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Morrisons Report

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Module Assignment One 1.0 Introduction to the assigment - Morrisons The supermarket chain to which this report refers to is ‘Morrisons’; this is considered to be one of the big four supermarket retailers in the country and since its creation in 1899 has grown from strength to strength. Morrisons is a family run empire that first started as an egg and butter merchant in Bradford, as times progressed its first supermarket was opened in 1961 (also in Bradford), throughout the 1970s and 1980s the company diversified into distribution of stock, and in 1999 its 100th year of trading it also opened its 100th store. In 2000 its first store opened in Wales, and in 2004 they branched into Scotland.
“The OFT said the big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - had built up their dominance of the food retailing business over the past six years.” ,
A sign of the times was when the company took over the Safeway’s Group ‘creating the UK’s fourth largest supermarket group’. At present there are more than 360 stores; several factories, distribution centres and head office administrative posts across the country employing over 130,000 staff and welcoming around 10 million shoppers each week; their mission statement is
‘to deliver the very best for less’ . 2.0 A review of the macro environment of Morrisons ‘Macro environment relates to the larger forces that have an impact on society as a whole and not just on one or a few organisations…the company’s macro-environment consists of six major forces that impact on organisations’
(These include demographic, cultural, economic, natural, technological, political and legal trends).

2.1, 2.2 Demographic and Cultural Morrisons has been able to benefit from being able to adapt well to its macro-environment, as a company that started off in mainly the north of England, it has developed itself as a store for the working classes. In areas such as Bradford, where there is high unemployment and was recently described as ranking as ‘…sixth-worst in England for unemployment and fifth-worst for low incomes. Overall, out of 354 districts in England, Bradford is ranked 64th for deprivation, which places the Metro District among the top fifth worst-off districts of the country’ . Morrisons has been able to use its demographic power to develop its marketing strategy to target those who cannot perhaps afford to shop at Sainsbury’s and Waitrose, with fresh produce and cheap prices it can appeal to the masses. On the other hand Morrisons underestimated the difficulties with suppliers in multicultural regions, what delayed whole process of Safeway’s acquisition and caused financial loss to the company.

2.3 Economic Although the economic predictions for the 2006 for retail sector were (and are) quite worrying, as recently described by Gladding, Morrison’s seems to continue their growth. ‘ The UK retail sector is expected to grow at a rate of about 2 percent, says Gladding, only slightly better than the 2005’s dreadful 1.8 percent growth rate. It seems the days of 3 percent of annual growth are a thing of the past, he said. “It’s really a case of survival of the fittest for the retail sector,” said Gladding. Cue: squirming suits in the crowd. Compounding the problem is rising import costs, property costs, fuel costs and energy costs. UK retailers, in total, face an additional 9.5 billion pounds in added costs.’ In an article in The Guardian newspaper the author reported that: ‘Morrisons has consistently beaten the sales performance of rivals in recent years by sticking to its no-frills and everyday low price strategy…’ It has been able to provide both branded and own label products and as mentioned as part of the Strategy and Structure on their website: ‘Our aim is to provide all our customers with the very best value for money wherever they live and uniquely, we have always charged the same prices in every one of our large stores’ When Morrisons aquired the safeway chain they became the UK’s fourth largest supermarket group with an annual turnover of ₤126 billion.
2.4 Natural There are several natural factors that have not been so beneficial for not just Morrisons but also for many of the supermarket retailers and have affected them up and down the country; and subsequently have had an economic impact upon their business. In 2001 and largest outbreak of ‘foot and mouth’ hit mainland Europe and as described in an article in the Royal Society – Infectious Diseases in Livestock. "…the outbreak was the worst experienced by Britain since proper records began and involved 2030 cases spread across the country. Some 6 million animals were culled (4.9 million sheep, 0.7 million cattle and 0.4 million pigs), which resulted in losses of some £3.1 billion to agriculture and the food chains…’’ More recently the world has been scared by the mention of Bird Flu. In the Far East many birds have been slaughtered, as a result of several outbreaks of Bird Flu. In Britain many poultry farmers are faced with the fact that with rising demand and possibly rising prices will have an impact upon how much stock they can sell. Morrisons, because of its buying power has the ability in which to demand from its suppliers the best produce, however it must as a company convince its customers that its produce is wholly British. At present there is little more than speculation in the press that bird-flu is on its way. Being labelled as one of the ‘big four’ is of huge significance to a company such as Morrisons, it is a sign of the times that it has joined three of the largest retailers (in mainly food and groceries) in the country and has a huge amount of buying power within the community.

