Harris: “We believe, long term, UGO has a good future”

Interview headlines:

• UGO stores need to “trade better” but are not “at danger level”
• IT and ordering issues will be addressed
• More UGO stores planned – new Leeds store “in negotiations”
• Own-brand bakery products to be stocked at UGO imminently
• Admits that “full weekly shop” idea was a mistake – “fine-tuning” required on product and price
• Main plan now is to “bed down” UGO

The first part of my interview with Arthur Harris focused on the collapse, earlier this month, of his Haldanes chain. For me, however, a key reason for meeting Harris was to talk about his fledgling UGO business, and – hopefully – to provide some reassurance to the staff who work at those 20 ex-Netto stores.

Here, again in his own words, Arthur Harris talks about how UGO has performed so far, and his plans for its future.

GS: I’ve received lots of emails and comments about from people at ex-Netto UGO stores asking me “Are we safe? Are we going to be all right?” Are you able to give any update on how trade is doing at your twenty UGO stores compared to your initial targets?

AH: I think we’ve made some mistakes, transferring. I think we’ve taken some assumptions probably incorrectly. At the moment, I think we need to get the UGO stores trading better than they are now, and we are looking at every fix possible to do that. Are they at danger level? No, they’re not at danger level today. I don’t know what else to say really. The stores need to trade a little bit better.

I think the Netto model was very much to push goods at the managers to sell, and so it was decided at head office what was being sold when and where to put it. And we probably expect our managers to have a little more input into that, and so we have had issues, ordering issues, and we also have issues with IT.

So, this is not blaming the managers at all for this, it’s an area we hadn’t realised would be so problematic, in both the IT, and from a managerial point of view. That needs fixing, and it will be fixed very shortly. That will help us no end.

We’re embarking upon much more aggressive marketing, once we’ve fixed that. There’s a period with this ordering that’s a major issue, and we need to bed that down, because we’d look very stupid if we embarked upon a huge, aggressive marketing campaign and couldn’t actually back it up once it happened with the consumers.

So, yes, we’re disappointed – I think that’s the right word to say at this moment in time – but there are some major fixes coming on board to put that right. I think we’d have been even more disappointed if we’d have let Haldanes suck it dry of any more money, because I was supporting Haldanes from different businesses of mine, and we supported it quite heavily.

GS: So, you’re basically saying that if trade were to continue as it is now, and you didn’t do anything, you’d have a problem later on, but you’re pretty confident that what you’re proposing to do will sort it out?

AH: We have learnt a tremendous amount with the Haldanes debacle. We sat back and let things happen with Haldanes that went on for quite a period. We will be very much more reactive quickly now, and make fixes quickly, and do things a lot quicker.

We believe, long term, it [UGO] has a good future. We don’t want to stop at 20 stores. We are out there in the market at this moment in time looking for outside investment to come in to expand the group, and that’s investment in the group which includes the bakeries [Scarborough-based Woodhead Bakery, acquired in April] and UGO and everything.

We believe we’ve got a fantastic group. The bakeries give total vertical integration into this, and as from next week we anticipate that the bakeries will start delivering into the UGO stores, with their own produce, which really does make a huge difference to what we’re doing.

Within the bakery we also own something called The Pie People. We own the intellectual property rights on a pie called The Wedge. We sell it to Morrisons – 30,000 or 40,000 of those a week to Morrisons – and to other catering service people, such as 3663. And we sell a vast amount of those.

We do believe we’ve got a fantastic product there, and through The Pie People the plan is that we will expand The Pie People onto railway stations, in booths, and at major events… and also into shops where there’s good footfall. We aim that we will probably open our first Pie People within the next six months, probably in York.

GS: Having your own vertical integration links to the issue of price and availability, and those were two of the things I noticed when I visited a couple of UGO stores in Hartlepool and Eston, a week or so after they opened.

AH: Can I tell you – I’m not a retailer, OK. By default, at this moment in time, I’m supposed to be, but I’m not. I don’t understand it. I employ people, like Richard Collins [Chief Operating Officer] and his team, in the operations side, who are specialist retailers and have been retailers for years and years.

