Later that year it lost its leadership to Tesco, which now boasts annual sales of £62.5bn, dwarfing Sainsbury’s £21.4bn.
Chief executive Justin King took the grocer from loss into profit when he took over in 2004, helped in no small part by having celebrity chef Jamie Oliver as the face of the brand. When King took over, it was expected that Oliver would be ditched, until School Dinners came along, taking him from cheeky cockney to health crusader.
Sainsbury’s latest results, out last month, weren’t exactly dire. Sales crept up 1%, but this was lower than the 3.6% rise of the previous quarter.
Delivering the news, King warned of a ‘sudden’ pull-back in consumer spending and a ‘quite dramatic’ change in shopping habits. The supermarket’s share price took a tumble as a result.
It has been a tough few years for retail. Now, however, the big four supermarkets seem to be entering a fresh era. There’s a new man in charge of Tesco, while hardly a week goes by without Morrisons announcing another venture.
Is it time for Sainsbury’s to try something new? We asked former Sainsbury’s and Somerfield marketer Nick Adderley, now the marketing director at Heathrow, and Euro RSCG chief executive Russ Lidstone, who worked on the Tesco account at Lowe.
Nick Adderley marketing and insight director, Heathrow Airport
The UK has always been spoilt when it comes to supermarket shopping. Thanks to John Sainsbury pioneering the super-market concept based on a quality ethos, the standards in the food-shopping arena are incredibly high. I think we have the world’s best grocer (Tesco), biggest retailer (Asda) and best mass-quality grocer (Sainsbury’s) slugging it out between themselves, along with Morrisons, M&S and Waitrose, all in
the relatively small UK marketplace.
Justin King and his team have done a great job making Sainsbury’s highly competitive and relevant over the past few years and a slight fallback in growth that follows the broader economy isn’t much to be worried about.
Is its message getting across, though? With the former patron saint of Sains-bury’s, Delia, now teamed up with Heston for Waitrose, is Jamie Oliver distinct enough to carry brand Sainsbury’s?
‘Try something new today’ has always been a stretch when it comes to prom-otional offers – in tougher times, will it stand out enough against the sharp price messaging of Tesco and Asda?
Remedy
Sainsbury’s should stick with food heritage and high quality, but look at how the communication is working. Has the Jamie Oliver effect gone out of date? Sainsbury’s has always had great advertising – is now the time for the next big idea?
Expanding the brand into more areas of food, such as sandwich shops, seems a pretty smart move – what about catering and restaurants as well?
Continue the quest to make non-food a strong part of the mix. It has never felt a natural part of such a strong food brand, but it is an essential element of any big supermarket.
Russ Lidstone chief executive, Euro RSCG
The news of slowing sales growth at Sainsbury’s concerned analysts and, after a brief ego boost, left the compe-tition nervously smoking in the corner wondering whether the worst is yet to come. Consumers are clearly sticking to their New Year’s resolution to keep the bank balance on a short leash, unaided by a lacklustre budget and the lowest disposable income level in 30 years.
What makes this story particularly newsworthy, in the sea of stock-market disappointments, is the high likelihood of a knock-on-effect. In fact, the whole of the retail sector should be wary.
For Sainsbury’s, the once-ground-breaking call to ‘Try something new today’ is fading into the background and is now challenged by shifting shopping behaviour as customers put ‘one less item’ into their weekly baskets.
Sainsbury’s fantastic performance in the run-up to Christmas only serves to highlight that its focus on quality is disconnecting with everyday consumer needs. The ‘feed your family for a fiver’ initiative has been a successful cosmetic exercise, but is no longer making a difference to the customer’s bottom line against the strong value/price messages of Tesco, Morrisons and even Waitrose.
Remedy
Delve deeper into the recent ‘value where it matters’ proposition to further highlight Sainsbury’s fair- priced offering.
Against the backdrop of rising food inflation, review the pricing strategy and how it can be refocused to reflect Sainsbury’s value proposition of
‘good food costs less’.
Focus on own-brand clothes and electrical goods ranges to capture Sainsbury’s broader role in delivering on the consumer’s search for value.