Budget Chain Aldi Sees Profit Boom In Britain

Five Secrets To Discount Supermarkets' Success

Updated: 3:10pm UK, Monday 29 September 2014

German discounters Aldi and Lidl continue to record stellar growth figures as the middle-class warm to their products and the big four supermarket chains battle it out in the bitter price war.

1. BIG IS NOT ALWAYS BETTER

Over decades the big supermarket chains have expanded their range and variety of products. While giving consumers a choice of between 10 different varieties of baked beans, such choice creates a stock burden, demands on the logistical chain and the need to have bigger stores to stock the products.

Instead, Aldi and Lidl restrict the number of different types of the same product. This allows them to reduce store sizes, warehouses and transport costs.

2. VISUAL SIGNALS

Big brands spend millions honing their packaging graphics, logos and label colours. The discounters sell their own-source items, from cereals to deli items and tinned food at below the price point of big brands. There is a remarkable similarity in the discounters' goods to the familiar household labels.

Aldi's prosecco sparkling wine's orange label is a similar colour to a famous French champagne, its chocolate wrappers have a scroll graphic like a luxury Swiss brand, and you may need to do a double take when you see their rice crispy breakfast cereals.

3. ONLINE DELIVERIES

Apart from Morrisons, the big chains raced into online ordering in the 21st century. They have built up big IT structures and local delivery networks to offer the service. But it does not come cheaply. Some estimates put the cost of each delivery at more than £10 - an expense borne by the retailer. Aldi and Lidl have avoided becoming sucked into the vortex of online ordering and delivery.

4. STAFFING

With smaller stores, the discounters can keep wage overheads to a minimum. Salaries are a big and fixed overhead for supermarkets. On October 2, Aldi opens its second store in Lincoln. The full staffing level of 45, for a store open long hours, is low.

Lower staffing levels means fewer checkouts and shelf stackers. The discounters get around this by selling many items directly from the transportation pallets. The big chains normally unload pallets in the back room and then restock using smaller trolleys. Wheeling pallets into their wide aisles saves time and the number of staff needed.

Fewer checkouts can cause tension and dissatisfaction for customers, but Aldi has found a way to trim a second or two from each item being scanned. Many of their products carry multiple bar codes, allowing checkout staff to improve item scanning time, alleviating the need to locate the code on the packaging.

The discounters have also avoided the added expense of setting up a chain of convenience stores. High street leases and fitting out costs are expense undertakings, and it has become another battleground for the big supermarkets.

5. WOOING THE MIDDLE-CLASS

Pre-financial crash, many middle-class families were happy doing the weekly shop at their local out-of-town mega supermarket. With belt tightening, more awareness of food wastage and a range of items that appeal to more discerning palates, Aldi and Lidl have catered for those with less-constrained budgets without disenfranchising budget buyers.

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Osborne: 'Raise The Ambition Of The Nation'

UKIP Defections: PM Did Too Little, Too Late

Updated: 10:09pm UK, Saturday 27 September 2014

By Anushka Asthana, Political Correspondent

During the 2010 election, I travelled to Rochester and Strood in Kent, where I met the Tory candidate Mark Reckless.

One thing that struck me as I watched him take to the doorsteps, was the number of constituents raising the issue of immigration.

One awkward incident involved an elderly man ranting about why he supported the far-right National Front. Mr Reckless backed off, embarrassed.

He certainly didn't share those extreme views. But it was clear then that he was a politician who was worried about immigration and angry about Europe.

I remember another conversation with Mr Reckless last year in the Commons.

Tory backbenchers were nervous about immigration, he told me. They felt David Cameron hadn't done enough, and the looming prospect of transitional controls lifted on Bulgarians and Romanians was of particular concern. 

Things could get tetchy in January 2015, he said.

Mr Cameron knew about these misgivings among his MPs and tried to act on them.

Late last year he unveiled a toughening up in the rhetoric on immigration – bringing in new rules to crack down on the access that new EU migrants would get to benefits. Then came the pledge of an EU referendum.

The hope was to appease the concerns of people like Mr Reckless, and you might have thought it was working.

After all, following the defection to UKIP of Douglas Carswell many asked the MP if he would be next. He insisted not.

When I texted Tracey Crouch, a neighbouring MP in Kent, about his decision to leave the Tories, she replied: "Nothing I can say right now would be becoming of a lady. I'm so angry. He looked me in the eye and promised he wasn't going to defect."