I can understand why I would go out and buy Woodhead’s Bakery, and I can understand that if we can make six sausage rolls, say, for 39p and sell them in a UGO store for 99p, I get 60p across the group. That’s easy, I can understand that.

Where to put those sausage rolls in a shop to sell them, and how to get them to the shop and everything else, isn’t my cup of tea at all. And people look at me strange when you have all these supermarkets and things and say you’re not a retailer. It’s not something I either want to be, enjoy or understand, but I know how to put the deal together.

GS: Two of the big things that you flagged up at that press launch were the fact that UGO would have low prices, and the fact that you could do a full weekly shop.

AH: I think we’ve made a mistake. I think the mistake we’ve made is that people actually don’t want to do a full weekly shop in Netto or UGO. They want good value and to be able to do their full weekly shop at their Tesco, their Asda, wherever, and come to us for their discount and good quality stuff.

What we did notice before, and I think we’ve kept going quite successfully, is that they wanted to come and get the fruit and veg and fresh from us, from a Netto, and they still do that, but we definitely tried to persuade them to do a full weekly shop, and it isn’t what they want to do. And to be fair, I think your blog says it, our prices, we buy from Nisa, and our prices are OK, but probably not where we would want them to be, and probably not where our shoppers would want them to be.

So we have a bit of fine tuning to do now.

GS: I’ve had emails and comments from staff and shoppers and the main thing they keep saying is that UGO is too expensive compared to Netto.

AH: I’ve got to say, I think it’s a little bit perception at times, and I think at times they’re not comparing it against anything because… they’re comparing it against something that wasn’t there before, with Netto, because Netto didn’t have a lot of the products that we’ve put in.

However, I think we’ve got to backtrack, and say, we’ve tried to force a shopper to do something that they actually don’t want to do. So we’ve got to go back, probably to the old Netto option, of putting a lot of products in there that are discounted. So that’s where we’re going.

GS: I understand you’re in negotiations for a new UGO in Leeds… Is that a store that’s currently trading as something else?

AH: No, it’s not, it will be a new store. So we have plans.

When we’ve just made 600 people redundant, and 600 people have lost their jobs, I’m very reluctant to talk in a buoyant way, because I think it’s probably immoral to do that. However, the two aren’t connected, have never been connected. We always ringfenced Haldanes because of the problems we had with the Co-op, apart from putting money into Haldanes [from other Group businesses] to try and keep it going.

But we do think there’s a good future in UGO, we do have to get it right, we have made some mistakes, and we believe that we can get it right.

GS: And presumably there’s also a future for Haldanes Xpress?

AH: We don’t see any problems at all with Haldanes Xpress. We’ve got a superb deli that’s in Folkestone. It’s at a services called Stop 24, the nearest motorway services to the Channel Tunnel.

Stop 24 has been slow to get going itself, and we’ve taken a little bit of a gamble going in there, but we believe that with everything that’s going on there – there’s a new big lorry park going in, customs are putting their offices in there – we think that that’s getting busier by the day.

The deli is a big deli offer, it’s a 60-seater deli eatery, with all homemade foods in there. Pastas, lasagnes, homemade burgers, that sort of thing, and homemade cakes. And along with a convenience store.

GS: Is your plan to open more convenience stores over time under the Haldanes Xpress banner?

AH: I’d like to open more deli eateries as well, and that’s all in our plans. The main plan is to bed down UGO, and the bakery, and get a solid base to expand upon. That is the plan. We’re not going anywhere else. There’s no bigger picture than to bed everything down now, to get everything working correctly. We won’t be expanding any more, doing anything stupid.

I don’t think we have done anything stupid, but I think the UGO deal is just so, so much better, so much better, than the Co-op deal. The stores are in so much better shape, the fabric of the stores is so much better, the refrigeration is so much better. Everything about it is so much better than what we took over from the Co-op.

And if we make a mistake with this, we have to put our hands up and say it’s our fault.