Kwik Save Group plc

Warren Drive
Prestatyn
Clwyd LL19 7HU
United Kingdom
(0745) 887111
Fax: (0745) 882504

Public Company
Incorporated: 1959 as Value Foods Ltd.
Employees: 23,000
Sales: £3 billion
Stock Exchanges: London
SICs: 5411 Grocers

The first and most successful grocery discounter to operate in the United Kingdom, Kwik Save developed the highly popular—and profitable—retailing strategy of selling a limited range of branded products very cheaply. This strategy, made possible through a combination of low overheads and strict central control, has resulted in a network of well over 870 unpretentious, conveniently located Kwik Save stores throughout the United Kingdom, all conforming to a simple, standardized pattern, and all boasting the Kwik Save “no nonsense” approach to grocery retailing.

Kwik Save was founded by Albert Gubay, a Welsh entrepreneur whose business ventures in the late 1950s already included Norwales Confectionery Ltd. and Norwales Development Ltd. Branching out cautiously into grocery retailing, Gubay at first rented market stalls and a small grocery shop in Rhyl, North Wales. Then in 1959 he established his own shop in Rhyl and with it a new private company, trading under the name Value Foods Ltd.

Although the company’s early name indicates that Gubay was concerned from the outset with offering value for customers’ money, he did not decide until 1965 to move into discount retailing—a concept unfamiliar in the United Kingdom at the time. A visit to the United States in late 1964 introduced Gubay first-hand to American-style discounting, with its hallmarks of low prices but high turnover for a limited range of brand-name products sold in simply designed and minimally decorated stores. Influenced by these American stores and inspired, as well, by the European model of discount retailing represented by the German supermarket chain Aldi, Gubay opened the first Kwik Save Discount in Colwyn Bay in 1965. Although nothing like it had been seen in Britain before, the shop’s success testified to the public’s approval of the new concept: within two years there were 13 Kwik Save outlets operating in North Wales and Cheshire.

All of the Kwik Saves followed a similar simple format: basic, even spartan design promoting utility rather than aesthetics—or even comfort. Goods were offered still in their manufacturers’ boxes, to be plucked out by customers, and were stacked high on the shelves to minimize warehouse and storage space. A very limited number of product lines—from 400 to 600—was available, but all of these were known manufacturers’ brands, and all were sold at a very attractive price. Unlike other grocers, Kwik Save promoted no loss leaders, special offers, or sales on selected items—simply consistently low prices. No money was spent on inessentials such as individual price-tagging; prices were listed near the items for the customers’ benefit, while checkout operators relied on a good memory. Wherever possible, Kwik Save stores also boasted another American-style feature quite unusual at the time in the United Kingdom: car parking facilities.

Clearly the company was filling a vacuum in grocery retailing, and during these early years expansion was swift and sure. Gubay’s earlier ventures were now firmly harnessed to the Kwik Save cause; Norwales Confectionery functioned as a wholesaler for the retail operations, and Norwales Development, formerly a builder of bungalows, turned its energies to building, repairing, and converting properties for new Kwik Save stores. By 1970, when the newly renamed Kwik Save Discount Group Ltd. was converted to a public company, there were 24 Kwik Save stores, mostly congregated in the North Wales, Cheshire, and Shropshire areas. Kwik Save suffered a crisis of confidence in 1973 when Gubay sold his remaining shares in the company and abruptly left the country, but it was soon recognized that even without its founder Kwik Save was set on a course for success.

The 1970s and 1980s saw a revolution in Britain’s retailing history: the rise of the superstores. A retailing culture traditionally revolving around the small High Street establishment or local neighborhood shop now witnessed the advent of edge-of-town and out-of-town ’ ’ greenfield’ ’ sites being developed into huge grocery complexes. Provisions of all sorts were now available under one very large roof, and, as shelf space was no longer at a premium, the availability of product lines was limited only by food manufacturers’ and grocers’ imaginations. British shoppers at Sainsbury’ s, Tesco, Safeway, and the other new giant supermarkets were confronted, by the late 1980s, with a hitherto undreamed of choice.

