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Sainsbury's (UK)

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Sainsbury's is the oldest of the UK's big four supermarket groups. Once the king of British food retailers, the company began to lose its way in the late 1990s, toppled from the top spot by aggressive innovator Tesco. A succession of new managers attempted to restore Sainsbury's to health, but the store struggled to match the growth shown by more forward-thinking rivals. In 2003, Sainsbury's was overtaken as the UK's #2 supermarket chain by Asda and, if anything, Sainsbury's troubles increased in 2004 following the disastrous introduction of a new stock control system. Despite a dreadful set of financial results, the group finally began to show signs of stability in 2005, as yet another new management team, this time led by former M&S executive Justin King, set about "making Sainsbury's great again". Progress after that was slow, but reasonably steady, and Sainsbury's finally regained the #2 position ahead of Asda at the end of 2015. Building on that renewed strength it announced plans to acquire general retailer Argos in 2016. Even more unexpected, was a deal announced in 2018 for Sainsbury's to take control of arch-rival Asda as well in a deal worth around £7bn. After a year of scrutiny, the merger was blocked by competition regulators in April 2019.


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Brands & Activities

There was light finally at the end of the tunnel for Sainsbury's in 2006, and this was reinforced by continuing improvement since, although the group is still some way from recapturing the glory of the mid-1990s. A major obstacle has been the rapid growth enjoyed by discounters Aldi and Lidl at the expense of the big four grocers. After years stuck in third place in the UK grocery sector, Sainsbury's finally pulled ahead of longtime rival Asda in the second half of 2015 and has maintained that lead ever since. That encouraged a bold diversification in 2016, with a deal to acquire general retailer Argos.

Yet challenges remain for the grocery business. In some ways the store still can't decide if it is a mass-market supermarket operator or a specialist food retailer. There is an emphasis on slightly exotic middle-class fare, which plays well in London, but less so elsewhere in the country. Despite its strong brand image, the company has yet to find a comfortable positioning that will support growth.

Sainsbury's was overtaken for the first time in market share by Asda during 2003, and remained more or less consistently behind its rival for the next 12 years, although there were repeated ebbs and flows in performance. A solid performance over Christmas 2013 finally put Sainsbury's within reach of the #2 position once again, and in Nov 2015 it overtook its main rival in Kantar Worldpanel's rolling 12 week figures. Rather than slip back into third place again after a brief lead, as it had done several times before, it has maintained that #2 position consistently ever since. For the the 12 weeks to Dec 2017, Sainsbury's had 16.4% of the UK grocery sector, just over a full percentage point ahead of Asda. Morrisons is almost six full points behind, but Tesco leads with 28.0%.

In a startling deal announced in April 2018, Sainsbury's agreed to acquire Asda for around £7.1bn in stock and cash. Had that merger been accepted by regulators, Walmart would have become the biggest shareholder in the combined entity with around 42% of equity. However, after a full year of review, it was blocked by the Competition & Markets Authority.


As of March 2017, Sainsbury's Supermarkets comprised 605 supermarkets and 806 convenience stores. Although stores are spread throughout the country, Sainsbury's is traditionally strongest in London and the South of England (where it has between 20% and 25% market share), and weakest in Scotland and the North of England (where share is under 7%). The brand has experimented with a number of different positioning statements in recent years but returned to its core message of "great quality food at fair prices" in 2005. Towards the end of that year, in a bid to take advantage of the high profile of celebrity chef Jamie Oliver, then a long-time Sainsbury's endorsement partner, the group re-emphasised its commitment to healthy eating with the message "Try something new today". It continues to champion the idea of "healthy, fresh and tasty food with universal appeal". Most recently it adopted the slogan "Live well for less".

After some serious missteps towards the end of the 1990s, Sainsbury's marketing has generally been innovative and original, often headline-grabbing for the right reasons. In 2007, for example, a low cost eco-friendly and reusable shopping bag designed for the store by Anya Hindmarch, and bearing the slogan "I'm not a plastic bag" became the fashion accessory of the year. Only 20,000 were produced, but sold out in a matter of days. The group is also the world's largest retailer by value of Fairtrade produce. This forward-thinking approach has led to the company being named as Retail Industry Supermarket of the Year five times out of seven between 2006 and 2013. In the latter year it was also Convenience Chain of the Year for the third consecutive year.

