Supply chain by sea: embracing the challenges

The Channel Islands may only be a short hop from the mainland, but for Waitrose, setting up shop on Jersey and Guernsey meant it had to set up an international division. That the Channel Islands would warrant an international classification may seem crazy but as Waitrose found, Jersey and Guernsey have their own way of doing things.

Set 100 miles off the coast of the mainland, the Channel Islands are closer to France than the UK. And while there are many similarities to the UK - they are British Crown Dependencies after all - there are lots of differences, including the tax system, the legal system, and being governed by bailiffs. And the bailiffs - the civil head - are different for each island, presiding over the Bailiwick of Guernsey and the Bailiwick of Jersey.

Waitrose managing director Mark Price says: “It may seem strange setting up an international division for stores in the Channel Islands but it operates very differently, and these shops are our first outside the UK to be wholly owned by Waitrose rather than operate as franchises so it required a different approach.”

Wholesale changes

The John Lewis Partnership owned grocer opened five shops in the Channel Islands between February and April this year. Having wholesaled to various supermarkets on the islands for the best part of a decade, Waitrose knew the market well and jumped at the opportunity of opening its own stores. It bought the clutch of shops from Sandpiper CI, owned by private equity firm Duke Street. Three of the shops are in Jersey - St Saviour, St Helier and Red Houses, and two are in Guernsey - Rohais and Admiral Park.

“Customers here are more connected with product and agriculture”

Graham Heald, Waitrose

Waitrose’s opening in Channel Islands threw up several challenges. Graham Heald, director of Waitrose Jersey and Waitrose Guernsey and the man in charge of opening in the Channel Islands, says: “We were working with the state about operating in the Channel Islands 12 months prior to the first shop opening but you can never plan for everything.”

Alongside the differences in tax, employment law and legislation, Waitrose also had to set up a new supply chain operation. “We are used to things like the vagaries of the British weather but what we had to learn was international maritime law,” says Heald. “And even then there is always something that crops up.”

Heald recalls one unexpected problem that Waitrose encountered when a delivery was due at its St Saviour store. “Our delivery was on the ferry then we got word that the ferry couldn’t dock because of the rough seas,” he says.

However, he adds: “Customers here understand the problems that the sea can cause. If the seas are rough, then the fishermen are not out. And stocks will be depleted. In the centre of London customers are disconnected with the product to a certain degree, but here they are more connected with product and agriculture.”

The other thing Waitrose had to get the hang of, he says, was the time lag in deliveries by sea. “You lose about a day in product life because of the sea.”

As in the UK, Waitrose has been keen to develop relationships with local suppliers on the islands. While the stores in the Channel Islands look like those in the UK, it is the local lines where they differ. In Jersey, Waitrose carries 350 local lines, and in Guernsey there are about 200, with products including milk, vegetables, bread, eggs and the famous Jersey ice cream and Guernsey cider.

Heald explains that the government brokered several meetings between Waitrose buyers and local suppliers. “The government has done all it can in aiding our opening here and has introduced us to lots of fantastic suppliers,” he says.
He says Waitrose is looking to increase the number of local suppliers and products it carries, and it will also explore bringing some of the lines to sell in the UK shops. “Having a wider distribution network gives suppliers confidence and we also want to make sure they understand we are here for the long term,” he says.

The competition in the Channel Islands is tight as there aren’t many retailers represented. Two of the shops that Waitrose bought from Sandpiper were Safeway stores, and the deal meant that Safeway has now exited the islands altogether. The other Sandpiper stores were operated under the brand Checkers. And while there are no longer any large Checkers shops left, Sandpiper still owns a chain of convenience stores on the islands, under the fascia CheckersXpress.

The Checkers fascia carries a broad range of brands including Waitrose, alongside other brands such as Iceland. Price says Waitrose will continue with its wholesale arrangement with Checkers for the time being despite now also having its own stores in the islands. “We will look at the supply agreement at some stage but it’s working well at the moment,” he says.

The other retailers on the island are Marks & Spencer, Co-operative Group and Iceland. Sandpiper operates the M&S stores in Jersey and Iceland on both islands on a franchise basis.

And when Retail Week visited the islands for one of the Waitrose store openings, the competition - in particular Co-op and M&S - were running heavy promotions to keep their customers from straying to the new kid in town.

Heald says Waitrose would consider Co-op and M&S in particular its competition. “They have long-term relationships with suppliers but there is room for everybody,” he says. “We have to be on our guard though. And we believe we’re bringing a new level of quality, breadth and assortment to the islands.”

Value for money

Heald adds that customers have been surprised at how strong Waitrose’s promotions are. “We have the same commitment to value as we do in the UK,” he says. “And with the tax and duty savings we are making here we have been investing that back into price. On fine wine, for example, we are saving £5 a bottle.”

The commitment to price is essential as there is a cross section of demographics on the islands, continues Heald. “The Channel Islands are known for their banking and legal industries and they are big employers meaning there are those that are incredibly wealthy, but there are also still those who don’t have much money.”

“Over the next decade we’ll pick the right formula for the right territory”

Mark Price, Waitrose

There is also a strong service industry in the summer, says Heald, meaning the islands are home to many Polish immigrants on seasonal placements, or on contract for a couple of years. As such, Waitrose has a Polish foods section in its supermarkets.

Heald says: “It’s easy to think this is Monaco when you see the harbours full of yachts but there’s much more to it than that, it has a really diverse customer base.”

Waitrose would not reveal sales figures for the Channel Islands stores, but Price says they are all “above budget, and have been very well received”.

And for Price, the Channel Islands is just the tip of the iceberg. Opening on the islands is part of his grand plan to get the Waitrose brand to more people in more places. International expansion is a focus for Waitrose and with its new international division set up, it’s ready to go.

It already has a franchise partnership in the Middle East, and Price says Waitrose is considering other markets, whether through company-owned stores or franchise partnerships. “Over the next decade we’ll pick the right formula for the right territory,” he says.

The Channel Islands are clearly among the first international steps.