Obviously unable to compete with the superstores on their own ground, Kwik Save quietly bucked the trend. Whereas before the company had chosen cheaper out-of-town sites for its stores, now it took every opportunity to move into the very areas being abandoned by other grocery retailers: town centers and residential areas. While the superstores were concentrating on creating, according to commentator Suzanne Bidlake, “atmosphere, leisure, excitement and ambiance,” Kwik Save prosaically maintained that “shopping is a chore, and let’s not pretend otherwise.” “No fuss, no frills, we simply save you money at the tills,” Kwik Save proclaimed—and Kwik Save kept its promise. Continuing its policy of pumping profits back into providing lower prices for customers, Kwik Save estimated that average shoppers could save 15 percent of their total grocery bill over a year’s time by shopping at Kwik Save rather than at one of the superstores.

Kwik Save’s smaller and simpler designs afforded it several advantages over the superstores. A Kwik Save, often a conversion of an already existing building of approximately 8,000 square feet, cost an average £1 million and could open within 10 days. A purpose-built superstore, of approximately 24,000 square feet, cost an estimated £25 million and could take up to three years to develop.

Nonconformist though it was in many respects, Kwik Save nonetheless saw the need to modify some of its strategies to compete with the superstore. The company’s limited product range in comparison with the superstores’ tremendous variety—viable in the 1970s when the difference was one of 600 versus 3,000—became worrying by the late 1980s when the superstores had boosted their range to approximately 15,000 products. Shoppers, of course, became increasingly accustomed to a wide choice, and many were reluctant to buy their cheap staples at Kwik Save only to have to go elsewhere for other products.

Thus in 1988 Kwik Save decided to widen its product range from its standard 600. Such a move meant that checkout operators could, of course, no longer memorize all product prices, so the company turned to technology for help. Almost from the outset of its history, Kwik Save had made extensive use of computer technology to ensure maximum efficiency, utilizing data-processing equipment as early as 1962. Therefore, the installation of laser scanners and computerized tills at the checkout was a natural progression. The system was capable of automatically recording sales volumes; it sent this information from individual outlets to central computers and even contacted regional distribution centers and suppliers for automatic stock replenishment. Kwik Save was thus able to stock “just enough” and “just in time”—essential for keeping operating costs down. By 1991 all of Kwik Save’s outlets had been converted to the scanning system, and all stores stocked at least 1,500 different items, with many stocking up to 2,500, thus going some way to counter the disparity between choice at Kwik Save and at the superstores.

Image is a vital ingredient in any retail operation, and in this area, too, Kwik Save found itself at odds with the superstores. Kwik Save’s market had historically been among the lower socio-economic groups. In addition, the stores tended to attract many older customers, who were alarmed by, or disapproved of, the new superstores and preferred the traditional walk-in High Street shop. The superstores, too, were simply out of reach for those without cars.

Kwik Save aimed to change this rather down-market image concurrently with its bid to move into the more affluent southeastern part of the country. The first London store opened in 1986, and in 1989 the company launched its first national advertising campaign designed to attract shoppers of all income levels. The timing was right; in a recession everyone welcomes the chance to save money where possible. By the mid-1990s 100 Kwik Save stores were operating in the Southeast, and the company had achieved some success in penetrating the middle socio-economic level. Although Kwik Save was unlikely ever to capture the market of status-conscious higher income groups who are able and prepared to pay for a greater range of choice in more comfortable surroundings, a niche appeared to exist for Kwik Save even in more affluent areas.

Competition with the superstores was not Kwik Save’s only concern as it entered the mid-1990s; a challenge appeared at the other end of the market spectrum—rival discount retailers. The most prominent of these were foreign enterprises, particularly the German chain Aldi and the Danish Netto. American warehouse clubs, principally Costco, also entered the market. A few homegrown competitors emerged as well, attempting the best of both worlds by creating discount superstores, such as Food Giant, owned by Gateway, and Dales, the discount arm of ASDA.

Although a few individual Kwik Save outlets were forced into minor price wars by these competitors, on the whole the new ventures had not, as of the mid-1990s, proved significantly damaging to Kwik Save. Aldi and Netto, with foreign suppliers, suffered from poor brand recognition among U.K. shoppers; operations like Costco required customers to buy in bulk (not heretofore a British shopping preference) in order to save money; and the discount superstores, finding themselves somewhat of a contradiction in terms, had yet to take off.

