Competition snag for Mad Butcher

The Mad Butcher chain needs a revolution to stay competitive against supermarkets, a retail expert says.

Veritas Investments, the owner of Mad Butcher and struggling gourmet supermarket brand Nosh, reported a $4.6 million loss for the year to June 30.

That compared with a $3.3m profit the year before.

Veritas chairman Tim Cook said the loss was largely due to $5.6m of impairments and losses associated with Mad Butcher, the closure of Kiwi Pacific Foods and the sale of three bars in Hamilton, and other restructuring costs.

Allowing for those, the profit after tax for the ongoing business was $3.16m.

Most of the Mad Butcher stores were profitable and the chain made an operating profit of $4.6m.

But the retailer has struggled with supply shortages, product choice and pricing, Cook said.

Veritas closed three ‘‘consistently unprofitable’’ Mad Butcher stores between January and June.

At least 10 Mad Butcher franchisees have faced liquidation since late 2012.

There are currently 33 Mad Butcher stores, 31 of which are franchised and two are owned.

However, two weeks ago Veritas took ownership of a previously franchised store in Pt Chevalier, Auckland.

Cook said the owner had health issues and Veritas was helping him to ‘‘remarket’’ the store.

First Retail Group managing director Chris Wilkinson said the only way for Mad Butcher and Nosh to compete in the market was to upgrade their value proposition to consumers.

This was increasingly important as local outlets of the larger supermarket companies catered more and more for their local communities.

Mad Butcher had a ‘‘super discount model’’ and did well in lower socioeconomic areas, but even so, the number of stores was shrinking and Wilkinson said that was a clear indicator that there was some distress going on.

‘‘I think it’s time for some revolution,’’ he said.

Mad Butcher had lost some of its consumer appeal without its colourful founder, Sir Peter Leitch, fronting the brand.

Leitch opened the first Mad Butcher store in Mangere, Auckland, in 1971 when he was 23

‘‘When he stepped away, it was interesting to see how things faltered,’’ Wilkinson said.

‘‘The big question is, does it have a nationwide appeal, or is the appeal more localised in certain markets?’’

The original Mad Butcher store went into liquidation in July this year and liquidator Peter Jollands criticised the business model as being in favour of the franchisor.

Nosh had a particularly ‘‘disappointing’’ year, making an operating loss $1.9m.

Nosh had lost its way too and did not offer a strong consumer proposition, Wilkinson said.

‘‘Where a business like Nosh will succeed is where it can achieve differentiation. Because Nosh has so few skews (different items) it’s very easy for large supermarket group like Progressive or Foodstuffs to pick them off,’’ Wilkinson said.

But even fellow gourmet supermarket Farro Fresh seemed to be doing better due to its strong community engagement.

Earlier this year, Veritas said it would franchise existing Nosh stores and was working through a short list of potential franchise operators.

Veritas closed Kiwi Pacific Foods, its meat patty joint venture with Burger King franchise operator Antares Restaurant Group, after the joint venture was terminated in September last year.

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Mad Butcher had lost some of its consumer appeal without its colourful founder, Sir Peter Leitch, fronting the brand.

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