Others pointed out that he was openly supportive of the Conservatives as recently as yesterday.

Then he tweeted: "Good to lead coach for Team2015 campaigning in Birmingham Northfield on Sunday + will be followed by our Clacton action next Thursday."

That is why Tory sources say they are "surprised". Other MPs told me they felt "let down", "frustrated" and "fed up".

"Another battle when we should be fighting Labour," said one.

Others argued that although he had behaved irresponsibly, giving a leg-up to Ed Miliband, that a number of backbenchers were angry with the party's position on Europe.

They believe that Mr Cameron hasn't done enough to prove he can loosen Britain's ties to the EU. They want to see the issue addressed at his conference speech this week.

The problem for men like Mr Reckless is they don't share the Prime Minister's views on Europe.

Mr Cameron wants to reform the UK's relationship with the continent and then – ideally – campaign for us to stay IN.

And that is the sticking point with Mr Reckless.

The former Tory MP was clear today that he believes in an independent Britain, and wants to follow the Scotland Yes campaign with what he said was a positive, patriotic message for voters.

He wants OUT – and UKIP is the only party that is fully with him.

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Tesco Taps Banks For £2.5bn Crisis Warchest

Tesco Profit Error: Could Something Be Amiss?

Updated: 9:35am UK, Tuesday 23 September 2014

By Ian King, Business Presenter

Even from a lesser company, three profits warnings inside a year would be startling.

Coming from a blue-chip stalwart like Tesco, it is nothing short of astonishing.

In issuing a profits warning on top of a profits warning, Britain's biggest food retailer almost seems to be taking to an extreme the strategy so commonly seen in its stores, with three for the price of two.

So what exactly has Dave Lewis, the new chief executive, uncovered?

Well, in its own words, Tesco has identified an overstatement of its expected profit for the half-year, principally due to the accelerated recognition of commercial income and delayed accrual of costs.

In other words, the reporting of costs incurred in the first half of the year appears to have been delayed so they are pushed into the second half, while profits enjoyed during the second half of the year appear to have been brought forward into the first half.

It is unclear what kind of activities generated these profits, but commercial income, with regard to supermarkets, could mean rebates from third-party suppliers or payments from those suppliers to incentivise Tesco to give their goods better positions when they are displayed in its stores.

This latter practice is common place in the supermarket sector and, having worked previously at Unilever, Mr Lewis will be familiar with it.

The overall effect of these two actions will have been to pretty-up Tesco's first-half numbers.

Cynics will suggest Mr Lewis has every reason to restate the numbers lower - after all, the period, the six months to August 23, was when his predecessor, Philip Clarke, was at the helm.

Some would say it is in Mr Lewis' interests to ensure that period is painted in as bad a light as possible in order to make any subsequent turnaround under him look better.

It's known as "kitchen sinking" in the City - where every possible bad bit of news, including the proverbial kitchen sink, is thrown into the accounts to make them look bad.

But the sheer size of this overstatement, £250m, would suggest this is a bit more serious.

So is Mr Lewis' response: the suspension of four of Tesco's UK executives, his recruitment of the top City lawyers Freshfields to investigate and his hiring of outside auditors from Deloitte - Tesco's regular auditor is PwC - to examine what has happened.

At this time, there is no suggestion that anything illegal has been happening. After all, all businesses occasionally recognise revenues early or take their time to recognise costs in the accounts.

Yet the sheer aggression of the accounting policy in this instance and Mr Lewis' response to discovering it rather suggests he thinks something may be amiss.

And, with plenty of American investors - who tend to be more litigious than their European counterparts - on Tesco's shareholder base,  he is doing the prudent thing in checking this out as thoroughly as possible.

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Five Secrets To Discount Supermarkets' Success

German discounters Aldi and Lidl continue to record stellar growth figures as the middle-class warm to their products and the big four supermarket chains battle it out in the bitter price war.

1. BIG IS NOT ALWAYS BETTER

Over decades the big supermarket chains have expanded their range and variety of products. While giving consumers a choice of between 10 different varieties of baked beans, such choice creates a stock burden, demands on the logistical chain and the need to have bigger stores to stock the products.

Instead, Aldi and Lidl restrict the number of different types of the same product. This allows them to reduce store sizes, warehouses and transport costs.

2. VISUAL SIGNALS

Big brands spend millions honing their packaging graphics, logos and label colours. The discounters sell their own-source items, from cereals to deli items and tinned food at below the price point of big brands. There is a remarkable similarity in the discounters' goods to the familiar household labels.

