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Summit News

Waitrose plans regal entry into U.S. food market

LONDON (Reuters) - British grocer Waitrose JLP.UL is planning its first foray into the United States through the relaunch of a premium food range founded by Prince Charles, heir to the British throne.

Mark Price, Managing Director of Waitrose, appears at the 2010 Reuters Consumer and Retail Summit in London June 21, 2010. REUTERS/Benjamin Beavan

Managing Director Mark Price told the Reuters Consumer and Retail Summit that the new ‘Duchy Originals from Waitrose’ range, due to go on sale in September, would act as a catalyst to accelerate Waitrose’s expansion in international markets.

The grocery arm of employee-owned British retailer John Lewis, Waitrose bought the license to the Duchy Originals brand in September last year and hopes to take it into markets like India and Asia, as well as the United States.

“It will become, I hope, a serious part of our export business,” Price said.

“We think a range that’s supported by His Royal Highness the Prince of Wales, is organic, sustainable and top-of-the-range premium will have great resonance outside the UK,” he said.

“What we’re working through now is the entry strategy. Do we go to one or two supermarkets? Do we go through a distributor in America who’s going to put the product out more widely?”

Foreign growth would complement expansion plans in Britain, where Waitrose’s sales growth is outstripping larger rivals, backed by a big investment in lower prices and a marketing campaign fronted by celebrity chefs, Price said.

Waitrose currently sells its products in 25 foreign markets, generating about 50-60 million pounds ($74-89 million) of annual sales. Price expects this figure to at least double over the next two to three years.

At home, Waitrose is outpacing growth at larger rivals like Tesco TSCO.L and J Sainsbury SBRY.L as recession-hit shoppers treat themselves at home, rather than eating out, and it wins new customers with its lower-priced Essentials range.

Price said there were also signs that ethical shopping was returning, with sales of organic foods starting to grow again.

DOUBLING IN A DECADE

Sales at shops open at least a year, excluding auto fuel and VAT tax adjustments, were currently up around 3.5 percent, compared with rivals showing little or no growth at all, Price said.

That should improve to about 4 percent for the year as a whole, helped by a pick-up in food price inflation, he added.

Price said Waitrose would invest about 40 million pounds in lower prices this year, similar to 2009, and back this up with a 40-50 percent increase in marketing spending, with TV adverts featuring celebrity chefs Delia Smith and Heston Blumenthal.

In the longer term Waitrose aims to double its UK market share over a decade to 8-10 percent by opening more stores, including smaller convenience outlets, and selling through third parties like pharmacy chain Boots ABN.UL and online grocer Ocado.

Price said results from trials with Boots were very positive, and a decision on a full roll-out to the 700 Boots stores that sell food would be taken around the end of the year.

He said Waitrose would always consider other potential deals to extend its brand, but declined to comment on media reports it had looked at, and decided against, buying sandwich chain Eat.

“People are choosing more prepared food to eat now,” he said, adding the market for such purchases was worth an estimated 18 billion pounds a year.

“We understand the consumer need. We’re not yet sure on the best way to address that customer need,” he said, noting that grocers like Waitrose did not necessarily have to open a separate chain but could adapt their smaller convenience shops.

Price also saw growth for Waitrose in non-food ranges. Just 5 percent of its stores have a significant general merchandise offering and this could rise to about 20 percent, he said.

Waitrose’s online business will start competing with Ocado in London next summer, Price said.

But he did not see this as a problem for either business, saying that with online grocery sales growing at over 20 percent there was room for both players and that together they could capture a larger share of the market.

($1=.6743 pounds)

Additional reporting by James Davey; Editing by Greg Mahlich

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