Sainsbury’s buys Nectar for £60m in move to take loyalty ‘to the next level’

The acquisition of Nectar-owner Aimia’s UK business is part of a strategic drive to help the supermarket know its customers “better than anyone else”.

Sainsbury’s has bought Nectar for £60m in a strategic drive to ensure it knows its customers “better than anyone else”.

The acquisition will see Sainsbury’s take over the UK business of Nectar-owner Aimia. That includes all assets, colleagues, systems and licences required for the full and independent operation of the Nectar loyalty programme in the UK.

“One of our strategic aims is to know our customers better than anyone else and obviously having ownership of the Nectar scheme allows us to do this and it’s a great opportunity,” a spokesperson for Sainsbury’s says.

There will be no change for customers as a result of the acquisition – and the organisational structure of the business will initially remain as it is. Nectar will also remain as a standalone scheme.

While there is a clear opportunity for Sainsbury’s in owning Nectar, it would seem the deal was in part led by Aimia’s desire to offload the programme.

Aimia’s group chief executive, David Johnston, says selling the Nectar business to Sainsbury’s – which was a founding partner of the Nectar coalition in 2002 – was the “optimal risk-adjusted outcome” for Aimia, and that it has worked to ensure a “seamless transition” for collectors and employees.

“The transaction allows for a sharper focus on Aeroplan, our largest and most profitable business, and simplifies our business all the while preserving a robust balance sheet for our ongoing business,” Johnston adds.

Nevertheless, Bryan Roberts, an analyst at TCC Global, believes the move will give Sainsbury’s the opportunity to move Nectar on to the next level – especially as consumers become “disillusioned” with traditional loyalty schemes.

“The main driver for Sainsbury’s bringing it in-house is that Nectar had lost some of its lustre as a genuine coalition loyalty programme after the departures of British Gas and Homebase,” Roberts explains.

“As Aimia points out, Sainsbury’s now encompasses grocery, financial services, energy, clothing, and general merchandise, therefore covering off many of the key categories for a typical retail coalition and is therefore Nectar’s largest issuance and redemption partner.

“Sainsbury’s can now take full control of the scheme, its data and the resultant insights that it and Aimia generated through i2c. Our research shows that shoppers have become a little disillusioned with traditional cards and points loyalty schemes, so this move gives Sainsbury’s the opportunity to move Nectar on to the next level.”

Jonathan Buxton, partner and head of consumer and retail at Cavendish Corporate Finance, says the deal will give Sainsbury’s “unparalleled access” to not only consumer habits within Sainsbury’s stores, but also within other operators.

“In today’s hyper-competitive grocery landscape, consumer data is king – for grocers, it helps them to market more effectively to consumers, optimise their ranges and maximise footfall,” Buxton says.

“With the Nectar loyalty programme under its roof, Sainsbury’s is putting consumers right at the front of its business, in contrast to the Tesco-Booker deal, where Tesco seems to be increasingly becoming a logistics operation.

“The deal will give Sainsbury’s unparalleled access to consumer habits within both Sainsbury’s stores and other operators, such as Vue Cinema, Ted Baker, and eBay, allowing it to refine product offerings, pricing and marketing.”