Some analysts warned that, although Kwik Save may not yet have felt any disadvantage in operating between the superstores on one side and the new discount competition on the other, it soon would if it continued its present policy of being neither fish nor fowl. The argument runs that Kwik Save, obviously unable to compete in the superstore arena, has also come so far from its discount roots that it can no longer be classified as a discounter in the true sense. Indeed, in what may have been a tacit admission of this, the company quietly dropped the word “Discount” from its name in 1986, becoming simply Kwik Save Group plc.

Although the Kwik Save milieu is by no means as plush as a superstore’ s, the starkness of the earliest days has been softened, unlike such hard discounters as Aldi and Netto, which retain a distinctly warehouse-like atmosphere. In addition, Kwik Save, which built its reputation on a policy of selling only known branded goods, introduced its own “No Frills” brand in 1993, under pressure from the superstores, who had developed lower-priced “own-brand” products. The range was developed to complement, not to supplant, branded items, but critics maintain that the company’s decision to provide more choice must of necessity result in higher prices; Kwik Save answers the charge by citing its efficient use of computer technology, which allows the stores to expand choice while retaining the lowest possible prices. In addition, Kwik Save, despite a broader product range and a slightly more up-market feel to the stores, remains true in the 1990s to the same strategies it developed in the 1960s. As the Observer succinctly described it in 1993: “Kwik Save chops prices, wins sales, gets better terms from suppliers, keeps costs down and grows profits, a virtuous circle.”

Certainly the company’s healthily growing profits showed no cause for concern in the mid-1990s. Indeed, some analysts suspected that, if Kwik Save was moving toward a middle ground, perhaps a market for such a strategy existed. In the essentials of the grocery business, Kwik Save held the same principles it pioneered at the beginning of its history. The secret of Kwik Save’s success was and remained its commitment—amounting almost to an obsession—to keep operating costs to an absolute minimum. The company maintains strict central control over its operations, which are standardized across the board. The surface simplicity of each Kwik Save store is backed by a highly sophisticated computerized system. Stock control is tightly regulated and administration, distribution, and store management are all kept as simple and streamlined as possible. Credit is not accepted at Kwik Save stores, thus keeping banking fees low. Customers soon learn that free bags will not be provided. Although its range is small, its products are high-volume staples, which have a quick and large turnover, giving Kwik Save strong buying power through bulk purchases; these lower prices from the manufacturers the company in turn recycles back into price savings for the consumer.

Kwik Save has always dealt strictly in non-perishable and semi-perishable items. Not wishing to diversify into areas where the company had no expertise but at the same time recognizing the importance of providing customers with one-stop shopping, Kwik Save developed the highly successful strategy of renting space in the stores to concessionaires providing meat, fruit and vegetables, and bakery goods. In 1981 the company acquired Colemans Ltd., to manage and monitor quality control of the franchises, all of which are run by local merchants. In 1991 the franchises were given brand names: Colemans (butchers); Gardeners (fruit and vegetables); Crumbs (bakery); and Petstop(pet supplies). Liquor sales are also available at many Kwik Saves; this, too, originated as a concession, but in 1991 the company acquired and integrated Liquorsave.

In the mid-1990s Kwik Save planed to continue to expand throughout the United Kingdom. After its successful foray into the Southeast, the company set its sights on Scotland. The first Scottish store opened in 1993 and a total of 100 were planned. A commentator in the Guardian wrote in 1993: “While Tesco, Sainsbury and Safeway have seduced most shoppers to their glistening temples on Britain’s ring roads celebrating the joys of ready-washed salads and chilled fresh celery soup, Kwik Save has stuck to the long-abandoned ... principle: stack things high and sell ’ em cheap.” In November of 1994, Kwik Save acquired the assets and business of Shoprite Group P.L.C. The Shoprite business includes 91 stores, 14 more stores under development, and two distribution centers.

With over 800 stores in 1994, Kwik Save was the largest discount grocery operator in the United Kingdom and by volume the third largest grocery retailer in general; clearly, its “No nonsense, no frills” approach had found favor with consumers.