Mills Group managing director, Nigel Mills
Mills Group managing director Nigel Mills talks about how the company has repositioned its convenience business with a stronger focus on fresh, healthy products.
If Nigel Mills, managing director of the UK convenience chain, Mills Group, were ever in need of a mantra, change and change again would fit the bill quite nicely.
Since the business was established as a news agency with home news delivery and sub post offices in 1986 it has undergone a series of evolutions of which Charles Darwin would be proud.
Today, it stands as a 73-strong chain comprising 45 convenience stores and 28 news agencies stretching from Northumberland in the north through to Wales.
Mills: roots as a strong CTN business
Founded with 11 CTN stores, Mills expanded rapidly in its first eight years to 30 outlets.
“Then the world changed,” recalls Nigel Mills. “There was deregulation of the newspaper industry and Sunday Trading was legalised, allowing supermarkets to open on a Sunday.”
On the plus side, Britain’s first National Lottery was launched in the same year.
“We lost sales of core products – news and magazines – but put back profit by putting Lottery into stores,” says Mills.
The business continued to trade merrily focusing on news, confectionery, tobacco and alcohol. It extended its opening hours and in 1997 introduced new services including PayPoint and E top-up.
But the status quo was short lived.
In 2002 Tesco bought T&S as a vehicle for developing its Express convenience model.
“It was very clear that we had to change again,” remembers Mills. “The news, alcohol and services model was still making money but the future was starting to be dictated by the multiples who were bringing fresh and chilled products into the community.”
In response, Mills turned to a design consultancy to freshen its brand and launched a new fascia in apple green featuring a new Mills Local logo plus the name of the village or street.
The shop fronts were opened up and painted white for a clean fresh look while inside the ambience was improved with new floors, ceiling and lighting and automatic sliding doors.
Taller gondolas were added along with a modern checkout design and wall to wall refrigeration for soft drinks, dairy, grab and go was introduced.
Top: new fresh food ranges and below, wall-to-wall refrigeration
As Mills puts it: “We added fresh and chilled and tins and packets to the CTN business. It became a full convenience offering focused on products and services.”
The model was piloted in three stores: Carlisle, in a 1,300sq ft store on a main arterial road; Brunswick Village, an 1,800sq ft store in a village location; and in Sea Road, a 2,200sq ft high street site.
“We then sat back and looked at the new models,” recalls Mills. “Carlisle worked extremely well, especially the grab and go convenience range and the promotions. The other two did not go so well. Sales still grew but they did not take off as we had hoped.”
According to Mills, the product range was not broad enough, the prices too expensive and the promotional activity was not sufficiently aggressive.
New focus on fresh
In 2006 Mills acquired a former Somerfield store in Filey, East Yorkshire.
It had been taking £50,000 a week, £20,000 from grocery and £20,000 from fresh and chilled, reports Mills.
“We knew from the experience of our test stores that the supply chain was not up to the job so we joined Nisa,” he says.
With a big push on fresh and chilled, the store retained 95% of the turnover.
Mills subsequently introduced the supplier to its three concept stores and sales took off again. That gave the business the confidence to roll out Nisa as a supplier to all of its convenience stores.
Mills reports that post development the average sales uplift per store is 14%. However, profit did not increase one jot, due to high levels of waste from fresh and chilled.
It was time to change again but this time, the emphasis was on changing the perception of Mills’ customers and its staff.
The three rapid changes in the business model had confused both camps, Mills admits.
Mills commissioned market research in a bid to change the shopper perception. It found Mills had fewer women shoppers, they bought fewer items on average than at competitor stores and were less likely to use a basket.
Mills picked up the gauntlet.
It introduced ‘basket buddies’ at the front of store, encouraging shoppers to pick up a basket, enticed by copies of the Daily Mail and OK! Magazine.
It added ‘wow’ bays in store with feature deals and strong promotional activity and deployed gondola and ladder ends and dumps bins to spread the message. And it backs up the in-store communication by distributing Nisa’s leaflets in a one-mile radius of stores.
Wow bays in-store
For the 1,100 store staff, Mills compiled training DVDs on categories including fresh and chilled and alcohol and introduced work books to develop employees as category specialists. It introduced a 10% staff discount on groceries as an incentive and encouraged employees to “buy to sell not waste”.
Mills reports waste has been reduced by over 30% in 2008 and the business is now starting to enjoy incremental profit as a result.
Fresh and chilled sales are now growing by 18% per annum and grocery is ahead between 12%-18%.
“It’s a huge growth opportunity for us because we’ve not had big sales of grocery and fresh and chilled before,” says Mills.
“Now we have the range and price and we are educating our staff – we’ve added components that were missing from the model.”
The competitive threat is ever present however.
As a consequence, deals and private label – Mills stocks Nisa’s Heritage brand – are increasingly to the fore. Nigel Mills reports promotional discounts have risen from £35,000 a week in July to £70,000 last month (November).
“Consumers want value but the consumer expectation is even higher,” says Mills. “It’s about price, customer service and quality and if shoppers don’t get it they will go somewhere else and not return,” he says.
Mills, no doubt, will evolve to ensure they do.