Last updated: March 6, 2014 5:41 pm

Waitrose defends customer loyalty scheme

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Mark Price, managing director of Waitrose, defended a customer loyalty scheme that has been attacked by Labour and criticised by some customers, saying it was a “very British response” to the threat from online shopping and the German discount supermarkets.

The FT revealed last week that the Labour party had accused Waitrose of stealing trade from small high street shops by giving a million free coffees and newspapers to its customers every week. The scheme has also upset some Waitrose shoppers, who feel that offering free hot beverages is attracting the “wrong type” of customers to the upmarket stores.

But Mr Price dismissed the criticism of the MyWaitrose scheme as a “storm in a coffee cup”.

The comments came as the John Lewis Partnership, of which Waitrose is part, cut its staff bonus after the employee-owned retailer’s pension deficit swelled to more than £1bn.

The 91,000 staff at the partnership, which also includes the John Lewis department stores, will receive a 15 per cent bonus this year – down on the 17 per cent paid last year, though still equivalent to about eight weeks’ salary. The total bonus pot was reduced from £211m last year to about £203m, after total pension costs before exceptional items rose by more than a fifth to just over £200m.

Profit before staff bonus and tax fell from a restated £343.3m to £329.1m, after a £47.3m charge for compensating staff who had been underpaid for holidays. Gross sales at the partnership broke through the £10bn barrier for the first time.

Mr Price said all food retailers faced the twin threats of online rivals and the so-called hard discounters Aldi and Lidl.

“I think Waitrose has taken a very British approach to that. We have decided to compete on giving our customers morning coffee and a cup of tea in the afternoon, and we have decided to give them . . . free newspapers,” he said.

“It seems to be working. Half a million more customers have decided to shop at Waitrose.”

Waitrose planned to install another 170 coffee machines in its stores to dispense the free hot drinks, he said, and would extend its hospitality offer, which already includes wine-tasting bars and dry cleaning in some stores.

Waitrose has also cut its milk prices amid an escalating milk price war, but said its 62 milk and dairy suppliers would be paid the same.

Helen Weir, finance director, defended the decision to pay a 15 per cent bonus, given the escalating pension deficit and higher debt.

She said the partnership had low net debt compared with rivals, and would generate a healthy level of cash.

“We are going to continue to invest in the business, but we felt 15 per cent was about the right amount of money to be returning to our partners. Its quite a carefully thought through decision,” she said.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, said the economy was recovering.

“We have not yet seen a resurgence in consumer spending. As disposable income starts to move ahead of inflation and the economic news improves, we hope to see that building up steam this year and confidence turning into improved spending,” he said.

He was also confident that the partnership’s governance structure would prevent it suffering the problems that have beset the Co-operative Group.

“Our governance structure is very very different to that of the Co-op,” he said. “We are owned by our partners. We have partner representatives on our board and non-executives on our board. I am very confident that our governance is in good shape . . . and we are not taking any undue risk,” he said.

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