SBHD: Tesco’s recent successes have put Sainsbury’s on the defensive. Ivor Hunt, Sainsbury’s marketing chief, is the man charged with freshening the image of a firm accused of resting on its laurels.
Ivor Hunt is rattled. One year this month after this affable, but less-than-charismatic, man took up the Sainsbury’s marketing directorship, Tesco has seized the publicity initiative.
From its compelling hors d’oeuvres of confidently-marketed customer-care milestones – among them reduced queuing and better facilities for parents – to February’s triumphant Clubcard main course, it is Britain’s second-biggest food retailer that is sharpening up its batterie de cuisine; leaving the biggest to unload the car.
Hunt is usually a placid man, a former statistician with more than a quarter of a century’s experience at what he calls “JS”. And if all the above events at Tesco were not enough to turn him into a prickly hedgehog with a hangover, then perhaps the promotion of his opposite number at Tesco, Terry Leahy – who is said to be another MacLaurin in the making – to deputy managing director might swing it.
Loyalty is one of the key planks of the Sainsbury success story – with employees’ loyalty to this 125-year-old family firm matched only by the loyalty of the 8 million customers who shop at its stores each week.
But when we meet, Hunt’s obvious ire at the largely rapturous welcome given by the City to Tesco’s Clubcard has all but made loyalty into a dirty word. His response to the initiative is swift. “Our rivals,” he says, “have in effect moved the goal-posts.
“Tesco is well aware Sainsbury’s dominates the high ground in terms of sheer food values, and it must therefore attract attention by concentrating on the more peripheral aspects of food shopping. I’m not saying that in-store packing, baby-changing facilities and no queuing aren’t important, but they are arguably less important than the central issue of food quality.”
And anyway, Hunt asserts, Sainsbury’s introduced many of what its rivals are claiming as new “initiatives” when Leahy was still in short trousers.
“Take all the publicity surrounding sweet-free checkouts. We took sweets off our counters more than a decade ago, yet when our competitors follow suit years later, everyone makes an enormous fuss about it. These so-called innovations simply aren’t new. Regardless of what hits the headlines today, the fact is that Sainsbury’s has been delivering good food that costs less for a very long time, and will continue to do so.”
But does the City share Hunt’s unshakeable belief that the Sainsbury’s ethic will continue to succeed? David Stoddart, retail analyst at Henderson Crosthwaite, has re- servations about the company’s ability to adapt to changing customer attitudes. “I think Sainsbury’s may have been looking through the wrong pair of glasses and filtering out some of the fundamental changes in social values in recent years.
“I can see that it is hard to change course when the old tried and trusted methods have worked so well for so long, but there is compelling evidence that today’s 21-year-old consumer requires rather different things to her mother. While Sainsbury’s continues to play the aspirational card, Tesco appears to be more responsive to the actual needs of today’s younger shopper. And however important older customers are, it’s the young they are after.”
The strength of Tesco’s position became clear in the Christmas and new year period, with Tesco’s like-for-like growth in December reaching seven per cent, or 3.8 per cent over the previous 20 weeks, while Sainsbury’s achieved a 2.2 per cent figure in the four months to mid-January. While Sainsbury’s remains top of the form – more profitable, with high margins – Tesco has stunned the City by catching up fast.
Hunt’s position on the issue of loyalty cards is clear – Sainsbury’s will continue to use its Savercard on a short-term tactical basis, but is yet to be convinced that the cost of a national loyalty scheme can be justified. It will, however, continue to extend the use of its Homebase Spend & Save loyalty card.
Robert Clark, director of the Corporate Intelligence Group, believes it is the notable advances being made by Sainsbury’s rivals that are casting a shadow over the company, rather than anything that it is failing to do.
He says: “If you take the view that these things go in cycles, then you could argue Sainbury’s has been at the peak of a cycle for a long time. Others are simply catching up. But it does Sainsbury’s no good to be seen as dismissive of something like loyalty cards when it already operates its own in the DIY market.”
While all the analysts I spoke to were at pains to point out how “intelligent” a company Sainsbury’s has always been, the consensus is that it needs to respond to its rivals rather than cling to its past. They say that while Tesco has appeared ready to innovate, the mighty Sainsbury’s has begun to have the look of a company which has run out of ideas.
One says: “Tesco’s `Every Little Helps’ campaign will probably never match David Abbott’s celebrity recipe work for Sainsbury’s, but it does at least have the advantage of freshness.” Others make the same point about Safeway’s “Harry” campaign, or about the steadily-improving reputation enjoyed by Asda.
In response to the criticism that his company has run out of steam, Hunt lists some of his own company’s recent headline grabbers – Classic Cola and the much-copied Sainsbury’s Magazine among them.
But what of the separate charge that by concentrating on acquisition and diversification – Texas here, Shaw’s and Giant in the US – Sainsbury’s has failed to keep its eye on the main UK food retailing ball? To Hunt, who says that Sainsbury’s is tremendously proud of becoming the first UK food retailer to diversify so significantly, there is no danger that “JS” will forget its origins.
“It is from the very strength of our grocery retail business, built on core values, that we have diversified as no other food retail company has done.”
Sir Ian MacLaurin remarked recently that by focusing so strongly on its 125-year celebrations earlier this year, it was clear Sainsbury’s was looking back, while Tesco was moving into the next century. But with Sainsbury’s now prepared to tackle the dwindling numbers of UK supermarket sites head-on, – and at least one of the motivations behind the purchase of Texas must have been the appetising list of sites ripe for conversion – it wasn’t altogether a fair jibe.
Yet more sites won’t necessarily secure Sainsbury’s future. Just because Mother wouldn’t have been seen dead in Tesco or Asda, it doesn’t mean her daughter won’t be. She might even switch allegiance to spite her.