Aldi's prosecco sparkling wine's orange label is a similar colour to a famous French champagne, its chocolate wrappers have a scroll graphic like a luxury Swiss brand, and you may need to do a double take when you see their rice crispy breakfast cereals.

3. ONLINE DELIVERIES

Apart from Morrisons, the big chains raced into online ordering in the 21st century. They have built up big IT structures and local delivery networks to offer the service. But it does not come cheaply. Some estimates put the cost of each delivery at more than £10 - an expense borne by the retailer. Aldi and Lidl have avoided becoming sucked into the vortex of online ordering and delivery.

4. STAFFING

With smaller stores, the discounters can keep wage overheads to a minimum. Salaries are a big and fixed overhead for supermarkets. On October 2, Aldi opens its second store in Lincoln. The full staffing level of 45, for a store open long hours, is low.

Lower staffing levels means fewer checkouts and shelf stackers. The discounters get around this by selling many items directly from the transportation pallets. The big chains normally unload pallets in the back room and then restock using smaller trolleys. Wheeling pallets into their wide aisles saves time and the number of staff needed.

Fewer checkouts can cause tension and dissatisfaction for customers, but Aldi has found a way to trim a second or two from each item being scanned. Many of their products carry multiple bar codes, allowing checkout staff to improve item scanning time, alleviating the need to locate the code on the packaging.

The discounters have also avoided the added expense of setting up a chain of convenience stores. High street leases and fitting out costs are expense undertakings, and it has become another battleground for the big supermarkets.

5. WOOING THE MIDDLE-CLASS

Pre-financial crash, many middle-class families were happy doing the weekly shop at their local out-of-town mega supermarket. With belt tightening, more awareness of food wastage and a range of items that appeal to more discerning palates, Aldi and Lidl have catered for those with less-constrained budgets without disenfranchising budget buyers.

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First-Time Buyers To Get 20% Off Under Tories

Young first-time buyers will get a 20% discount on their new homes, under plans announced by the Conservatives.

David Cameron has set out plans to build tens of thousands of new homes on commercial "brownfield" land, reserved for first-time buyers, under 40.

As Tories begin gathering in Birmingham for their annual conference, the PM said a Conservative government would implement the plan if they were re-elected in 2015.

Homes built under the proposed Help to Buy: Starter Homes scheme would be exempt from a range of taxes, lowering their price by 20%, say Tories.

First-time buyers have been priced out of many areas, especially in London

In an interview with The Sun, Mr Cameron said the programme would deliver 100,000 starter homes over the lifetime of the next parliament.

"We want to help more young people achieve the dream of home ownership so today as part of our long-term economic plan I can pledge we will build 100,000 homes for young, first-time buyers," he said.

"We will make these starter homes 20% cheaper by exempting them from a raft of taxes and by using brownfield land.

"I don't want to see young people locked out of home ownership.

David Cameron says the new homes would be exempt from some taxes

"We've already started to tackle the problem with Help to Buy mortgages - and these new plans will help tens of thousands more people to buy their first home."

The Conservatives said the homes would be built on brownfield land already zoned for development but no longer needed for industrial or commercial use.

Such land is not normally made available for housebuilding and can be bought more cheaply than other land, and the savings will be passed on to the buyer.

Public sector land which is surplus to requirements will also be brought into the scheme.

At the same time, the Conservatives said that the properties would be exempt from most of the taxes imposed on new homes.

These taxes include the social housing requirement and the community infrastructure levy.

Some future regulations such as the zero carbon homes standard will also not apply to properties built under the scheme.

The announcement is intended to set the tone for the party's final annual conference before the country goes to the polls next May.

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Vast Food: Restaurants Urged To Cut Portions

By Poppy Trowbridge, Consumer Affairs Correspondent

Restaurants should cut portion sizes or charge more for large servings to help reduce food waste and fight obesity, experts have said.

The Chartered Institute of Environmental Health said the measures would also mean significant savings for food outlets and catering firms.

Jenny Morris, policy officer at the professional body for environmental and public health, told Sky News: "Many of us eat too much.

"The portions we expect to see are too big.

"It seems obvious to me, that an easy solution is to only produce the amount of food that is going to be consumed or that is needed."

She also added that there was some rationale for restaurants to charge a premium for large servings, in a bid to combat rising obesity rates.

