Early development and growth
The company began business bottling wine in 1940s and gradually expanded into a producer and distributor of a wide variety of products in the west of the country. In 1955, it became a limited company and in 1960 it purchased it’s the first of the two large food discount stores complete with ample parking space. By adapting strong financial control techniques, GVF managers were able to bring the stores which have been failing back into profits.
Perhaps without realizing it, GVF had stumbled on the concept of the modern out-of-town supermarket with ample parking space. Until the 1960s, car ownership in the country had been limited to the well off, but a growing economy and the increasing affluence of working people led to a wider spread of car ownership. This development contributed significantly to the success of GVF’s first stores. Customers came not only from the immediate area, included a growing body of new car owners ready to drive miles to buy low-cost groceries. Encouraged by this success, GVF began to buy up abandoned mills and warehouses in the west of the country and to offer to a public a limited selection of produce at the lowest possible price.
By 1972, GVF had 50 supermarket stores with plans to open new stores every year. In the ten years from 1972 to 1982, turnover rose 150 150 million pounds to 1,560 million, and pre-tax profits from 7.3 million to 71.6 million pounds. At this time, GVF ranked sixth in the supermarket league. As the number of supermarket increased, GVF embarked on diversification program into the non-food sector. The first move was into discount clothing, which it displayed in a section of each of its larger supermarket stores. Later, consumer electrical goods were added and then, as the success of the company continued, GVF purchased carpet and furniture retailing businesses.
Problems leading to decline
Unfortunately, in the years immediately following the acquisitions, the economy feel into recession and there was a heavy price discounting in the furniture sector and increased competition. In 1983, GVF closed its furniture division and at a substantial cost to the company. The carpet business managed to make a small profit even in the recession and, when the recession ended, bounced back with substantial earnings.
During the late 1970s and early 1980s, it became fashionable for families to do one major shopping trip per month to large out-of –town superstores and GVF, like the other supermarkets, prospered. But competitors were expanding, especially in the affluent east of the country. GVF also continued to open new stores, but these were in the less well-off western regions of the country. It also became clear as time progressed that GVF was losing customers to its competitors even on its own territory. The main reason for this seemed to be the competition’s improved store design with its wider aisles and improved presentation of products. Shoppers evidently liked to shop in pleasant surroundings as well as to be able to buy groceries at discount prices. GVF’s old formula of high-volume, low-price goods with no frills came to look outdated.
By the mid 1990s GVF superstore development was floundering , especially in the east, and its older stores were in need of refurbishment to bring them in line with consumer expectations. The organization also needed a more efficient distribution system. Competitors had already developed their nation-wide systems with state-of-the-art technology, and this gave them competitive edge over companies like GVF. It was not only the food side of the company’s business that suffered but also the own-label clothing that had had once done well. The electrical appliance side of the business did so badly that it had to be sold off.
Furthermore, while GVF had once been cheaper, this was no longer the case. Competitors had developed a much larger percentage of own-brand products and this gave them much larger gross margins than branded goods that all the supermarkets were obliged to stock.
Though fierce competitive activity had reduced the major players in the industry to half a dozen large chains in the years since 1970, the competitive pressures and large-scale capital investment required had not deterred new entrants to the market. A few foreign competitors seeking new markets had managed to secure a foothold by offering unbranded goods at rock- bottom prices. These companies kept costs at a minimum by displaying a limited range of grocery necessities on pallets in large warehouses and offering only minimal service. This development only served to increase the pressure on GVF since the new entrants nibbled away at what had been part of GVF’s traditional customer base.
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