Netto. He is now confident that the discounter has moved beyond recovery mode and into growth. While Paul Foley claimed Aldi was cheaper than the multiple supermarkets, Lancaster goes so far as to claim Netto is cheaper than the other discounters.
“We like it when the agenda is about price because there’s only one winner and that’s us,” he says. “We are the lowest-price supermarket in the UK.” Judging by the well-lit and spacious new Wigan store, price-cutting hasn’t compromised the overall shopping experience. Quite the reverse. Bread and chilled fruit and veg are what shoppers first see on entering. “A year ago you’d have seen cleaning lines here,” he says. “Fresh produce is such a barometer of quality so it’s important to have it by the entrance.”
With hanging signs and shelf-talkers, the store looks more like a regular supermarket. “It’s all part of the process we’ve been going through in the past year to lift the look and feel,” says Lancaster. “We felt we needed to adapt to the UK market. Traditionally, there has been snobbishness in the UK. It’s not been unusual for people to come in and bring Sainsbury’s or Waitrose bags. But the credit crunch is changing that. People are proud to have bought a bargain.”
As well as changing the format of its stores, Netto has increased the number of lines from 1,100 to 1,400 while keeping the proportion of brands at about a third. Lancaster has a target of 1,500 lines – any more and it will start to interfere with the discounter’s low-ticket, high-volume model. He admits there aren’t enough chilled products such as fresh meat and yoghurt in his stores but says he plans to change that. The main depot is being extended to include a big chilled section and there are plans for 80 more chilled lines in the next year.
Then there has also been a move into convenience-type retailing in the past year with the addition of e-top-ups, tobacco, greeting cards and, in some stores, ATMs. Lancaster says store growth will come in the south and the Midlands but he has no current plans to move into Scotland, south Wales or the south west because they are too far away from its depots. Though the economic situation has arguably boosted sales, Lancaster is confident consumers won’t desert Netto once the credit crunch is over.
“Our real boom time will come during the economic recovery. We are capturing shoppers from many other retailers because they want better quality products at lower prices. When the upturn arrives they will stay because they will think – why go back to paying more? We are well insulated against the downturn but our real boom will come in the upturn.”
People may even start using Netto bags to take their shopping home in.