Sainsbury's close relationship to TV chef Jamie Oliver delivered particular rewards during the 2000s. So closely was Sainsbury's identified with the chef (and vice versa), that his various televised healthy eating initiatives effectively served as unpaid commercials for the supermarket group as well, despite the fact that they had no involvement with them. However, eventually, all relationships come to an end, and Sainsbury's and Jamie Oliver finally agreed to go their separate ways in 2011 after an 11-year partnership, during which Oliver appeared in more than 100 ads for the company. In 2009, the group also scored a big promotional push from "I'm Running Sainsbury's", a weekly Channel 4 reality TV series which profiled enterprising employees given the opportunity to launch their own promotional ideas for the store. There was a strong presence from members of the Sainsbury's management team in that series, especially chief executive Justin King.

The majority of supermarket outlets are large edge of town or suburban outlets, mostly 25,000 sq ft or more. In 2014, the group agreed a licensing deal with Scandinavian group Supermarked to reintroduce the Netto discounter brand in the UK, pitched directly in competition with Aldi and Lidl, with 15 stores open by March 2016. However that arrangement failed to take off and was later abandoned. However, the group has successfully rolled out a chain of smaller convenience stores in urban centres under the Sainsbury's Local banner. These are mostly under 15,000 sq ft. Following up the success of the Sainsbury's Local rollout, the group moved more aggressively into the sector in 2004, acquiring Bell's Stores and Jacksons Stores in northern England. These now trade as separate units, either under the original Bell's and Jacksons banners or as Sainsbury's at Bell's Stores and Sainsbury's at Jacksons. The group was also involved in long-running but apparently unsuccessful negotiations to acquire multiple retailer TM Group, owner of Martins and Forbuoys newsagents and convenience stores. Later it purchased JB Beaumont, a convenience store operator in the East Midlands. Following the purchase of Safeway by Morrisons it acquired 14 smaller Safeway and Morrisons stores, which were converted to the main Sainsbury's brand. A trial partnership with Shell to operate convenience stores on selected petrol forecourts was scaled down in 2008. For ye 2016, convenience stores contributed combined sales of over £2.3bn. The group was named Convenience Retailer of the Year for the sixth successive year in 2015 at the Retail Industry Awards. Around 280 Sainsbury's supermarkets contain an in-store pharmacy. In 2015, the group agreed to sell these operations to Lloyds Pharmacy, and all pharmacy counters now carry the latter's brand.

Of Sainsbury's 30,000 products including fresh produce, around half are own brand, under the overall banner of "by Sainsbury's". It was the first supermarket to introduce branded own-label products back in the 1960s, although it has since been overtaken by others, notably Tesco. Of Sainsbury's current lines, the oldest is Organics, launched in 1986. The most popular, however, is Taste The Difference, launched in 2000, and now the #2 supermarket own-label overall behind Tesco Finest, with sales of £1.1bn in ye 2015 and more than 1,400 products. Other own-label brands include Sainsbury's Kids (which replaced Blue Parrot Cafe in 2006), healthy eating selection Be Good To Yourself, and a new low price brand introduced in 2004 under the name Sainsbury's Basics.

General Merchandise

The group has steadily extended its range beyond foods, initially into entertainment products, news and magazines, and then more general merchandise. In late 2003 it considerably enhanced its non-food offering, introducing more than 2,500 new home and cookware products, and adding over 1,500 new own-label and established brands to its already extensive health and beauty range. Towards the end of 2004 it launched Tu, its first clothing brand, now available in all larger stores. Other own label offerings in the non-food range include Tu homeware and cookware by Terence Conran, flowers by Orlando Hamilton and home accessories by Orla Kiely. Fashion commentator and TV personality Gok Wan launched his own range for Tu in 2011. Sales from general merchandise topped £1bn for the first time in the year ending 2013, and Tu is now the country's 6th largest clothing brand by volume (10th by value) with sales of well over £800m.

Sainsbury's To You is the UK's #2 internet-based home delivery service (behind Tesco.com), covering more than three-quarters of the country. The Sainsbury's Reward card scheme was merged into in 2002 into Nectar, now the country's biggest loyalty marketing operation. As a founder member of the Nectar scheme, Sainsbury's had held a minority shareholding in the scheme, which was cotrolled and run by Canadian loyalty marketing specialist Aimia. In 2018, Sainsbury's took full control of Nectar, buying out Aimia for a reported £60m.

