Tesco’s sales overtake Sainsbury’s for first time

Tesco’s annual results show it has overtaken market leader Sainsbury’s in sales and is chasing it hard in market share.

Pre-tax profit leapt 12.7 per cent to ú595m, UK sales increased by a similar sum and group sales rose 17.6 per cent to ú10.9bn.

While figures from the Institute of Grocery Distribution show that Sainsbury’s retains an edge on Tesco with 11.8 per cent, as compared to 11.4 per cent (including William Low), in supermarket sales, AGB Superpanel figures show Tesco taking a 19.1 per cent share of packaged groceries for February to March, ahead of Sainsbury’s 18.5 per cent.

Tesco’s year-end results show the chain overtaking Sainsbury’s as the retailer with the biggest supermarket sales for the first time at ú10.9bn. The ú257m purchase of William Low last September boosted Tesco’s position but, more importantly, the figures reveal the chain has closed the gap on Sainsbury’s – something which two years ago seemed inconceivable.

Sainsbury’s, the market leader for years, is looking increasingly vulnerable. Its strong corporate culture makes it slower to adapt to consumer changes. Analysts predict supermarket sales of ú9.5bn and a group profit (including SavaCentre, Homebase and its overseas business) of more than ú800m when it reports its results next month.

The multiple supermarkets are playing push and shove as each vies to edge ahead of rivals in a competition to capture common ground. The race is on to top the league of “one-stop” shopping destinations. Superstores are extending their drive from category to category, drawing customers away from high street retailers and independents.

Tesco has stolen a march on its main rivals this year through a variety of marketing initiatives and tactical plays which have taken customers from the weaker players in the market – the independents, Co-op, Somerfield and Kwik Save.

The launch of the Clubcard loyalty scheme two months ago is the latest sign that Tesco is at the forefront of superstore marketing. Tesco chairman Sir Ian MacLaurin says: “The scheme will increase the overall loyalty and spending of our customers, especially those we have attracted in the past two years. It will allow more effective, targeted marketing.”

The Clubcard launch is a move to tie floating shoppers into Tesco. If it is to maintain the status it has now achieved it will have to use the information it gleans from the loyalty scheme to cement its position.

The expansion of the Express petrol forecourt format is an indication of the importance of petrol retailing where the superstores now take nearly a quarter of the market. A further ten sites will be opened before the end of 1995.

At the same time, Tesco is refitting 80 of its stores with home entertainment departments selling CDs, videos, books, stationery and toys. In videos, Tesco has increased marketshare from two per cent in 1993 to 5.3 per cent in 1994, and is looking for seven per cent in 1995.

However, other supermarket retailers are preparing to hit back at Tesco.

“Tesco is making hay while the sun shines,” says one analyst. “But its rivals won’t just let it get away with it. Safeway has extended its loyalty card to 106 stores, and Sainsbury’s is also increasing its distribution and trying cheap regional pricing. Asda is also stepping up its loyalty card initiative.”

The chain promises to “maintain the momentum in the future”. A new campaign – stage three of the Every Little Helps campaign – breaks in the spring. Tesco’s ability to maintain its slender lead will have as much to do with the response of it rivals as its own efforts.

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