Blackfriar: Retail chief dismisses theory of value-end victims in cuts

Value supermarkets such as Leeds-based Asda, Bradford-based Morrisons and market leader Tesco are going to be hit harder by the impending public sector job cuts than their upmarket rivals – Sainsbury's, Marks & Spencer and John Lewis' supermarket operation Waitrose.

The logic is simple.

More public sector workers, many of whom are on below-average incomes working as nurses, teaching assistants, cleaners, dustmen and council workers, shop at cheaper supermarkets.

In contrast, the theory is that the upmarket retailers will fare much better than their more downmarket rivals as their customers still have considerable spending power and will be relatively unscathed by the public sector cuts.

Some argue that the upmarket retailers could actually see a boost as the private sector is spurred into action to create jobs and bolster the UK economy, benefiting their customers.

In addition the so-called grey pound, the wealthy over sixties who are either already collecting their pension or have made more than enough money to tide them over during their latter years, tend to shop at upmarket stores such as Sainsbury's, Marks & Spencer and Waitrose.

Blackfriar put this theory to Sainsbury's chief executive Justin King at the group's results yesterday, but he was having none of it.

He described it as a "very simplistic view", adding that if Sainsbury's was attracting over 20 million customers every week, it was attracting every part of UK society.

He also added that the notion that the North would suffer more than the South, as it has a bigger proportion of public sector workers, failed to acknowledge the large number of state employed workers in London and the surrounding area.

We will find out who is right in the New Year when the public sector job cuts start to take their toll.

But rumour has it that both Asda and Morrisons are gearing up for a difficult 2011 with plans to push cheaper products if customers' budgets are harder hit than expected.

In their favour, both supermarket chains have strong new chief executives in place with the experience to ride the downturn.

FAMILY businesses can sometimes be their own worst enemies, as nepotism, egos, misplaced loyalties and introspection backfire.

But Fenner's succession plans, unveiled yesterday, show a strategy that Blackfriar believes is about as close to a successful family succession plan as you'll see in the City.

After 17 years supervising the East Yorkshire company's growth, chairman Colin Cooke is retiring at 70 years old.

In his place will be Mark Abrahams, the one-time finance director who has been chief executive since 1994. He is stepping aside for Nick Hobson, the next generation of Fenner executives who has more than 20 years with the conveyor belting specialist.

Between them, these three men are a core part of Fenner's family: have more than 57 years' experience with the group.

"Regrettably there comes a time when people have to retire," said Mr Abrahams. "Therefore the issue for us as a board was what's the best way to maintain that momentum and culture and things that make Fenner distinctive.

"We all agreed that this was the right way to take things forward and make sure that it's safely transitioned into safe hands."

Mr Hobson is current managing director of Fenner's highly profitable advanced engineered products division, and has held a number of management positions in this division.

It was he who developed Fenner's medical business, which the company sees great potential for in the world of minimally invasive surgery.

"Nick is a great man. He has built the medical business that we have created and perhaps more importantly shares the goals, ideals and values that have created the culture," said Mr Abrahams.

"It's that that gives me the confidence."

Mr Hobson's knowledge, skills and experience were thoroughly evaluated for the role, said the group, via a process that included external benchmarking.

Fenner consulted major shareholders and investor body the Association of British Insurers before the finalising the changes. The City appears to agree, and shares lifted 4.6 per cent yesterday.

Mr Abrahams added: "In respect of the values, people, and the way people are treated, respected and encouraged, then we are almost like a family business, but that's overlaid with proper corporate governance."

Blackfriar believes Fenner gets the best of both worlds with this succession plan.

It retains Mr Abrahams' 20 years' experience, and gets a fresh and hungry new chief executive to drive its growth.