2.5 Political and Legal Marketing decisions are strongly affected by the government; recently the issue of the large supermarkets taking over areas of ‘greenbelt’ which had previously been thought of as a good idea, (although in actual fact had forced out many smaller local shops); however in actual fact these huge supermarkets had underperformed. The government may in the future have more of a say in site development. Kevin Hawkins described in his article: ‘..that there should be a complete ban on all mergers and acquisitions in the retail industry and that a retail regulator (our old friend "Off Trolley") should be set up - were speedily kicked out of sight by the DTI..
..2,000 small shops are going bust every year - or was it every week?..
..then we have the predictable call for more regulation - supermarket power must be curbed; small shops should be preserved..’ 10

2.6 Technological With the acquisition of Safeway’s, Morrisons now needs to centralise all of its distribution and supply centres. A proposed plan for a new head office should ensure that this process is followed through. As with the rest of its business Morrisons maintains as much direct control over its distribution function as is reasonably possible. Morrisons also estimated that cost savings may reach £65 million in 2004 due to the benefits of vertical integration. But as technological advance is being further developed and from February 15th, all UK ‘chip and pin’ cardholders have had to give up scribbling their signature and instead tap in their pin number at point-of-purchase, Morrison’s has been forced to install Bluetooth system in their stores which might reduce their estimated cost savings.

3.0 A review of the micro environment of Morrisons

‘These are internal factors close to the company that have a direct impact on the organizations strategy’. These factors include customers, employees, suppliers, shareholders, media and competitors 3.1 Customers
Customers are very important to businesses and in order to survive they need to have the products to appeal to them, according to ‘This is Morrisons’ (taken from their website)
‘We aim to provide all our customers with the very best quality and value for money on their weekly shopping, wherever they live…customers can expect to receive the highest standards of service and care’
Because of so many multi-buy offers which Morrisons introduced for their custmers, there is a bad utilisation of space in stores. Promotional products takes too much of the store space and blocks access to several aisles. There are also problems with a signage, and it is hard to find products as they are kept in not very logical way on the shelves. As customers are required more and more from the supermarkets, the on-line shopping seems to be nessesity. All of Morrisons rivals have well advanced on-line shopping as well as home deliveries. Therefore it is a big chance and opportunity for Morrisons to create such a services.

3.2 Employees Morrisons Retail Philosophy is best described on their website: ‘…to offer outstanding quality and value for money, unbeatable customer service and a pleasant shopping experience, we are renowned for our ‘’no-nonsense’’ approach to retailing, consistently offering reliable, honest good value’. While the good value for honest price seems to be matching with Morrisons Philosophy, customer service leaves a shadow of doubt. (Appendix 4) 3.3 Shareholders
Throughout the history of the company, Morrisons has not only depended on its customers and its employees but also its shareholders. These people are concerned with assessing the quality of their investment and the payoffs that they can expect in the dividends and capital growth. The group has been able to maintain a steady level of profit and in 2005 had a turnover of almost £5,850 million. However, after the takeover of Safeway, Morrisons lost many customers to their rivals such as Sainsbury`s and Waitrose and did not keep the pace to attract new customers.
“Morrisons has struggled to successfully integrate its acquisition of Safeway into its store portfolio. Safeway customers, disenchanted with store conversions and the replacement of premium products in favour of Morrisons products, migrated to competitors such as Sainsbury’s and Waitrose. Although its distribution channel more than doubled with the acquisition, the brand’s ability to attract new customers has not kept pace. The brand is still deemed slightly down market. Its harsh black and yellow colours do nothing to engage with its audience and consequently its ability for brand extension is limited at only 47%.” . 3.4 Media All of the big four have their own way of attracting new customers and being able to fend off the competition. From using big names (such as Jamie Oliver) to promote their products to being involved with charities and good will causes, each chain will try and out-do the other. (Morrisons raised in 2005 £800,000.00 for Diabetes UK and in 2004 raised £552,000.00 for Marie Curie Cancer Trust)