The group has also tested a number of joint ventures to widen its product offering or benefits. In 2015, the group began testing a partnership with Home Retail Group's Argos chain to install dedicated Argos collection points within selected larger stores. That relationship prospered, and at the beginning of 2016, Sainsbury's announced a deal to acquire its partner for £1.3bn. Those plans were thrown into disarray soon afterwards when South African group Steinhoff issued a rival bid for the business. After several weeks of jostling for dominance, the newcomer withdrew, leaving Sainsbury's as the winning bidder with an improved offer of £1.4bn in shares and cash. The deal closed in Sept 2016.

Argos comprises a chain of around 715 high street stores operating a unique catalogue-based sales model which has evolved from the company's roots in trading stamps. Each outlet offers a huge range of general merchandise, almost none of which is displayed on shelves. Instead, customers browse from a weighty catalogue displayed instore or available to takeaway, and order all items over the counter or by mail order. Most larger stores have been shifting to a purely digital format, replacing the old-style laminated catalogues with ordering screens and terminals. The main range is held in stock, while other items can be ordered for later pick-up or delivery. It is the UK's number one retailer of toys, furniture, jewellery (by volume), small electrical appliances and sports equipment, and a leading player in many other markets including DIY and gardening, consumer electronics and furniture. Product range has been gradually extended since 2005, rising from around 13,000 product lines that year to more than 19,300 by early 2010, of which as many as 11,000 are stocked in all stores.

The company also owns several own-brand businesses including jewellery retailer Elizabeth Duke and budget electronics range Mikomi. It has steadily added to this collection by acquiring other brands from other companies. In 2008 it acquired the consumer electronics brands Bush and Alba, followed by toy brand Chad Valley from failed retailer Woolworths in early 2009. Later that year it acquired the Hygena and Schreiber furniture brands from another collapsed retailer MFI. In 2011, Argos also acquired the Habitat furniture and homewares brand in the UK (but not elsewhere in Europe), and there are a small number of branded stores around the country under that banner.

Since completion of the acquisition in 2017, Sainsbury's has ramped up the introduction of Argos digital catalogue counters in Sainsbury's supermarkets, with a target of operating 250 such instore units.

Financial Services

Financial services supplier Sainsbury's Bank was split out from the supermarket business as a separate division in 2001. Originally established as a 55:45 joint venture between Sainsbury and HBOS, the partner's respective holdings were shifted to a 50:50 split in 2007. HBOS's role was subsequently inherited by Lloyds Banking Group, but Sainsbury's sealed a deal in Jan 2014 to buy out its partner altogether for £248m. The bank offers a range of credit cards, savings accounts, loans and mortgage products. In 1998, it added insurance to its range and now offers home, travel and pet cover, underwritten by HBOS, as well as life insurance through Legal & General. As a direct banking business, available by phone or online, Sainsbury's Bank has no branches, but attracts customers through in-store information points, and began testing in-store banking centres during 2001. However performance of the business has been badly dented by high levels of bad debt relating to an insufficiently cautious drive to attract high-risk customers between 2002 and 2004. After reporting a losses in 2006 and 2008, the business was back in profit in 2009. There were around 1.8m active customer accounts at the end of ye 2017. Argos added another 1.8m financial services customers. For the year ending 2017, it generated a £62m operating profit on net revenues of £407m.

Divested Operations

Another joint venture offering from Sainsbury's was a branded prepaid mobile service - Mobile By Sainsbury's - launched in summer 2013 as a 50/50 partnership with Vodafone. However that relationship was terminated at the beginning of 2016. Sainsbury's property development and management division was sold in 2003. DIY subsidiary Homebase was sold to management in 2001 and later became a unit of Home Retail Group. It was acquired by Australia's Wesfarmers in 2016. A chain of Sainsbury's stores in Egypt was also sold in 2001. The group's last remaining international holding, US-based Shaw's, was sold in 2004 to Albertson's for almost $2.5bn.


The group's financial recovery has remained on track since 2006, but has been steady rather than spectacular. For the year ending March 2014, net sales excluding VAT rose 2.8% to £23.95bn (gross inc VAT of £26.4bn). After hitting £827m in the year to 2011, their best level since the mid 1990s, pretax profits slipped for two consecutive years, falling to £788m for 2013. For the year to 2014, pretax profit jumped 16% to £898m.

However the brutal competition from Aldi and Lidl began to tell on Sainsbury's during 2014. For the year to 2015, group sales slipped almost 1% to £23.78bn, and the group reported its first net loss for a decade with a pre-tax deficit of £72m. That figure included a £753m charge, mainly for impairments on abandoned store developments. Underlying profits excluding those items slipped 15% to £781m. Revenues to March 2016 slipped back by another 1% to £23.51bn. However, without the previous year's impairments, bottom line rebounded to a net profit of £471m.

