Shelf Wobbles

Time is running out for Sainsbury’s. Having experienced arguably the worst two years in its history, the supermarket giant has put its faith in Abbey National marketer Sara Weller to give the brand a face-lift. But is she too late, now that the chain has become enmeshed in takeover speculation?

By this time next year, J Sainsbury, the supermarket group which has dominated UK food retailing for much of the past century, may no longer exist. Predators are circling the business, which has seen its fortunes wane in the second half of the Nineties, and overseas retailers are sizing it up for a takeover.

But the beleaguered supermarket chain is preparing a last ditch attempt to restore its fortunes, and is installing a new management team to find the elusive ingredients that can make Sainsbury’s 405 supermarkets the number one destination for grocery shoppers. The previous line-up of group chief executive Dino Adriano and group marketing director Kevin McCarten will pass the baton to supermarket managing director David Bremner and former Abbey National Retail marketing director Sara Weller. The Bremner and Weller show goes live this month.

Weller, who joins as supermarket marketing director on January 17, will have to address one basic question.

She says: “We have got to understand what makes people drive two miles further to one supermarket rather than another. Wherever they have a choice, we have to make them come to us.”

Weller has been given the task of reviving Sainsbury’s fortunes after arguably the worst two-year period in its illustrious 130-year history.

Falling profits because of slow sales growth at its core supermarket division have been compounded by fears in the City about its ability to survive a bloody price war being waged by its main rival Tesco and the rejuvenated Asda, now under the ownership of US giant Wal-Mart.

There have been concerns about Sainsbury’s marketing strategy for the past five years. McCarten, a former Procter & Gamble marketer, joined via Woolworth’s in an attempt to rejuvenate the Sainsbury’s brand in 1995.

But even McCarten, though respected by colleagues and observers for his easy and expansive nature, found the chain’s rigid, bureaucratic style difficult.

A former colleague says: “There’s no question he has become frustrated. He came from an environment where you made a case, agreed it, then made it happen. He has found Sainsbury’s structures and complex inter-relationships hard to deal with.” McCarten says the extent of the company’s formal style surprised him.

Weller, 39, spent 14 years at Mars before taking up her job at Abbey National at the beginning of 1997. She is married with children and lives in Basingstoke.

As she makes her own efforts to rejuvenate the Sainsbury’s brand, observers question whether she will be able to break down those barriers when McCarten seemingly failed. Though rated highly by almost all who have come into contact with her, Weller’s creativity has been doubted.

Sainsbury’s needs creativity

A former colleague says: “Creativity isn’t her strong point and, of all things, Sainsbury’s needs creativity. She is professional, intelligent, organised, diligent and a good people manager. But she is relatively weak in terms of creativity, although by no means lacking imagination.”

Others counter that during her time at Abbey Weller was responsible for overhauling its communications and improving customer service (despite being forced to accept a plan to charge customers £5 for bills paid over the counter).

Neil Jones, client services director at Carat, Abbey’s media consultancy, says: “She is possibly the brightest marketer I have worked with, and she combined this with real commercial nous.”

Another source says: “She can be a bit of an ice maiden when you first meet her but, once you have gained her confidence, she is a real team player.”

Weller’s ability to turn Sainsbury’s into a customer-focused company will be the real yardstick of her time at Stamford Street.

She says: “The key focus will be on making sure the in-store experience is the best in the industry. In retail, service is delivering every time at a face-to-face level. The way we serve is everything.”

Weller adds that advertising will be key to communicating her message: “The advertising at the moment doesn’t look like it is doing this. Some of the executions are very smart, while others, such as the Cleese work, have been derided. We have to pick one thing and do it well.”

She will meet agencies when she arrives at the company, but says she has no preconceptions about what action she will take.

Analysts agree that Sainsbury’s downfall lies in its stores – and in what it says to customers.

One leading retail analyst comments: “It simply needs to develop a competitive edge to draw people to the stores. There needs to be a greater clarity of thinking at the top and a consistent, different marketing message.”