3.5 Competitors Morrison’s the company that once started as an egg and butter stall, has diversified its product range over the years and more recently acquired the Safeway Company to its empire. This has meant that they have been able to expand their market share and become one of the big four (alongside Tecso’s, Sainsburys and Asda). All companies thrive on being able to get one over on their competitors and nowhere is that more competitive than in within supermarkets? All of the big four have their own way of attracting new customers and being able to fend off the competition. From using big names (such as Jamie Oliver) to promote their products to being involved with charities and good will causes, each chain will try and out-do the other. (Morrisons raised in 2005 £800,000.00 for Diabetes UK and in 2004 raised £552,000.00 for Marie Curie Cancer Trust) Morrison’s is up against the ‘big four’ and must share the market with them; a price check exercise carried out by the author (detailed in Appendices I and II), shows how a trip to these four leading supermarkets; buying both branded and own label products highlighted the difference in costs between Morrisons and its fellow competitors. The result of which were that Asda is the leading company followed by Tesco and Sainsbury`s with Morrisons being fourth. Also the results of their own brand line products shows that Tesco`s and Asda`s are the cheapest followed again by Sainsbury`s and Morrisons. The results shows that Morrisons is still the outsider in the race for customers and needs more offers to keep up the pace with them. The expansion of CD’s and DVD’s in stores has enabled supermarkets to ‘tap’ into additional markets and gives Morrisons to offer more for their customers. Why just do grocery shopping, when you can come to the local supermarket and pick up the latest blockbuster release or number one album, at probably a lower or the same price than HMV or Virgin Megastore?
As it can be observed Morrisons has the cheapest number one CD album and not the most expensive new released DVD, so for many it might be good reason to buy CD’s and DVD’s in Morrisons instead of going to HMV or Virgin Megastore (Appendix 3). All of the major competitors to Morrisons have won the government’s legislation to create small, local ‘metro’ stores, whilst Morrisons are still wondering whether to invest in small stores or stay with big supermarkets.

4.0 SWOT Analysis This next section of the report focuses on the strengths, weaknesses, opportunities and threats of Morrisons. 4.1 Strengths • Becoming one of the big four supermarkets after Safeway’s takeover
• Branches all over the UK (over 360 Morrison’s stores across the country)
• Wide range of multi-buy promotions (market leader ahead of the big four on the ‘best range’)
• Aggressive petrol sales strategy
• Word of mouth
• Cheap prices
• Good advertising compaign ( posters and TV adverts, ‘reason number ... to shop in Morrisons’

4.2 Weaknesses • Family driven from the top, still very much a family business Sir Ken Morrison very dominant
• Poorly informed staff
• Bad utilization of store space and bad localization of some products
• Not having smaller ‘metro’ stores in areas such as town centers, train stations etc
• No on - line shopping and home deliveries

4.3 Opportunities
• Expansion on the Safeway brand, stores and locations
• Development of the ‘best range’
• Non food expansion (CD’s, DVD’s, clothes, electrical goods etc)
• Not having smaller ‘metro’ stores in areas such as town centers, train stations etc

4.4 Threats
• Bird Flu and Foot Mouth
• Other supermarkets entering the market and becoming more competitive
• Competitors such as Tescos and Sainsburys having smaller ‘metro’ stores
• Planning restrictions and competition for new sites
• Not having smaller ‘metro’ stores in areas such as town centers, train stations etc

