Sainsbury’s will try something new next month when chief executive Justin King unveils a fresh ten-year strategy to take on supermarket leader Tesco.
King last week announced plans for a wide-ranging shake-up at the chain to “align it for future growth”, in a restructure that will trigger a round of marketing musical chairs across UK retail. The chain is assembling a marketing dream team to drive Sainsbury’s through a challenging period and bring to life King’s vision of making the chain “great again”.
The suave and ever-resourceful chief executive is under pressure to prove he can keep up the momentum of Sainsbury’s recent strong trading performance amid concern surrounding the high costs of Sainsbury’s operations as it seeks to slash prices. Analyst Clive Black, of Shore Capital, says: “Sainsbury’s sales are lower than its competitors and in any economic downturn it has to work harder to stand still.”
Sainsbury’s staff will likely be working harder after King’s restructure, which involves axing more than 200 jobs at Sainsbury’s head office out of a total of 3,500. Some marketing roles may go.
King will whittle the five existing business units down to three – fresh food, grocery and non-food. In a riposte to the sceptics, King last week gave an upbeat presentation to stockbroker Cazenove in which he outlined the opportunity “to do over the next ten years what Tesco has done over the past ten”, according to a note from the broker.
Such an ambition will require the best efforts of some of the UK’s top marketers to bring it to life. Helen Buck, director of brand communications, is moving to the key role of trading director of the newly created grocery unit. Boots marketing director Claire Harrison-Church has been hired to replace her. Meanwhile, Tesco’s former Clubcard chief, Andrew Mann, joins Sainsbury’s as director of customer insight and loyalty, a new role. The new marketers should be in place by the end of February.
For Buck, who has overseen the marketing of brand Sainsbury’s for the past four years, promotion to head of grocery trading will be quite a switch from the glamour and glitz of hiring and commissioning London advertising agencies. She now faces the hard-nosed grind of negotiating supply deals with the likes of Procter & Gamble, Unilever and Nestlé. Buck’s success in her new post will be closely watched by other retail marketers to see how seamlessly she can migrate to the intense, cold-blooded task of striking deals with suppliers. She has spent much of her career in retail marketing communications, though spent seven years as a buyer at Boots during the Eighties.
One source says that some supermarket roles can be testing for marketers who are not used to the cut and thrust of retail trading. He points to Tesco, where a round of marketing changes were made last summer as the retailer prepared for the tough new trading environment. Lance Batchelor, who joined Tesco as marketing director from Vodafone in July 2007 with little retail experience, was moved to a new role heading Tesco Telecoms. “Lance was in Tesco’s group marketing director role for just one year before he was replaced with Carolyn Bradley, who had been on the commercial and trading side at the chain,” says the source.
About the same time Tesco moved Andrew Mann – now hired by Sainsbury’s – from the role of Clubcard director to head of insight, which the source believes suited Mann’s analytical and “chew-the-fat” approach to marketing. Mann was replaced as head of Clubcard by ex-Olympic sprinter Janet Smith, who had been working at Tesco’s US operation.
The source adds that Sainsbury’s creation of the director of customer insight and loyalty post for Mann is a significant move, indicating that the chain wishes to find new ways to retain customers. “Sainsbury’s doesn’t have an insight director, but every business needs to use insight to drive its customer strategy, especially in a downturn. Sainsbury’s is focusing on retaining existing customers and winning back those who have gone elsewhere,” he says.
Another observer says Sainsbury’s has a highly effective retention strategy. “The ‘Try something new today’ campaign is clever because it gets customers to extend their basket size just a little. King realises that it is not about attracting masses of new customers, it is about keeping the ones Sainsbury’s already has and getting them to spend a bit more.”
Many thought Sainsbury’s premium positioning and pricey goods would leave it a victim of the burst economic bubble. But King has cut prices on key items without damaging quality perceptions, which has helped attract consumers who have traded down from upmarket rivals such as Marks & Spencer and Waitrose.
A renewed marketing emphasis on Sainsbury’s own-label Basics range has also helped stop customers drifting to rivals perceived as cheaper such as Tesco, Asda and the German discounters. As ever, celebrity spokesman Jamie Oliver is on hand to lend a cheeky chappie endorsement to Sainsbury’s marketing with his “feed your family for a fiver” promotion.
King’s bold ambition to “do a Tesco” will shake up an already frenetic grocery market, where Morrisons is bounding ahead and Tesco is struggling to build further on its overwhelming market lead. The chain is ceding some of its 30% of the grocery market as it increases discount offers against Sainsbury’s 16% (TNS).
Most observers praise Sainsbury’s achievement in building sales even during the downturn. Its last trading statement showed year-on-year underlying sales growth of 4.5% in the 13 weeks to January 13.
But Shore Capital’s Black sounds a note of caution, pointing to high costs, such as a comparatively greater proportion of stores that are leased rather than freehold. “I worry a bit more about Sainsbury’s compared to its competitors. It has a 3% operating margin against Tesco’s 6%, and over 4.5% for Morrisons and about 5% for Asda.
“It is successfully addressing and exceeding expectations, but it does have a higher price perception. In a downturn, that causes us to worry about how Sainsbury’s can sustain itself,” he says.
With some top new marketers on board, a slimmed down trading structure and a bit of savvy marketing, sustaining Sainsbury’s comeback is King’s next great challenge.