Campaigns have sought to encourage consumers to cut back on food waste for years, but the CIEH says the industry itself must drive the changes.

Anthony Worrall Thompson says 97p per customer is lost in food waste

"I think that it is business that needs to lead on it because it is business that is in control," Ms Morris said.

"It hasn't always been the focus up until now."

While big business has begun to measure appropriate portion sizes and reduce food waste, the majority of Britain's food businesses are missing out.

Ms Morris said small and medium-sized restaurants could save hundreds of pounds a week by simply reducing how much meat and produce is wasted.

Celebrity chef Anthony Worrall Thompson estimates that 97p per customer is lost in food waste.

"When you add that amongst the thousands of customers we have every year, it's a huge amount of money," he said.

Recycling body WRAP estimates the cost of food being wasted in the UK from the hospitality and food service sector will reach £3bn per year by 2016.

Ms Morris said: "We are in a very privileged situation at the moment where food is relatively cheap. It won't be in the future.

"It doesn't matter whether a business is small or large, it can save a lot of money." 

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Vauxhall Recall: Warning Over Corsa Steering

Recalls By Carmakers On The Rise

Updated: 11:25am UK, Saturday 27 September 2014

The recall by Vauxhall of around 3,000 vehicles because of a steering problem is just the latest in a series of headaches for motor manufacturers.

Last year, manufacturers recalled 868,605 vehicles to dealerships to fix potentially life-threatening defects - up from 665,000 in 2009.

However, the increase does not necessarily mean cars are more prone to faults, but that firms are acting more quickly to deal with problems - anxious to avoid damage to their brands.

Here are just some of the major recalls seen in the past year or so.

:: Only this week US car giant Ford put out a recall on around 850,000 cars in the US over a "potential issue" with airbags.

:: Ferrari has recalled more than 3,000 of its £200,000 luxury sports cars because a fault with a latch means anyone trapped in the boot would not be able to get out.

:: General Motors recalled more than 220,000 cars to correct a brake defect that could increase the risk of fire.

:: Earlier this year, Toyota issued a recall affecting 6.4 million vehicles worldwide and 35,124 in the UK. The carmaker has learned the lessons from the past when it suffered a backlash, after being seen to have responded too slowly to a fault that caused models to accelerate without warning in 2010.

:: Aston Martin recalled 17,590 sports cars in February due to a problem with the accelerator pedal.

:: In 2013, Mercedes recalled 2,540 M-class SUV models in the UK when it discovered a particular floor mat could impede the accelerator pedal.

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Tory Plan To Lower Benefits Cap To £23,000

UKIP Defections: PM Did Too Little, Too Late

Updated: 10:09pm UK, Saturday 27 September 2014

By Anushka Asthana, Political Correspondent

During the 2010 election, I travelled to Rochester and Strood in Kent, where I met the Tory candidate Mark Reckless.

One thing that struck me as I watched him take to the doorsteps, was the number of constituents raising the issue of immigration.

One awkward incident involved an elderly man ranting about why he supported the far-right National Front. Mr Reckless backed off, embarrassed.

He certainly didn't share those extreme views. But it was clear then that he was a politician who was worried about immigration and angry about Europe.

I remember another conversation with Mr Reckless last year in the Commons.

Tory backbenchers were nervous about immigration, he told me. They felt David Cameron hadn't done enough, and the looming prospect of transitional controls lifted on Bulgarians and Romanians was of particular concern. 

Things could get tetchy in January 2015, he said.

Mr Cameron knew about these misgivings among his MPs and tried to act on them.

Late last year he unveiled a toughening up in the rhetoric on immigration – bringing in new rules to crack down on the access that new EU migrants would get to benefits. Then came the pledge of an EU referendum.

The hope was to appease the concerns of people like Mr Reckless, and you might have thought it was working.

After all, following the defection to UKIP of Douglas Carswell many asked the MP if he would be next. He insisted not.

When I texted Tracey Crouch, a neighbouring MP in Kent, about his decision to leave the Tories, she replied: "Nothing I can say right now would be becoming of a lady. I'm so angry. He looked me in the eye and promised he wasn't going to defect."

Others pointed out that he was openly supportive of the Conservatives as recently as yesterday.

Then he tweeted: "Good to lead coach for Team2015 campaigning in Birmingham Northfield on Sunday + will be followed by our Clacton action next Thursday."