There was solid growth in topline for the year to 2017 as a result of the part-year contribution from Argos, with net revenues rising 12% to £26.22bn. However like for like sales were down marginally, and a sharp increase in administrative expenses caused pretax profits to slip by 8% to £503m, while net profit slumped 20% to £377m. Growth in the core Sainsbury's business is not coming from supermarkets, where sales have been slipping by around 2% a year, but from convenience stores (up over 6% in ye 2017) and especially online (up over 8%).

In February 2007, several private equity funds led by CVC formed a consortium to attempt to broker a buyout of Sainsbury. Despite a generous offer, that proposal was rejected by members of the Sainsbury family, who remain the group's dominant shareholders. Subsequently, Delta Two, an investment fund controlled by the gulf state of Qatar, acquired a 25% holding in the group and made its own indicative offer for the group as a whole, valuing it at around £10.6bn. Despite several months of detailed negotiations with Sainsbury's board, that deal also disintegrated towards the end of the year after Delta Two pulled out of talks. The Qatar Investment Authority continues to control a 22% shareholding.

Although the Sainsbury family no longer hold senior management positions they continue to be a dominant shareholder group, with around 15% of the equity between them, held within several family trusts. Lord David Sainsbury is the most influential family shareholder with 3% of voting rights. Judith Portrait, a lawyer who represents various Sainsbury family trusts, manages just over another 3%.


John and Mary Sainsbury opened their first store in 1869. A small dairy, it was situated in Drury Lane, London, close to Covent Garden vegetable market. The business expanded quickly, and by 1900, there were almost 50 shops in London and the South East, selling meat and vegetables as well as dairy products. The Sainsbury family expanded no less dramatically, with six sons joining the business during the late 19th and early 20th century. During WWI, with dairy products hard to come by, the company broadened its range to include preserves and other groceries. Eldest son John became the company's chairman when his father died in 1928 (Mary Sainsbury had died a year earlier).

Branching further afield, the younger John Sainsbury acquired Midlands-based chain Thoroughgood's in 1936, and the company continued to expand. In 1950, Sainsbury's followed a trend pioneered by downmarket rival Tesco, changing from counter-service to American-style self-service supermarket at its Croydon branch. The format was subsequently rolled out nationwide, with the last Sainsbury's going self-service in 1982.

In 1973, the group went public. Two years later Sainsbury teamed up with British Home Stores to launch the Savacentre chain as a joint venture, selling clothing and electrical goods alongside food. The Homebase DIY and Garden Centre format was developed at the close of that decade, with the first store opening in 1981 in Croydon. The 1980s saw Sainsbury take its first steps overseas, when it acquired a shareholding in US chain Shaw's in 1983, before becoming sole owner in 1987. Two years later, the company also bought out its partner in Savacentre. Further acquisitions followed. In 1994, the group bolstered its US portfolio with a 16% stake in Washington chain Giant Food, building that stake to 20% over the next two years.

But expansion threatened to distract Sainsbury's from competitive pressure in its core market. David Sainsbury was the last family member to head the group. The great-grandson of the founder, he succeeded his cousin (another John) as chairman in 1992, having previously served as financial director. Although he oversaw a period of important expansion by the group, critics latterly accused him of corporate arrogance and of misreading the direction of the market. Most importantly he went on record to dismiss Tesco's introduction of a loyalty card in 1995 as "the electronic equivalent of the Green Shield Stamp". However, the Clubcard proved to be an extremely successful incentive, pushing the rival supermarket ahead in overall market share. That year Sainsbury reported its first fall in profit for 22 years. Sainsbury's eventually introduced its own incentive scheme, the Reward card, in mid-1996. But by then, Tesco had overtaken Sainsbury to become not just the country's biggest but also most profitable supermarket group. Sainsbury's was slow again to match Tesco Clubcard Plus, a direct debit card which offered attractive interest rates on both savings and borrowings. In 1997, Sainsbury's was the first supermarket to open a fully-fledged bank, in a joint venture with Bank of Scotland. But group profits slumped to £651m, down almost 20% from two years earlier.

Facing a barrage of criticism, not least because the Sainsbury family continued to hold a huge shareholding in the group, David Sainsbury stepped down as chief executive later that year, replaced by Dino Adriano, a Sainsbury's staffer for 35 years. In 1998, the group sold its 20% holding in Giant Food (to Dutch group Ahold for £375m), before acquiring control of Boston's Star Markets Group for $490m. The following year, the group dipped its toe into the Egyptian market, building an 80% shareholding in Cairo-based supermarket group Edge.