5.0 Conclusion As part of its micro-environment strategy Morrisons has matched its straightforward trading philosophy, and despite the volume demands of a growing business, Morrisons has consistently achieved industry-leading levels of availability.
In June 2005 Morrisons won The Grocer 33 award for availability and customer service, achieving availability of 98.3% during the 12 months to June 2005. Morrisons’ store operations director Mark Gunter said of the award:
“These awards demonstrate that even with the conversion challenges facing our business, the dedication of all our team ensures that we consistently deliver with the right products on the shelf at the right time” The past 100 years have been very significant for the supermarket chain Morrisons, starting as a small stall in 1899, to the first superstore in 1961 to the acquisition of Safeway’s in 2004 and becoming a part of the ‘big four’ this company has gone from strength to strength. Morrisons has both micro and macro factors which have enabled it to see-off the competition and become one of the ‘big four’ successful supermarket chain. Although there are many areas in which need to be further developed in order for it to remain one of the ‘big four’. Morrisons to diversify their product range, and in keeping with this ensure that they have a dynamic advertising campaign, that will be able to keep up with Jamie Oliver promoting Sainsburys’, Prunella Scales promoting Tecso’s, and the mother patting her rear pocket for Asda. Morrisons can further break into the market by developing its hold on the metro stores that Sainsburys and Tecso’s do so well.

6.0 Appendices

6.1 Appendix 1

A basic shopping list and how their prices compared:

Shopping List /Store
Asda
Tesco
Sainsbury’s
Morrisons
Whole Fresh Milk 1pt £0.32p
£0.32p
£0.32p
£0.32p
Loaf of White Bread
Hovis
£0.72p
£0.96p
£0.96p
£0.88p
250g Lurpak Spreadable Butter £0.97p
£0.96p
£0.97p
£0.96p
200g Jar of Nescafe £3.49p
£3.49p
£3.49p
£3.49p
80 Tetley Tea Bags £1.43p
£1.59p
£1.59p
£1.69p
Heinz Baked Beans £0.44p
£0.44p
£0.44p
£0.44p

Shopping Totals:
£7.37p
£7.76p
£7.77p
£7.78p

6.2 Appendix 2

A basic shopping list and how their prices compared:

Shopping List /Store
Asda
(Smartprice)
Tesco
Sainsbury’s
(Basics)
Morrisons
Whole Fresh Milk 1pt £0.35p
£0.35p
£0.32p
£0.31p
Loaf of brands own bread £0.28p
£0.28p
£0.28p
£0.48p
Brands own Butter 250g £0.53p
£0.53p
£0.64p
£0.69p
Brands own coffee 200g £1.28p
£0.76p
£1.48p
£1.58p
Brands own Tea Bags
80 bags
£0.31p
£0.38p
£0.31p
£0.59p
Brands own Baked Beans
420g
£0.15p
£0.15p
£0.15p
£0.15p

Shopping Totals:
£2.90p
£2.45p
£3.18p
£3.80p

Shopping List /Store
Asda
Tesco
Sainsbury’s
Morrisons
HMV
Virgin Megastore
Madonna, Confession on a dance floor (CD) £8.94p
£7.97p
£8.99p
£9.77p
£8.99p
£9.99p
Harry Potter and the goblet of fire (DVD)
£14.97p
£15.97p
£14.99p
£12.99p
£13.99p
£14.99p

6.3 Appendix 3

CD`s and DVD’s price comparison



6.4 Appendix 4

The author’s trip to Morrisons;

While on my ‘tour’ of the price search of supermarket, I went to one of the aisles to search for custard, found it, and then went to another aisle to ‘test’ the sales assistant if he knew where it was. After a lot of deliberating, and then asking a colleague he sent me in the opposite direction. I have also observed, that the store space is very much reduced because of too many promotional items.
Localization of some products is not very logical and it is hard to find them, especially when it is a busy hour and have to squeeze through shopping people.

7.0 References

List of websites used

www.morrisons.co.uk last accessed on the 12/03/2006 http://news.bbc.co.uk/1/hi/business/4788916.stm, last Updated: Thursday, 9 March 2006, 12:28 GMT last accessed on the 12/03/2006 www.learnmarketing.net /microenvironment.htm last accessed on the 13/03/2006 www.footandmouth.csl.gov.uk last accessed on the 12/03/2006 The telegraph and Argus, web-page 11th March 2006 www.thisisbradford.co.uk last accessed on the 8/03/2006 The Guardian -‘Morrison’s management vindicated by 10% sales rise’ by Julia Finch, Saturday January 10th 1994. last accessed on the 4/03/2006 The Grocer, comments made by Mark Gunter 11th June 2005 last accessed on the 12/03/2006 www.buseco.monash.edu.au last accessed on the 14/03/2006 http://www.gmid.euromonitor.com/Tree.aspx last accessed on the 24/03/2006 Key Note, Market Assessment Report 2003, Second Edition April 2003, Edited by Emma Wiggin, pp.110-111 Key Note, Market Assessment 2003, Supermarket Services, Second Edition September 2003, Edited by Harriet Graham, p.26, p.77 I.G.D. retail analysis, retail presentation-morrisons-M.I.expl. provided by libraries on-line www.guardian.co.uk/christmas2003/story last accessed on the27/02/2006

