Sainsbury’s questions ‘phoney’ price war as it backs ‘values’ marketing message

Sainsbury’s CEO Justin King has questioned rivals’ recent price investments, labelling talk of a price war as ‘phoney’ and backing his supermarket’s ‘valueofvalues’ marketing message to differentiate in the market as it reports its first sales decline in 36 quarters.

Video: Sainsbury’s recent #valueofvalues ad to promote its Basics eggs

https://www.youtube.com/watch?v=4PrqN9c6k-s

Sales at stores open for more than a year declined by 3.1 per cent excluding fuel, while total sales fell 1 per cent, excluding fuel. Sainsbury’s blamed slowing growth in the overall market, recent warm wet weather and the later timing of Mother’s Day and Easter for the drop.

Speaking on a call with analysts today (18 March) King said that while Sainsbury’s will respond “tactically” to price cuts if needed, as it has done by cutting the price of milk, eggs and bread, it will not get involved in a price war. Instead, the supermarket will continue its focus on fresh food, own label and growing its online and convenience businesses, supported by its values marketing message and data from its Nectar loyalty scheme.

“We have responded to every price cut that has been made and we will continue to respond to any made in the future. This feels a bit like a phoney price war. Customers that go into rivals’ stores might be a bit disappointed,” he adds.

Convenience continued to perform strongly, up 15 per cent, while online increased 6 per cent year on year. This was behind the 10 per cent growth seen a year ago due to the supermarket’s “cautious” approach to marketing while it completes its website relaunch, which is expected to be finished by the end of April.

While the like for like sales drop ends Sainsbury’s 36 consecutive quarters of growth, the supermarket maintained its market share at 17 per cent and is confident it can outperform its main rivals Tesco, Morrisons and Asda this year. Mike Coupe, currently commercial director but set to take over from King when he steps down in July, says he sees price cuts from rivals as an “increased opportunity for differentiation”.

In particular he points to Sainsbury’s “pride” at its wide range of grocery products and the “significant amounts” it has invested in counter operations in recent years.

Morrisons last week outlined plans to reduce its range and remove some activities from counters such as fish, while investing £1bn over the next three years in price. Tesco announced a £200m price investment.

King said of Morrisons that having made these announcements, he would have expected to see big changes in store that he argues haven’t happened.

“The reality is it would be hard to argue that the experience of shopping in Morrisons was different at the weekend compared to the previous week. If you are going to tell world the world has changed, it would be good to ensure it has changed by the time you tell them or in pretty short order afterwards,” he adds.

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