Waitrose beaten to best supermarket title by Aldi

Waitrose Jubilee chickenGetty Images

Upmarket grocers Waitrose and Marks & Spencer just got beaten to the best supermarket title - awarded by consumer champion Which? - by no frills chain Aldi. The German discounter was praised for delivering exceptional value and outstanding product quality.

Even so, Waitrose has been punching above its weight. A supermarket minnow compared to Tesco, the market leader with a slice of more than 30%, it has been outperforming most of its larger rivals in the past few years. How did it get there? And how did it get its name?
The darling of middle England, known for its TV ads featuring celebrity chefs Delia Smith and Heston Blumenthal, Waitrose is part of the John Lewis Partnerhip. It runs 243 branches across the UK, including food halls in John Lewis department stores and 30 "little Waitrose" convenience stores, employs 37,000 people and has a 4.6% share of Britain's grocery market.
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The supermarket chain dates back to 1904 when it was founded as a small grocery store in Acton in west London by Wallace Waite, Arthur Rose and David Taylor. A few years later, after Taylor had left the business, it became known as "Waitrose".

By 1937 when John Lewis took it over the chain had grown to 10 stores and employed 160 people. Under the department store's ownership, Waitrose opened its first supermarket in 1955. It expanded across London and the south east and in 1983 became the first major supermarket to sell organic food.

It slowly became a national retailer, although it remains weighted towards the affluent south east and London area. In 2000 Waitrose bought 11 stores from Somerfield, and following Morrisons' takeover of Safeway in 2004/5 added 24 Safeway stores, which Morrisons was forced to shed under competition rules. This took Waitrose as far north as Durham, although that supermarket was later shut because it was making a loss - a rare blip in the Waitrose success story. Today Waitrose also has branches in Scotland and Wales.

Prince Charles
In the autumn of 2009, Waitrose came to the aid of Duchy Originals, the struggling organic food business started by Prince Charles in 1990 to sell the produce grown at his Highgrove estate. Waitrose agreed to an exclusive deal to stock the range, in return for paying a royalty to the Prince's Charities Foundation. The Duchy range was relaunched with new lines under the Duchy Originals from Waitrose brand, but the Prince's company remained independent. Waitrose lauded the deal as a "match made in heaven" while the Prince of Wales returned the compliment, describing Waitrose as "one of the great British stores".

Despite the sight of Prince Charles and Camilla in its aisles, Waitrose has been trying to shed its reputation for being posh and pricey by introducing a budget range called Essentials, along with running more promotions. (This sparked a spoof story - 'Waitrose withdraws 'essential' range after finding poor people in stores'.)

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This takes time, but once you know the cost of a phone call, putting the dryer on, or a bag of potatoes, it enables you to judge far better how much you can afford to consume.

Once you know the base price, you are in a position to keep your eyes open for a better offer. If you see a discount you can judge for yourself whether it actually constitutes a bargain. For bigger things like utilities it enables you to do a proper price comparison and see if you can cut your bills.

Don't just assume that the premium range is better, try the every-day brand, or even the basic version and see if you spot the difference. Likewise, consider trading down your supermarket from one of the big players to local markets or discounters like Aldi.

If you plan what you buy to match what you actually cook and eat then not only will you be able to budget far more effectively, but you'll also waste much less and find your money goes further without you having to try.

If you can't think of a way to get your meat for less, consider a vegetarian day once a week. If you can't find petrol any cheaper, then work on making your driving as efficient as possible. The more you can think of clever alternatives the less you will have to make painful cuts to make ends meet.

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In a direct attempt to take on Tesco, Waitrose has been matching the market leader's prices on 1,000 items since mid-2010. In May, the middle-class brand went even further and adopted John Lewis' famous 'Never knowingly undersold' pledge - which dates back to 1925 - promising to roll out the price match to 7,000 lines.

Waitrose's relationship with another middle-class brand, Ocado, is interesting. Ocado delivers Waitrose-branded food to people's homes but also competes with it. Waitrose's online sales have benefited from the ending of a non-compete clause that until last summer prevented it from going head to head inside the M25 with the grocery delivery firm.

Secret to success
Since its humble beginnings Waitrose has steadily built up a reputation for wholesome food and quality, and has strong ethical and environmental credentials. It has its own farm in Hampshire, where it sources some of its veg, fruit and milk. It even runs a cookery school above its Art Deco store in Finchley Road in north London.

Like John Lewis staff, all of Waitrose's employees share in the success of the business and receive an annual partnership bonus. Waitrose is feeling so confident it is stepping up its expansion abroad, with more store openings planned in the Channel Islands after a first supermarket opened in Jersey last year. It is also runs stores in the Middle East under a franchise agreement. At one point Waitrose even contemplated taking over cafe chain Eat.

Perhaps surprisingly, the latest grocery market data reveal that along with the discounters Waitrose is one of the winners of the economic downturn, with till growth of 7.5% over the last 12 months. The lipstick effect? When times are tough, or so the theory goes, people like to treat themselves to small affordable things like a lipstick - or some nice food.

Edward Garner, of market research firm Kantar, said recently: "Waitrose sees no slowdown in its growth as some households refuse to let economic pressures affect their food purchasing. This may also be a result of cutbacks on eating out. The continued growth of premium own-labels, particularly Tesco Finest and Sainsbury's Taste the Difference, is further evidence of this."

But Waitrose has also shown it can adapt to the times. Interestingly, its Essential Waitrose range was modelled on a Whole Foods initiative. Waitrose's managing director Mark Price and other directors went over to America in 2007 to see how supermarkets there were coping with the subprime mortgage crisis.

"The big decision for us was: were we going to start tiering our assortments and bringing in an entry level to Waitrose?" Price told the Daily Telegraph in 2010. "We went to see the Whole Foods chain in America and they have a range called 365 Everyday Value. We toyed with the idea and our marketing team came up with Essential Waitrose."

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