Books and Magazines Services Marketing, Helen Woodruffe, 1995, M&e Pitman Publishing, London

Retail Week, ’Supermarkets do not need more regulation’ by Kevin Hawkins, March 10th, 2006

8.0 Bibliography List of websites used http://www.cia.gov/cia/publications/factbook/geos/uk.html
Last accessed 26/02/2006 http://www.statistics.gov.uk/CCI/nugget.asp?ID=6
Last accessed 4/03/2006 http://news.bbc.co.uk/1/hi/business/4289358.stm
Last accessed 28/02/2006 http://www.statistics.gov.uk/articles/economic_trends/ET620_Baran.pdf
Last accessed 11/03/2006 http://reports.mintel.com/sinatra/reports/view&name=reports_subs/&levels=152631,167197,1288622/display/id=114755&anchor=a114755
Last Access on the 22/03/2006 Key Note, Market Report 2003, Supermarkets and Superstores , Twentieth Edition January 2003, Edited by Rozmeen Tambe http://news.bbc.co.uk/1/hi/business
Last access 28/02/2006

Books and Magazines

Marketing Management, P. Kotler, 2003, International Edition, 11th Edition, Pearson Education International G.Armstrong and P.Kotler (2003). Marketing: An introduction. 6 ed, London: Pearsons Education LTD J.Groucutt et al (2004). Marketing: essential principles, new realities. London: Kogan Page D.Jobber(2004). Principles and Practice of Marketing. 4ed. London: McGraw-Hill Education F. Brassington, S. Pettitt (2003). Principles of Marketing. 3rd ed., Harlow : Pearson Education Limited Smith, P. and Taylor, J. (2002). Marketing Communications: An Integrated Approach. 3rd ed. London: Kogan Page

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... 2.1 Purpose The purpose of the report is to decide whether supermarkets have become too big to the extent that they are damaging competition by explaining and analysing the changes in legal framework and economic and political structure that has enabled them to become dominant in UK grocery retailing. 2.2 Supermarkets background: The first supermarket opened in the UK after World War 2 (1948), which introduced the cheap agricultural food revolution. Today there are several different supermarkets and grocery stores all over the UK. In the supermarket industry the most dominating firms are Tesco with 30.4% of the market share, Asda with 16.6% of the market share, Sainsbury with 16.2% market share, and Morrisons with 11.2% market share. All these supermarkets opened their first self-service stores during 1950 – 1963. Joanna Blythman, SHOPPED The shocking power of Britain’s Supermarkets (2004: 4) states that ‘in 1950, supermarkets had only 20 per cent of the grocery market while small shops and traditional Co-ops had 80 per cent between them’. The average size of the Big 4 supermarkets has increased significantly in the past years. However, the Big Four have also incurred some problems with merging or taking over with many firms in the same industry too quickly as seen in the case of Morrisons, which led to them going through financial strains. This was because Morrisons had an aim to convert their Safeway stores into Morrison stores which was the largest......

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Managing Financial Resources

...Introduction: The aim of this report is to conduct an analysis of the financial statements of J. Sainsbury plc and Tesco plc for the year ending 2013, comparing both companies by looking at the ratios calculated and looking at the importance of supplementing financial analysis with non-financial considerations. Tesco is Britain’s leading food retailer and the third largest in the world. Tesco opened in 1929. After joining the eighties trend for large out-of-town supermarkets, in the 1990’s the company started pioneering many new innovations. Tesco has over 530,000 colleagues over 12 countries serving up to 75 million transactions every week. J. Sainsbury is into grocery, retail and financial services. It has a 16.8% UK market share. It has 157,000 colleagues, 23 million customer transactions per week, and 1,106 stores. The information in appendix 1 and 2 was extracted from both companies’ annual reports, for Sainsbury’s year ended March 2013 and February2013 for Tesco. Analysis An operating profit of £9.25 was made on every £100 of capital employed from Sainsbury’s. Compared to Tesco, an operating profit of £7.02 was made on every £100. Looking at the two figures Sainsbury utilizes their capital more efficiently than Tesco, because looking at their revenue scale Tesco is has 2188 compared to Sainsbury which only has 887. Using the 10 year benchmark in the UK, the risk free return rate is at 2.87% in the UK ( (Bloomberg). Therefore comparing Tesco and Sainsbury against......