Bremner’s appointment is the first step in achieving that goal.

McCarten, whose own position seems uncertain following Weller’s appointment, says: “Bremner is now responsible for the core chain and Weller will feed into that. His appointment is the most significant of them all.”

McCarten oversaw a series of measures on his arrival, including the promotion of branded goods over Sainsbury’s once all-conquering own-label lines, and reversed a decision not to launch a loyalty card to rival Tesco’s Clubcard.

As Weller takes her seat next to the new managing director for UK supermarkets David Bremner, who took up his role on November 1, the initial reports of a Competition Commission investigation into alleged price-fixing in the sector are expected this month. Some fear supermarkets may be asked to sell many of their stores.

Sainsbury’s has seen the ground shift under its feet and changes to the retail landscape have left it facing some tough decisions.

Richard Hyman, chairman of retail research group Verdict Research, says: “The middle ground which Sainsbury’s occupied with such success is now a dangerous place to be. At one end you have price-driven value operators such as Wal-Mart and Tesco, while at the other there are upmarket, quality operators such as Waitrose and Marks & Spencer. Sainsbury’s doesn’t want to jump on the price bandwagon because it can’t afford to compete, but if it goes upmarket there is unlikely to be a large enough market to sustain it.”

The City has responded to this dilemma by downgrading Sainsbury’s stock by 40 per cent since the Eighties. Sainsbury’s, which is still 35 per cent owned by descendants of the original Sainsbury family, is the subject of intense takeover speculation. This follows the appointment of financial advisers by the trustee of the 15 per cent stake owned by science minister Lord David Sainsbury.

The company insists the move has been made to defend against a takeover rather than to seek one, but the fact that advice is being sought highlights the precarious position of even the strongest retail brands amid merger activity on a pan-European scale.

Defensive strategy

Hyman says: “Sainsbury’s retaining its independence and continuing to lose ground to its rivals are mutually exclusive. We are predicting massive takeover activity in the sector in the New Year, in which only the outstanding businesses will survive. Sainsbury’s is a potential target, but then so is Tesco; everyone is vulnerable.”

Weller and Bremner face a race against time.

Last year Sainsbury’s invested millions of pounds in a rebranding programme under a new slogan, “Sainsbury’s – making life taste better”, to offset the effect of the much-derided campaign starring John Cleese, which tried to emphasise the chain’s low prices.

It also cut 1,100 jobs in a restructure aimed at giving the company – famed for its bureaucratic style – a flatter management structure.

Yet six months later the chain is still struggling to keep up. Last year operating profit fell by 2.8 per cent to £714m on sales up 4.6 per cent to £12.1bn, prompting group chief executive Dino Adriano to hand responsibility for the core UK chain to Homebase boss Bremner.

Alienating staff

It was McCarten and brands director David McNair, who lost his job in the April restructure, who oversaw the Cleese campaign. The campaign alienated staff. It showed Cleese berating Sainsbury’s workers with a megaphone and confused the chain’s “Middle England” customer base, which is used to seeing Sainsbury’s as the quality-led safe ground.

McCarten’s response – the “Making life taste better” campaign by M&C Saatchi – is not without its detractors. Weller will be expected to review what many see as a step in the right direction rather than a lasting solution.

One former Sainsbury’s marketer told Marketing Week: “‘Making life taste better’ is as on target as any strategy there has been for some time, but it’s a brand leader’s campaign when Sainsbury’s is clearly no longer the brand leader.”

Weller’s appointment, revealed in Marketing Week (December 16), was to be put off until this month, as part of wider changes to the company’s management team.

A Sainsbury’s spokeswoman says: “Weller has strong experience from her time with Abbey. We have made huge progress in rejuvenating the Sainsbury’s brand and she will take that development even further.”

Analysts will be sizing up Bremner’s trading skills – he has a reputation for hard decision-making and clinical efficiency – but also watching to see whether Weller’s much-vaunted marketing skills can restore Sainsbury’s to its former glory.

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