Kwik Save

This article describes the UK-based chain. There are also several unrelated shops of the same name in the United States.

Kwik Save logo

Kwik Save logo

Kwik Save is a discount supermarket chain in the United Kingdom. Its stores are small to medium sized high street supermarkets and are mainly located in areas with below average incomes. It has struggled to make profits in recent years as superstore operators such as Tesco and Sainsbury's have introduced their own budget brands, and other discounters such as Lidl and Aldi entered the market. The firm has recently encountered severe financial problems and has closed a third of all its stores across the United Kingdom, and the future of its remaining stores is uncertain.

History

Foundation

Founded as Value Foods by Welsh entrepreneur Albert Gubay on 11 May, 1959 in Prestatyn, the company rented its first retail shop in Rhyl in July 1959. Gubay infringed local laws on shop opening, by staying open till 9pm on Fridays, thereby breaking the 1950 Shops Act. His aggressive price cutting resulted in some manufacturers refusing to supply him.

In 1964 Gubay visited the United States with fellow director Ken Nicholson, and learnt about the "baby shark" method of retailing. Combined with ideas gained from West German retailer Aldi, the business model was based on buying a limited range of lines on favourable (net 60 or 90) payment terms, distributing and selling them at or below cost before the payment fell due, and using the interest on the resulting cash flow to fund the business. The first Kwik Save Discount branded store opened in Prestatyn in 1965, and produced more sales than the existing Value Foods supermarkets. The second opened in Colwyn Bay, and by 1970 Kwik Save Discount had 24 stores.

Just before it was floated on to the London Stock Exchange in November 1970, the company changed its name formally to Kwik Save Discount Group Ltd. In 1973, Gubay sold Kwik Save for $28 million. Gubay repeated the low-price retail model using the 3 Boys brand in New Zealand, Ireland and the United States.

1990s

In 1994, Kwik Save bought out the UK mainland supermarkets of Shoprite, a fellow food discounter, taking its store portfolio to more than 1,000. The deal over-stretched its new owner and it took around three years to sort out the consolidation, with all stores being re-branded and many under-performing branches closed. The reduction in profits and the resultant decline in Kwik Save's share price caused by this deal left the company open to takeover.

Somerfield merger

Kwik Save became part of the Somerfield group in 1998 when it and Somerfield merged. operating as a trading division of Somerfield Stores Ltd. Following the merger Somerfield's Food Giant discount supermarkets were re-branded as Kwik Save.

Originally all Kwik Save stores were to be re-branded as Somerfield, but it was quickly realised that the look and feel of existing Kwik Save stores - featuring warehouse style wooden shelving, space-saving small checkouts and narrow aisles - would not lend itself well to the Somerfield fascia. For this reason, the original plan was abandoned and the best Kwik Save stores were cherry-picked for conversion, based on location and market demand, receiving a full refurbishment. At the same time, the company announced the closure of more than half of its stores in Scotland and the conversion of the remainder to the Somerfield fascia. This had the effect of pushing the ABC ratings of the average Kwik Save customer, and also the brand itself, further downmarket.

Sale of stores to BTTF

On 27 February 2006, Somerfield Stores Ltd sold the Kwik Save brand and 171 stores to BTTF, an investment vehicle headed by Paul Niklas, for an undisclosed sum . Somerfield re-branded the 102 Kwik Save sites it has retained under its own name and a further 77 stores have been sold to other retailers, including 19 to Netto.

According to a report in PR Week in April 2006, Kwik Save hired a marketing agency in a bid to revitalise the brand and reposition it as an alternative to the leading supermarkets. Around £200,000 is being allocated to Public Relations as part of a marketing brief worth £4m-£5m.

It was announced in October 2006 that a £30m refinancing package from unnamed investors was put in place, part of which will be used to finance the purchase of a further 45 more stores from Somerfield. Some of those purchased were included in the Competition Commission investigation ruling into Somerfield's purchase of 114 Safeway Compact stores in 2004..

In December 2006, The Sunday Times reported that Kwik Save was suffering from a "sharp fall in sales and mounting losses", and was seeking another financial injection. On 22 January, 2007, it was reported that Kwik Save was suffering problems over delays in payment to its major suppliers, with stocks of many core products being limited as a result.

