Morrisons | Annual Report and Financial Statements 2011

We believe that having great own brand products can give consumers a reason to switch supermarkets, and we are ambitious to create an industry leading range.

Much work was done during the year, starting with a detailed benchmarking of existing Morrisons products against competitors. In blind taste testing, we found that our quality was already high, and overall was better than the average of our direct competitors. As always, there was room for improvement, particularly in going beyond just having a set of good own label products, to having a family of great relevant brands that influence consumer behaviour.

2011/12 saw the start of a three year programme of new product development, and we made good progress. Informed by research and customer insight, we built a plan, created a talented team and began the execution that will see 5,000 new products introduced this year and more than 10,000 products relaunched by Christmas 2013.

Our own brand is a major pillar in delivering our brand promise of 'Friendly People Making Great Food Affordable for Everyone'.

M Kitchen launch

We commenced the rollout with our M Kitchen range in October 2011, launching over 600 products in a category where we knew that we were performing below the market.

Product quality is exceptional. Through close co-operation with suppliers and inspiration from great chefs including Pierre Koffman and Aldo Zilli, we have developed an innovative and exciting range with exceptional product quality.

The response from customers has been extremely positive and M Kitchen sales have increased 40% over the same categories last year.

In addition to the M Kitchen launch, we also relaunched our bread range, introducing new products, improving quality and finding ways to show our customers that we make our own bread. This has been really successful and we have seen own brand participation increase by 10%.

Traditional beef

We also launched our traditional beef breeds programme. This is a longer term programme, working in partnership with over 100 farmers to bring an exclusive range to our customers. The range will be available all year round at guaranteed quality and at an affordable price.

M savers

In January 2012, we launched M savers, our new entry pricepoint range, which is designed to be a clear proposition of good quality at the best price, in strong support of our conviction that value is forever.

We have increased our range to over 500 lines, competing with the broadest offer in the market and enabling customers to do a full value-led shop, should they choose to do so.

Coming up

In 2012/13, we will begin to deliver solutions across home and leisure, and other general merchandise categories. We will continue to leverage the expertise of our team of chefs to ensure our products and brands are consistently delivering quality, value and relevant innovation. In 2012/13, we aim to further increase own brand participation.

By the end of the journey, we will have a market-leading own brand, which customers trust to bring them everything from the best value, to unrivalled produce, to fabulous restaurant-quality meals at Morrisons prices. Customers will also be much more aware of the products we make and prepare in-store as well as those we manufacture ourselves in our own factories. Our new proposition will give us the relevant points of difference in every part of our store to support our positioning as a great food retailer, reaffirm our fresh credentials and offer unbeatable value to our customers.

Moving further ahead on fresh, optimising space and enhancing our service culture

These initiatives combine in our 'Fresh Formats', focused on offering customers the best fresh food in the UK, unrivalled value for money and fantastic service from an environment that really feels different. This initiative is a key part of our strategy and is underpinned by our core convictions that customers want fresh food, great value and a more experiential and engaging shopping environment.

We have brought together a number of separate strands of work to create a new shopping experience for our customers.

Our Fresh Lab, where we have created a fantastic fresh food environment, transforming our produce and flowers sections, introducing new ranges and revitalising our counters.

Our Space Lab, where we have found ways to work our space harder and eliminate duplicated items. The Lab has shown that we can 'liberate' up to 750,000 square feet of our existing store space, which will be available for an expanded fresh food offer and new ranges such as restaurant quality ready meals and children's clothing.

HOT service is an initiative to enhance our service culture and ensure that our customers always get a warm and friendly experience in our stores. Over 110,000 store colleagues have received service skills coaching - the largest training programme of its kind in the UK.

The work done in the Lab stores has enabled us to create a series of modules capable of being applied to our existing estate and to our new stores. In 2012/13, we will tailor the core concept to different locations and store sizes, ensuring that we provide customers with the elements they really want while maximising the benefits from our investment. This continuing evaluation will see around 15% of our space operating all or most of the new concept by the end of the first half of the year, with total capital expenditure per store of c.£1.7m. This is contained within our 2012/13 capital expenditure targets.