Blackfriar: Supermarkets do battle to gain that Christmas X factor

Last weekend Morrisons used the controversial ITV flagship show to launch its Christmas TV campaign which features Bruce Forsyth, the host of BBC arch rival show Strictly Come Dancing.

Meanwhile Marks & Spencer was busy yesterday deleting any reference to fired ‘X Factor wildboy’ Frankie Cocozza from its Christmas X Factor-themed campaign.

Sainsbury’s traditional decision to avoid launching its Christmas TV ad – chef Jamie Oliver’s swansong campaign – until after Remembrance Sunday means it will be late to the party.

But underneath all this festive glitter and tabloid mayhem lies a far more serious story. This Christmas is going to be tougher than ever for the UK’s supermarkets.

Analysts say that last Christmas was a weak one for the food retailers and this year looks like it could be a lot worse.

According to respected retail analyst Dave McCarthy at Evolution, the consumer is planning for a frugal Christmas.

In the past customers have shown a willingness to spend for big occasions even in tough times – the so called ‘save and splurge’ effect.

But this year Mr McCarthy says the consumer won’t spend in the same way.

“The consumer has less cash and is more fearful than ever of not having enough money in the future,” he said.

“Plus we have now had a prolonged period of the consumer cutting expenditure, reducing wastage and trading down. These new habits have become the norm and we do not expect this to reverse over Christmas. The consumer has fundamentally changed.”

He adds that Sainsbury’s is looking “very vulnerable” in this environment.

“We believe that price activity will step up in the New Year, with Asda and Morrisons leading the way,” adds Mr McCarthy.

Blackfriar put this scenario to Sainsbury’s chief executive Justin King over lunch yesterday, but he was having none of it.

Mr King believes the consumer is carefully planning ahead of Christmas and will rein back again in January and February when the credit card bills come in.

“The idea of ‘save and splurge’ is nonsense,” said Mr King. “Consumers know when exactly when Christmas is coming, they plan for it and they will celebrate it. This idea of a big rise around occasions and then a big plunge is nonsense. It’s far more a case of a rise and then a plateau.”

The latest IGD data suggests that six out of ten shoppers will spend the same or more on Christmas as last year.

This raises the prospect that retailers might actually get away with a decent Christmas.

But the real challenge will be in January and February when consumers have to pay for their festive overspend. This is when the gloves will come off with price wars expected to dominate the food retail landscape.

As Mr McCarthy says, Leeds-based Asda and Bradford-based Morrisons are in a strong position if consumers look to reduce their budgets.

n IT’S the quiet ones you’ve got to watch, as the old adage goes.

Fenner has been just that. The East Yorkshire-based engineering group, this year celebrating 150 years of trading, has quietly been growing and refining is business even as global markets threaten to nosedive.

Yesterday it reported pre-tax profits growth of 87 per cent to £69.6m in the year to the end of August. Revenues increased 30 per cent to £718.3m, and have grown through the downturn.

“If we did not read the newspapers or watch the TV, our view would be ‘Crisis? What crisis?’” said chief executive Nick Hobson.

Blackfriar does not mistake this for arrogance – Fenner suffered its fair share during the recent recession as customers stopped ordering while they worked through old stockpiles. Jobs were cut and wages trimmed.

But still the company plugged away, continuing its £150m investment programme, improving productivity and tailoring its business to growth markets.

Now it is reaping the rewards.

At first glance, Fenner’s strategy of mixing conveyor belting with plastic components used in keyhole surgery looks an odd mix. But who will blame the group for chasing high margin business in areas with clear growth potential: global energy demand and the ageing Western population.

Its decentralised management structure – handing autonomy to managing directors in its subsidiaries – allows for this broad approach, loosely based around the polymer engineering label.

Investors who followed the company, even when its shares fell as low as 38p in March 2009, have been rewarded. Its shares were trading for 354p yesterday, and analysts think they are worth more. A UK-based manufacturer on a one-way growth trajectory, Fenner can be excused a little smugness.