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Merger and Acquisition

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Task Sheet

...In this task I am going to identify some of the competitive factors in the retail environment Tesco faces and the internal and external changes they need to face. I will also identify the competitors of Tesco, their market position, barriers to entry and new retailing concepts. The aspects of government policy concerning planning guidance for new store locations, specifically the influence of Planning Policy Statements. Lastly I will explain the retailer's way of working which may be determined by government. Tesco's competitors are Sainsbury's, Asda and Morrisons. These stores constantly battle against each other for the biggest market share. The reason why Tesco competes with other stores is because they all sell the same or similar products so they all compete through best offers and low prices. They don't let other new businesses get in their way, therefore Tesco has been spending large amounts of money on the development of their existing infrastructure. They compete on things like who sells their products for the lowest prices. For example, because they are such a large company Tesco can always negotiate the best competitive prices with their suppliers and their own brand product manufacturers when compared to small food chains. If a new technology is introduced it will affect Tesco's performance. Because their present employees will have to either learn how to operate the new systems or leave the job. Tesco doesn't want to lose their employees because they are......

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Bakery

...An Ordering System For Prima Continental Bakery. This chapter provides a brief look at the history of the stakeholder, background to the problem and the problem statement. The stakeholder in question is Bradford based Prima Continental Bakery. The company was founded 1952 by John Paciej and has been passed down through the generations, with the current owners being Henry Szepler and a silent partner. The business expanded rapidly distributing its goods to major food retailers in the West Yorkshire region, which included major supermarket chain Wm Morrison. But recently the business has seen a down turn in revenue due to aggressive competition from major supermarkets including Wm Morrison, who ended their relationship with Prima Continental Bakery and started to produce goods in store. Due to the increase in competition Prima Continental Bakery reviewed its business strategy and decided to focus more on its core business which is sandwich shops in the West Yorkshire, with emphasis being placed on producing hand made continental bread and baps. Recent financial data shows the business is making a turnover of around half million pounds, which shows its in a strong financial position to cope with co mpet ition fro m the major supermarkets. Background to the problem statement Prima Continental Bakery currently produces a range of products which can be categorised under the terms confectionary and bread. There is a total of 21 products......

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The Supermarket Retail Sector in Uk

...as a fundamental part of the retail industry, that leading the food retailing (Shitti et all, 2006, P.94). The supermarket sector has an essential influence on the retail industry. The UK supermarket sector is led by few companies, Tesco, ASDA, Sainsbury, Safeway, Morrison and Co-op Group that control over 50% of grocery retail. A shift in consumer lifestyle has changed retail industry to offer a diversity of services. (Agriculture and Agri-Food Canada)) The UK grocery has been classified with a wide range of formats including Hypermarkets, Superstores, Discounters and Convenience stores. Generally, food retailers were developed from a highly simple source then they established a sound successful business, interspersed by failure (Williamson et al. 2004). The UK competing supermarkets in the retail industry are; 1. Morrison The supermarket was established in 1899 by William Morrison. In 1962, he purchased the Victoria Supermarket out of town. The growth of Morrison went steadily to increase their stores from 45 in 1990 to 81 in 1996 located in towns that close to main roads. It has been regarded as a leader in Sale-Based Ordering (SBO). Customers consider Morison chains as price competitive. Morrison is considered as the pioneer in feature of Market Street 2. Tesco It is classified as the market leader in grocery retailing that reached 545 outlets by 1996 guided by formula ‘pile it high, sell it cheap’. Tesco had two SBO systems, one for fresh food and...

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