Somerfield is the 5th largest food retailer in the United Kingdom as of 2005, operating as Somerfield Stores Ltd. It is part of the Somerfield Group plc, which merged with Kwik Save Group plc in 1998. As a result of the merger, Kwik Save is no longer a separate trading company (Kwik Save Stores Ltd is a property holding company). Kwik Save is now a trading division of Somerfield Stores Ltd and shares its supply chain and back office systems with Somerfield.

Company logo (Courtesy of Somerfield plc)

The Somerfield business unit currently has 814 stores, whilst Kwik Save has 494 stores (December 2005). Somerfield will contain 940 stores and 177 forecourts whilst the Kwik Save business unit will hold 368 stores by Christmas 2006, as a result of a 'Portfolio Transformation Programme'. Somerfield recently re-branded half of Kwik Save's Scottish stores under its own name and closed the remainder, thus removing the brand from the marketplace north of the border.

Somerfield is the fifth largest food retailer in the UK. The four larger ones are Tesco, ASDA, Sainsbury's and Morrisons, and they are the only ones that operate full size superstores. All of the others are niche players of one kind or another. Somerfield's self-declared niche is to "be the leading small format retailer in the UK". For the 53 weeks ended 30 April 2005 Somerfield Group's turnover was £4.676 billion. Profit was £60.9 million before tax, and due to a tax credit it was £62.9 million after tax. These profits were up about a third on the previous year; the group has had very narrow profit margins for a number of years.

History

Somerfield's origins are traced back to 1875 when a small family grocery store was opened in Bristol by J H Mills. By 1900 it had grown to a chain of 12 stores. In 1950 the fourteen stores were renamed "Gateway" when Bristol finance house Tyndall took a majority shareholding. The new name was chosen due to the company's home town being the 'gateway to the West Country'. In 1977 Gateway was taken over by Linfood Holdings Group and combined with Linfood's 'Frank Dee' supermarket chain to create a group with over 100 stores, with the Frank Dee stores being rebranded as "Gateway" - a move which was completed by 1983 when the group was renamed "The Dee Corporation".

Between 1983 and 1987 a number of acquisitions and mergers were made, adding Keymarkets, Lennons, International Stores, Fine Fare and the UK operations of Carrefour to the group - all rebranded under the Gateway name. In 1988 the group was renamed "The Gateway Corporation" and a year later, many of the larger superstores were sold to ASDA. In the 1990s, after falling sales and a poor reputation, the company decided to rebrand it's operations as Somerfield after a successful pilot scheme in 1990. A small number of stores were also relaunched under a new Food Giant discount brand, with the first store opening in 1991.

In 1998 the company took over rival Kwik Save, with the Food Giant stores being rebranded under that name. The core chain began to divest its superstore portfolio in 1999 (including many of the rebranded Food Giant stores) and now focuses on small to medium sized stores on high streets and in local shopping centres. It recently changed its logo from a rectangular shape to a more contemporary design and opened a number of store formats, such as Somerfield 'Essentials' and Somerfield 'Market Fresh'. It has further changed its brand image by introducing newer own-brand lines such as "So Good", "Good intentions", and a new advertising strapline: "Somerfield - Somerthing Different".

In October 2004, Somerfield acquired 114 Safeway Compact stores from Morrisons, which were subsequently re-branded under the Somerfield name. This deal was referred to the Competition Commission, which announced on July 27 2005 that 14 of the stores might need to be divested in order to satify concerns over localised monopolies. After carrying out its investigation the Commission instructed Somerfield to sell 12 stores. In September 2005, Somerfield announced its intention to appeal against the decision.

Somerfield has been subject to takeover speculation since 2003. A substantial part of the the group's appeal to bidders lies in the value of its property estate rather than its trading operations, as this can be used to leverage its financing after a takeover. Retail entrepreneurs John Lovering and Bob Mackenzie made two failed bids in 2003. In 2005, Icelandic venture capital group Baugur made an approach, while United Co-operative and London & Regional Properties also expressed an interest, but both groups dropped out of the running. In October 2005 Somerfield's board provisionally accepted a bid of around £1.1 billion from a consortium comprising property tycoon Robert Tchenguiz, private equity firm Apax Partners and investment bank Barclays Capital. This is subject to shareholder approval, but it not expected to be referred to the Competition Commission as the buyer is not another UK retailer.

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