A fresh set of problems arose in early 1999. The group launched a new marketing campaign focusing on cheap prices, and accompanied it with a TV commercial featuring comedian John Cleese at his most abrasive. Critics savaged the group for sacrificing corporate branding for discounts, while the ill-conceived ad appeared to present Sainsbury's staff as stupid or incompetent. Staff complained, sales dropped, the ad was pulled, agency AMV BBDO was sacked. Worse still, at the height of the furore, Asda claimed it had overtaken Sainsbury's market share in groceries. That claim was angrily denied by Sainsbury, and financial results for 1999 showed an improvement, but chief executive Adriano warned mid-year that the group's problems were not yet over. Later that year interim trading figures revealed that Sainsbury had become the poorest performer of the UK's top five supermarket groups. A reshuffle of senior management did nothing to dispel rumours that the board was preparing the whole group for sale.

The millennium appeared to bring some good news. In January 2000 Sainsbury announced the appointment of a heavyweight new CEO, Sir Peter Davis, widely credited with the rejuvenation of Prudential. In a bid to focus attention on the supermarket business, he announced that the fast-expanding Homebase division would be sold off. Davis also withdrew the group from its disastrous venture into Egypt, writing off accumulated losses thought to be as much as £125m. Meanwhile trading in the UK improved, allowing Sainsbury to report more encouraging financial results for the year to March 2001. Also that year, AMV.BBDO was rehired to produce a new advertising campaign featuring television chef Jamie Oliver. The series of commercials which followed sealed Oliver's reputation as the UK's best-known celebrity chef.

A joint venture with Carlton Communications to launch Britain's first television and internet food and drink channel, Taste Network, was less successful and was dissolved in 2001. A separate partnership was formed with Oddbins to deliver wine via direct mail and internet order. Yet another joint venture was initiated in summer 2001 when pharmacy chain Boots, also struggling, signed up to test a series of Boots-branded concessions within larger Sainsbury out-of-town outlets. Under the terms of the trial, the Boots range of health and beauty products replaced Sainsbury's existing range of products, occupying clearly branded space within Sainsbury's stores. However the joint venture fizzled out in 2003 after the two companies failed to agree terms for a full rollout. Two further promotional tie-ups were announced in 2002. Sainsbury agreed to merge its Rewards loyalty card into new launch Nectar, also being adopted by Barclaycard, BP service stations and Debenhams department stores. Also, the group agreed a partnership with Unilever to trial Persil Service instore launderettes at selected supermarkets.

These were all bright ideas, but were unable to prevent the continuing erosion of Sainsbury's market share. The acknowledgement that the store had finally slipped behind Asda by market share for the first time came as a severe blow in 2003, and Davis announced that he would hand over the role of CEO to Justin King, former head of Marks & Spencer's food division. Davis became chairman instead, but it was a sign of the unhappiness of Sainsbury's shareholders that even the succession planning process was marred by controversy. In early 2004 the group announced Sir Ian Prosser, former head of Bass, as deputy chairman and the future successor to Peter Davis. Shareholders greeted the announcement with loud disapproval, complaining that Prosser's many other commitments would prevent him from giving enough time to Sainsbury's. He subsequently declined the role.

Behind the scenes there were other problems which demonstrated how disorganized some of the group's new initiatives had been. Sainsbury's had invested several hundred million pounds in new stock control and supply systems, but the new systems were if anything worse than those they replaced. In July 2004, the group admitted that its new automated supply depots could not yet be relied upon to read product bar-codes correctly, leaving many stores out of stock of key items. Range extensions were also badly planned. The rush into non-food products, for example, resulted in Sainsbury's offering customers no less than 14 different types of electric kettle. One financial analyst joked to the Financial Times in July 2004 that "There are some problems in this world that are insoluble. The Irish question; the Middle East problem; and Sainsbury's." A new row erupted after it was revealed that Peter Davis had been granted a bonus worth £2.4m for 2003, despite the fact that the group's sales and profits both fell that year. Davis resigned shortly afterwards, and on the same day the group warned that profits for the latest financial year would also be substantially below forecasts.

Meanwhile new CEO Justin King announced an overhaul of the management structure. Stuart Mitchell and Sara Weller resigned as respectively managing director and deputy MD of Sainsbury's Supermarkets and left the company. In October 2004, the new management team launched a campaign to overhaul the business under the banner Making Sainsbury's Great Again.

Last full revision 24th January 2018

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