That is why Tory sources say they are "surprised". Other MPs told me they felt "let down", "frustrated" and "fed up".

"Another battle when we should be fighting Labour," said one.

Others argued that although he had behaved irresponsibly, giving a leg-up to Ed Miliband, that a number of backbenchers were angry with the party's position on Europe.

They believe that Mr Cameron hasn't done enough to prove he can loosen Britain's ties to the EU. They want to see the issue addressed at his conference speech this week.

The problem for men like Mr Reckless is they don't share the Prime Minister's views on Europe.

Mr Cameron wants to reform the UK's relationship with the continent and then – ideally – campaign for us to stay IN.

And that is the sticking point with Mr Reckless.

The former Tory MP was clear today that he believes in an independent Britain, and wants to follow the Scotland Yes campaign with what he said was a positive, patriotic message for voters.

He wants OUT – and UKIP is the only party that is fully with him.

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Lloyds Sacks Eight And Stops Bonuses Over Libor

Lloyds Banking Group has sacked eight staff and forfeited their bonuses of £3m over Libor and currency manipulation attempts.

The staff members of the taxpayer-backed bank were found guilty of misconduct for actions between 2006 and 2009.

The findings follow an investigation by UK and US regulators over manipulation attempts for the interbank lending rate, and the currency fixing known as the Sterling Repo rate.

Lloyds Banking Group CEO Antonio Horta-Osorio said: "Having now taken disciplinary action against those individuals responsible for the totally unacceptable behaviour identified by the regulators' investigations, the board and the group's management team are committed to preventing this type of behaviour happening again."

"A number of individuals have been dismissed. In addition, the Remuneration Committee is tasked with ensuring that the outcome of the disciplinary process and the significant reputational damage and financial cost to the group are fully and fairly reflected in the options considered in relation to other staff bonus payments."

Sources have told Sky News the bonus-cutting - averaging £375,000 per employee - was part of new rules over so-called clawback.

The purpose of clawing back bonus and other incentives from previous years it to dissuade bankers from reckless behaviour, if they are found liable at a later date.

The unnamed Lloyds staff now have the right to appeal the decision, in accordance with Lloyds's disciplinary policies and procedures.

Sky News City Editor Mark Kleinman revealed in February that Royal Bank of Scotland - 81% owned by the taxpayer - was eyeing up to £100m in staff bonus claw back over Libor at its investment bank.

Lloyds admitted it was unable to take any disciplinary action against a number of other staff members who left the group prior to the settlements with regulators in July.

The UK's Financial Conduct Authority fined Lloyds £105m, and it was also heavily fined by US regulators, with the overall penalty coming to £218m.

Chancellor George Osborne said the Libor fine for Lloyds would go to military good causes.

Royal Bank of Scotland was fined £390m manipulating benchmark rates in February last year, and there have been a number of other banks, including Barclays, UBS, Deutsche and JPMorgan punished.

Barclays was the first bank to settle with regulators for manipulating Libor submissions, paying £290m in June 2012.

Meanwhile, Swiss banking giant UBS has warned it faces new fines after confirming talks to settle allegations of involvement in foreign exchange (forex) rigging.

It has previously paid out fines totalling $1.5bn (£920m) over benchmark rate manipulation, and has set aside $2bn for fines over forex.

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Insider Trading Charges For Ex-Morrisons Exec

The City watchdog has charged a former senior executive at supermarket group Morrisons over alleged insider dealing.

The Financial Conduct Authority (FCA) said Paul Gerard Coyle was charged with over two offences, contrary to Section 52(1) of the Criminal Justice Act 1993.

The FCA said the alleged offences related to Ocado share trades between February and March 2013.

Mr Coyle was first arrested late last year, as part of an investigation by the watchdog.

He was suspended by the supermarket chain in January.

Shares in Morrisons dropped 2.4% shortly after the announcement was made, while those in Ocado dropped by 2%.

Morrisons began using Ocado for its debut home delivery service in January.

It announced in the previous May a deal with Ocado for deliveries over a 25-year period.

Part of the deal included a £170m purchase of its distribution centre in Dordon, Warwickshire.

In a statement, Morrisons said the FCA's insider dealing investigation "did not concern Wm Morrison Supermarkets plc nor any other Morrisons' employee". 

"Morrisons is satisfied with its governance and procedures concerning the handling of market sensitive data in this case and found that the company's procedures had been properly followed," it said. "These accusations, if proven, would be the result of an individual acting alone."    

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