On 29 January, 2007, it was reported that a new investor was about to inject £70 million into the Kwik Save business.. In mid-February 2007 the company announced that it had managed to source a £50 million refinancing package to revive the failing retailer[1]. In March 2007 the £50 million deal was finalised and Paul Niklas returned as managing director of the company. The holding company changed its name from BTTF to Kwik Save Limited.

Store closures

On 29 May 2007, Kwik Save announced plans to close 79 stores with almost immediate effect. All stores affected will be closed by 30 May 2007. Kwik Save market share fell from 1.2% in the 12 weeks to April 2006 to 0.2% in the same period in 2007, according to TNS Worldpanel. BBC News also reported that Arla Foods UK stopped delivering fresh milk to the Kwik Save chain in the week beginning 21 May, 2007 due to what it called "payment problems".

On 14 June 2007 Kwik Save announced plans to close a further 22 stores with immediate effect in order to protect them from the danger of administration. The group has now closed a third of its stores across the UK, leading to up to 700 job losses. It is possible the entire firm could go into liquidation in less than a year.

Brand image

Kwik Saves stores are primarily aimed at the lower end of the food market, a position which has been maintained throughout the company's history, except for the introduction of some non-food lines during the Somerfield era.

The firm always traded on no-frills, value pricing, with utilitarian shop fittings, basic checkouts and charges for carrier bags. The stores originally stocked up to 600 lines and checkout staff were trained to memorise all prices, thus saving on both the capital costs of bar code reading technology and labour costs of marking the price on every item. In the early years, when the company had little in the way of effective competition, this was a clear recipe for success among the millions of people who might have found the mainstream supermarkets expensive, so the brand was highly regarded.

The company's quirky image has been damaged in recent years, however, by the increasing competition from other discount chains, such as Aldi, Lidl, Iceland and Netto, as well as increased competition from larger chains, which have introduced their own 'value' brand ranges. Also, Kwik Save was seen for many years as the poor relation of Somerfield, consisting only of stores which were considered unsuitable for conversion to the more upmarket fascia, resulting in a further dilution of brand strength.

Store formats

Traditionally Kwik Save stores had warehouse style wooden shelving, laid out in a traditional style familiar from most early supermarkets.

In an effort to modernise the Kwik Save brand when under Somerfield ownership, the company undertook a programme to renovate its stores which included new staff uniforms (a black and white chequered shirt which replaced the red t-shirts), new 'ASDA style' shelves to replace the wooden warehouse racking (referred to as 'boards and beams'), new floors, checkouts, colour schemes and lighting.

Renovated stores devoted more space to fresh foods, introduced new features, such as bakeries, and removed the requirement for customers to pay for carrier bags which, for many years, was symbolic of the Kwik Save business model. Around a third of the Kwik Save estate was transformed, with each store having between £300,000 and £1,000,000 invested in the improvements. Sales figures from renovated stores suggested that the public did respond positively to the new look, although the profitability of these stores still doesn't meet that of unrefurbished Somerfield fascia stores.

The off licence sections of many Kwik Save stores were in a separate department known as Liquorsave. Up until the late 1990s, the fruit and vegetable sections and butchery counters were usually run by local franchisees, usually under the name of Colemans. Also some stores rented out space to non-food retailers. This format has been reduced in recent years and it is unclear what the new owners of the chain will do with existing concessions. These are being phased out in all stores converted to the Somerfield facia.

During the 1980s some Kwik Save stores incorporated a frozen foods section which traded under the name of Arctic Freezer Centres.

Own-brand goods

In the 1990s the chain launched its popular No Frills brand, offering cheaper generic products for people on a budget. This was replaced by Somerfield branded goods shortly after the two companies merged in 1998. Later, this was joined by Manager's Specials, a varied range of low price products.

In March 2006, the new owners of the chain announced that it would no longer sell own-brand goods, switching instead to well known household brands at discount prices. It was also announced that goods would be sourced locally whenever possible.

External links

• Somerfield Ltd press release announcing sale of Kwik Save
• Kwik Save corporate site