Safeway struggles with a wonky trolley

One of the most oft-written company comments in the late 1980s was how fortunate it was for Argyll Group that it had been cheated by Guinness out of the Distillers bid prize because if it had succeeded it would not have gone on to acquire Safeway. At the time Safeway seemed an inspired acquisition. Today things do not look quite so rosy and indeed they may never have been as good as they were painted. Ever since Argyll acquired the supermarket chain in 1987, the group has been in catch-up mode. While rivals Tesco and Sainsbury raced down the supermarket aisle of progress, Safeway was left looking like a frustrated housewife with a wonky trolley.

It would be unfair to characterise Argyll as the sort of company that sits on its hands and watches the world go by. This is far from the case. Safeway's original portfolio has been supplemented by 150 larger, swanky edge of town superstores. Older underperformers have been weeded out and viable outlets extended and modernised. Even so, it is plain that the company still faces a legion of problems. Now there is to be a Herculean effort to close the gap. Most of the ideas that lie behind its Safeway 2000 campaign are copied from rivals. It is also undoubtedly the case that management should have acted sooner. Furthermore, the initiative hardly compares in boldness and scope with Operation Checkout, Tesco's hugely successful campaign to transform itself away from the pile 'em high sell 'em cheap philosophy of the past. Nonetheless, it is something, and judging by the share price reaction, the City is grateful.

The draconian job cuts will address the criticism that Safeway stores have too many chiefs and not enough Indians. Seven or eight management jobs will disappear from every store. Out go the department managers and many supervisors. Again Sainsbury and Tesco have already done this but Safeway could not have acted sooner because it did not have the technology in place. Safeway is also beefing up its non-food lines, extending the range of magazines, videos and CDs on offer while matching the discounters on grocery lines with its Savers range. Newer ideas such as creches, dry cleaners and photo processing labs are being extended.Much more needs to be done, however. Safeway's sales per square foot compare poorly with its two main competitors. Even if it reaches the pounds 15 a square foot targeted in three years' time, it will still be well behind Sainsbury's at pounds 20 and Tesco's at pounds 17.

Just to keep up Safeway needs to run very hard indeed. Sainsbury and Tesco are bigger, richer and have a portfolio of out of town stores Safeway will never match under current planning restrictions. Argyll may have to resign itself permanently to the position of poor relation.