DESCRIPCIÓN DE PROCEDIMIENTOS

In 1980, Argyll was mainly a small manufacturing company involved in retailing. The declared programme was the development of a broadly based food group, both through organic growth and, where appropriate, acquisitions (Annual Report, 1981).

In the early 1980s, Argyll’s strategy was to expand in the GRI. Between February 1981 and August 1984, Argyll acquired Oriel Foods, 67 Pricerite outlets, the much larger Allied Suppliers' from Generale Occidentale, 26 retail outlets from George Mellis and Son, 5 Mainstop superstores from BAT, 2 stores from WBG, and it finally took over Amos Hinton. Furthermore, it also attempted to take over Linfood (Gateway's name at the time). At the end of this acquisition programme (1984/85), Argyll was the sixth largest UK grocery retailer (after Sainsbury, Tesco, Coops, Gateway and ASDA). Most of the companies that it acquired were stagnant businesses with fragmented consumer franchises and a poor infrastructure. Initially, the policy was to maintain all the retailing fascias although a profit-enhancing programme was implemented as these companies were acquired.

' Allied Suppliers had estimated sales of £847m and operated 918 stores (1981 data).

Chapter 8 - Argyll Group PLC - page 17 5

Table 8.1 Argyll’s Acquisitions: 1981 - 1984

Year Acquisition Cost (£ m)

1981 Oriel Foods 19.5

Patterson 0.9

1982 Pricerite 3.4

Allied Supplies 101.0

1983 5 Mainstop Superstores 3.0

26 George Mellis Stores N/A

1984 6 Key Market Stores, and 2 development sites 9.0

2 Stores from WGB N/A

Amos Hinton 25.3

Source Various Documents

At the end of 1985, Argyll’s management announced, together with a three year expansion programme, the decision to concentrate on two fascias: Presto and Lo-Cost. Presto was set as the principal retail fascia. In the long term. Presto was supposed to compete for quality with the major industry players. Lo-Cost was set as an alternative to Presto, and it was to compete alongside Gateway and Kwik Save in the discount end of the market. The decision came as the company decided to make the most effective use of smaller stores with a more limited range concept, lower store investments and lower wages costs.

However, Argyll had not only been developing in the food retailing industry. In August 1983, Argyll merged with ADP. James Gulliver, chairman at the time, said that the future would have witnessed intensifying competition among the big food retailers. When the expansion programme came to an end, companies would then have had to seek means of diversification. From this perspective, the Argyll/ADP merger was a 'far sighted union

Chapter 8 - Argyll Group PLC - page 176

G r a p h 8 . 1 A r g y l l G r o u p : S a l e s 1 9 8 1 - 1 9 8 7

19KVB1 1861/82 1962/83 1963/84 1964/85 1965/86 1966/87

Source: Based on Dala from Argyll Group Annual Reports

8.2

December 1985-January 1987

The

Failed Bid for

Distillers and the Departure of James Gulliver

The merger with ADP was the basis for the bid by Argyll in December 1985 for Distillers (which had 79 brands of Scotch Whisky). However, it lost to Guinness in April 1986 “We had Distillers in view for three years One of the reasons we have a drinks division is that that was going to be a springboard into Distillers, the same way early Argyll business was the springboard into Allied Suppliers” (Grant, in Financial Weekly, 11/12/86: 12-13).

The failure to acquire Distillers was a turnaround in the company’s activities and its long-term strategy Distillers was an international player that had lost market share over the years, but it was a cash-generating business that owned premium brands. At the time

Chapter 8 - Argyll Group PLC - page m

the bid was made, the only “stars” in Argyll’s portfolio were the retail side led by Presto and the drinks business with ADP. However, Argyll’s drink division was too small, this being why Argyll wanted to acquire Distillers.

However, a few months after the failed bid for Distillers, Safeway US announced the sale of Safeway UK. Argyll showed immediate interest in buying the company, and as no one else was in the position to take it over, Argyll acquired Safeway UK in January

1987.

In the meantime (December 1986), James Gulliver stepped down as chief executive of Argyll but maintained his chair. Alistair Grant, previously managing director of the food retailing division, became the new chief executive. Gulliver also announced that he was going to leave the company within one year. His personal ambitions were to develop a major force in UK grocery retailing, but more than anything, to direct a major international consumer-products business. His ambition had been thwarted when Distillers was acquired by Guinness. It is said that Gulliver had always maintained a proprietorial attitude when he was chairman of Argyll, that he saw Argyll as his company and that much of the strategy of Argyll during the early 1980s was the result of his view on what the company had to do on the market. When Gulliver left in June

1988, Grant became the new chairman and chief executive of the company.

The acquisition of Safeway transformed Argyll’s profile. Argyll’s market share had been static over the previous two years as the company concentrated on improving profits and consolidating its retailing activities under the Presto and Lo-Cost fascia. In a time of much expansion by the major retailers, Safeway was the last major opportunity

Chapter 8 - Argyll Group PLC - page J78

to catch up with the market leaders. Argyll, after the failure of the Distillers bid, needed a quality business.

Table 8.2 Argyll Group: Financial and Operational Statistics 1986/87

Note * Also comprising food manufacturing, wholesaling, frozen food retailing, off-licence chain. Source Various Documents

In February 1987, one month after the acquisition of Safeway, Argyll pulled out of its drinks business. The decision was taken as the company recognised that it could not become a heavyweight contender in the international arena. It was a middleweight player; it would have floundered and continued to be squeezed between the low cost competition and the well-established more expensive brands. Another acquisition was out of the question since there had been further consolidation in the industry with Allied Lyons’ purchase of Hiram Walker and Elder IXL’s purchase of Courage.

Chapter 8 -Argyll Group PLC - page J 79

By March 1988, the company was also operating 54 Galbraith Convenience stores in Scotland; Snowking, a frozen food distributor; Mojo, a cash and carry; Winterschladen, an off licence chain; and Vinters.