Grim news about price increases is everywhere. Days after our interview with the managing director of Musgrave in Northern Ireland, yet another sobering statistic comes out.
ccording to research company Kantar, in the 12 months to June 12, grocery price inflation in Northern Ireland climbed by 0.6 percentage points to 4.2%.
Trevor Magill, who’s been managing director at the Centra, Mace and SuperValu owner for nearly two years, might have avoided the pressure which the early months of the pandemic put on his predecessor Michael McCormack.
But inflation, now at 9.1% according to the Consumer Price Index, is another headache.
“We are keenly aware of both the scale and the impact of the price inflation right across the supply chain, and that’s coming from producers right through to the customers,” he says.
“As a local business, there’s a level of concern, considerable concern.”
He won’t say explicitly the extent to which the business, which mainly operates stores in partnership with independent retailers, has had to increase prices.
“The inflation is being driven by commodity price inflation and there are political issues out there as well.
“We’re working very hard with our suppliers to ensure that we are minimising what we need to pass on.”
Even before the full impact on inflation of the Russian invasion of Ukraine was becoming clear, Musgrave had announced a £5.6m investment in offering value to customers in its Centra and SuperValu stores.
He says price rises are affecting goods “across the board” but particularly in raw materials and basics like milk, bread and packaging.
Trevor says the business is trying to keep price rises low. “In saying that we are seeing inflation in the market, that’s (price rises) going to be inevitable, but we’re doing the best we can.”
Musgrave in NI is part of the Cork-based family-owned Musgrave Group behind convenience store brands Mace, Centra and SuperValu in Northern Ireland, and as well as Centra, SuperValu and Mace equivalent Daybreak in the Republic.
The company has nearly 300 stores in Northern Ireland and about 1,500 staff here. The majority are owned by independent retailers.
Musgrave in the Republic reported €4.5bn in turnover in 2020, up 14%, and 11% growth in profits before tax to €98m.
And in Northern Ireland, Musgrave Retail Partners had turnover of £308m in 2020, up 11.2%. Pre-tax profits were £3.4m, three times the level of the year before.
The financial performance for the business has put it in a strong position for an investment of £2.7m in sustainability across Centra and SuperValu stores in Northern Ireland.
Mirroring the level of investment in the Republic, each independently-owned SuperValu and Centra will get £42,500 and £21,250 respectively to spend on reducing their carbon emissions.
“We’ve been giving the retailers ideas on what they can spend the money on. That can be up to date refrigeration, new LED lighting, solar panels, anything that actually reduces carbon emissions.
“It depends retailer by retailer on what they spend their money on and we’ll work with them on that to make sure they take full advantage.
“Our plan is to reach net zero by 2040 so introducing this will allow us to reduce our carbon by 12% over the next two years, it’s a great thing to give them and it’s gone down very well.
“For themselves and consumers, sustainability is really top of mind at the minute.”
The company’s preferred model for its stores is for them to be owned and operated by independent retailers, and supplied from Musgrave’s wholesale arm.
Out of up to 150 Centra and SuperValu stores north of the border, 31 are company-owed. However, all 80 Mace stores are independent.
“At the minute, our first preference is to open independent stores run by family businesses but where that’s not possible they become company-owned.”
Because the company headquarters are in Cork, the operation is part of an all-island business. But he says he and his NI management team mainly run NI themselves.
“We are an island of Ireland business, full stop, that’s what we do. If you look at our NI business itself at this stage, we’ve a very strong credentials there when it comes to our local sourcing. We’re currently sourcing in the region of £160m a year from local food companies.
“We are working through 150 local suppliers and working with 3,000 farmers across the north, so there’s definitely a business in NI that we ring fence and we’re very proud of our longstanding local credentials in that area.”
He says a partnership with independent butchers McAtamney’s has resulted in the creation of a brand, SimpliDish, which is now worth £1.6m and well on its way to becoming a £2m brand.
As an all-Ireland business, the NI Protocol inevitably comes into play for Musgrave, but days before MPs vote on a deal which would ditch many aspects of it, Trevor insists his business hasn’t suffered unduly.
“Look, from my perspective, we’re like any other business, when it comes to the protocol.
“All we’re looking for is stability and consistency, that’s the key that we’d want.
“It is a political issue to be resolved, Musgrave we would ask the government and the EU to get themselves together to resolve it as quickly as possible.
“From a Musgrave perspective, we are an island of Ireland business and it’s important that we operate as effectively as possible across the island.”
He won’t comment on what impact a hard border on the island of Ireland would have on his business. “We’re very clear that we have a very strong local sourcing base here at this stage. We’re comfortable that our local arrangements from a sourcing perspective will stand us and have stood us in good stead.”
He says that between 70 to 75% of its product range is sourced in Northern Ireland. Some non-perishables are sent from Great Britain. But while other businesses have complained about the impact of friction on that route as a result of the protocol, Trevor says it has had “minimal impact, to be fair”.
“Obviously you bring in the big brands from Great Britain, but we’ve had no concerns in that area.”
The business is split into wholesale and retail, with foodservice part of the wholesale business.
Foodservice was badly hit in the pandemic due to the closure of the hospitality sector.
But he says both elements are now trading ahead of 2019 levels. That year, the business also acquired off-licence business Drinks Inc, which Trevor says has been embedded well.
“Drinks Inc has been a great acquisition. We bought that in 2019 as part of our food and beverage strategy. We did a lot of work within the business, 50 new wines came into the business in lockdown and we secured new agencies for the business reopening again, it’s back on track and where we would want it to be.
“Acquiring Drinks Inc was the right decision. We’re always looking to grow the business and that has been Musgrave’s mantra since the business was formed.
“We’re always looking for the right opportunity and we have the backing of the group if the right opportunity with the right fit came along.
“You wouldn’t be prescriptive about what you’d go after but you would play to your core strengths as a business. That would be very important to us to do that but the acquisition of Drinks inc showed that we were ready to think outside the box.”
Despite the pains being caused by inflation, he insists his main challenge is to ensure that growth in the business continues.
He says that by the end of this year the business will have opened 14 new stores, and more are planned for 2023. But Trevor won’t say where any of the future new stores will be.
And all three brands — SuperValu, Centra and Mace — are equally important.
“They play to their own strengths, we focus very much on growing all three brands and that’s our strength in the market. “
He says that recruitment is a challenge in his sector, like it is everywhere. “Recruitment is a problem right across the board, not just across the grocery industry.
“But our focus is to ensure that we’re becoming an employer in choice and investing heavily to ensure we can attract the right level of talent.
“It’s really important that we retain our talent, and as a family business (the all-island business is owned by the Musgrave family) that’s core to our values. Our independent retailers are managing recruitment and retention on a day to day basis. And I’m sure there’s been some level of inflation when it comes to pay.”
As we’re all aware, Covid-19 led to many indirect effects on business and the economy, including a crisis in supply chains which led to good being held up in ports all over the world, result in escalating logistics costs. But Trevor says his business was largely unscathed.
He says working from home was a success for headquarters staff. But for approximately 1,000 others who work in store, working from home wasn’t an option.
Trevor says: “I’d really like to pay tribute to our independent retailers and our colleagues who were on the frontline and showed dedication, courage and hard work which ensured that we protected the food supply chain during those really difficult days of Covid.”
