Sainsbury’s vows to continue quality focus despite sales slowing

Sainsbury’s has credited its focus on quality and values with helping ‘strengthen’ its position in the grocery market despite full-year sales slowing and says it will continue that strategy even as rivals take a more price-based approach in an attempt to counter the rise of the discount grocers.

sainsburys-value-ads-2013-460
Supermarket believes quality and values proposition will be even more important as rivals take a price-based approach.

Sales at stores open for more than a year increased by 0.2 per cent excluding fuel for the 52 weeks to 15 March, down from 1.8 per cent growth a year ago. Total retail sales were up 2.7 per cent, again down from 4.3 per cent growth in the previous year.

Retail operating profit was up 5.1 per cent to £873m, the ninth successive year of profit rises. Sainsbury’s says it continues to see “significant opportunities for growth” through its differentiated offer, supported by its “value of values” marketing message, Nectar loyalty data and Brand Match scheme.

On a conference call with journalists this morning (7 May), chairman David Tyler says: “Sainsbury’s has strengthened its position in the market through a focus on quality and we have done this without departing one iota from Sainsbury’s values. We will continue to focus on our differentiated quality proposition. It is possible this will be even more of a differentiator in future than in the past given the changing priorities of our competitors.”

Sainsbury’s three largest competitors – Asda, Tesco and Morrisons – have all announced price investments this year. Morrisons last week launched its “I’m the new cheaper Morrisons” strapline to promote price cuts across 1,200 of its products, while Tesco has cut the price of a number of products, as well as its online grocery service, under its “Down and staying down” marketing message.

The shift to a more price-based approach by Tesco and Morrisons comes as the discount grocers continue to increase their market share. Aldi and Lidl both took a record share of the grocery market in the 12 weeks to 27 April to 4.7 per cent and 3.5 per cent respectively, according to figures from Kantar Worldpanel.

Sainsbury’s, meanwhile, saw its share fall to 16.6 per cent, with Tesco and Morrisons also experiencing declines. Asda’s market share proved most robust in the period, flat at 17.3 per cent. 

Outgoing chief executive Justin King, speaking on the same call, admits Sainsbury’s is not immune to the changes happening in the market and that it has done a lot of work on making its price more straightforward and consistent and its promotions more relevant and targeted using Nectar data. However, he believes it is not just about price, with customers still interested in core issues such as sustainable sourcing, British suppliers and animal welfare.

He also said points of difference such as its range, in-store experience and staff skills would remain important in differentiating from the discounters even as rivals such as Tesco and Morrisons announce plans to remove bakeries and butchers from individual stores.

King added: “We win in the future by being a better version of us not a poor version of [the discounters]. We compete by clearly differentiating our offer.

”This is an opportunity to widen the gap on these dimensions. If everyone else chases single mindedly on price the gap we enjoy will widen.”

He also said Sainsbury’s strategy will remain the same once he departs in July, to be succeeded by commercial director Mike Coupe. King credits Sainsbury’s success with its consistent strategy, although highlights that it will change as necessary as new challenges come into the market.

Darren Shirley, retail analyst at Shore Capital, says although Sainsbury’s is performing above expectations when rivals are reporting flat or declining sales the growth enjoyed by discounters and the price cuts made by its big four rivals does raise questions. 

He adds: ”To date we have believed that Sainsbury has a relatively differentiated offer, which acts as a barrier to the worse excesses of direct price competition. However, at this juncture, we’re not so sure, reflecting a recent deterioration in the group’s relative performance.”

Recommended

Marketoonist 8-5-14

Pivots

Samuel Joy

Tom Fishburne is founder of Marketoon Studios. Follow his work at marketoonist.com or on Twitter @tomfishburne See more of the Marketoonist here.

Comments

    Leave a comment

    Close

    Discover even more as a subscriber

    This article is available for subscribers only.

    Sign up now for your access-all-areas pass.

    If you're an existing paid print subscriber find out how to get access here.

    Subscribers enjoy unlimited access to unrivalled coverage of the biggest issues in marketing, alongside practical advice from the digital experts at Econsultancy.

    With a subscription to Marketing Week Premium you will get full access to:

    > World-renowned columnists

    > Analysis & case studies

    > Exclusive leading-edge insight

    > Carefully curated reports & briefings from Econsultancy

    > Plus, much more including a £300 discount for the Festival of Marketing

    Subscribe now

    Got a question?

    Contact us on +44 (0)20 7292 3703 or email customerservices@marketingweek.com

    If you are looking for our Jobs site, please click here

    Subscribers enjoy unlimited access to unrivalled coverage of the biggest issues in marketing, alongside practical advice from the digital experts at Econsultancy.

    With a subscription to Marketing Week Premium you will get full access to:

    > World-renowned columnists

    > Analysis & case studies

    > Exclusive leading-edge insight

    > Carefully curated reports & briefings from Econsultancy

    > Plus, much more including a £300 discount for the Festival of Marketing

    Subscribe now