Sainsbury's is the oldest of the UK's big four supermarket groups. Once the king of British food retailers, the company began lost 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 April 2018 for Sainsbury's to take control of arch-rival Asda as well in a deal worth around £7bn. That proposal will necessitate considerable scrutiny from competition regulators.
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Adbrands Weekly Update 3rd May 2018: Competition regulators will be kept busy in the coming months by a startling deal announced over the weekend: the proposed acquisition by what is now the UK's #2 supermarket Sainsbury's of its closest rival Asda, which is also Walmart's largest international subsidiary. However, Asda has struggled with weak performance for the past couple of years in face of brutal competition across the sector on pricing. It overtook then-ailing Sainsbury's in 2003 to become the #2 store behind Tesco, but lost that position almost three years ago, and has failed to recover ground despite a series of marketing reboots. Meanwhile, Sainsbury's appears to be going from strength to strength under its new CEO Mike Coupe, expanding its corporate footprint with the acquisition of general retailer Argos two years ago. Clearly, Walmart decided it could no longer regain lost ground in the UK on its own, and talks between the two groups began in earnest almost a year ago.
Under the proposed arrangement, Walmart would transfer Asda to Sainsbury's in return for £2bn in cash and a 42% investment stake in the merged company, but just under 30% of voting shares. That would value Asda at around £7.3bn. On a proforma basis, the combination of Sainsbury's and Asda would create a new #1 in UK groceries, with over 31% share of the market, ahead of Tesco on around 28%. However, the two brands would continue to co-exist, at least for the immediate future. Asda will operate as a separate chain still led from its current HQ in Leeds, Yorkshire. Yet even with that proviso, and the promise of further investments in jobs and technology, the merger is unlikely to get an unconditional green light from regulators. Though Sainsbury's and Asda argue there is little overlap between their current respective retail footprints, most observers expect, at best, that they will be required to divest as many as 100 stores between them.
Adbrands Weekly Update 8th Feb 2018: UK retailer Sainsbury's has acquired full control of the Nectar loyalty and rewards scheme in a buyout from its former operator Aimia for £60m. Sainsbury's was one of the original co-founders of Nectar in 2002. It said that the deal would make no change for existing Nectar customers.
Adbrands Weekly Update 23rd Mar 2017: UK supermarket retailer Sainsbury's backtracked on the assignment of its UK media account to M/Six, the WPP-CHI & Partners joint venture. According to Campaign, incumbent agency PHD filed a complaint with the Sainsbury board, alleging that the process had not been conducted fairly. As a result, the pitch has been reopened for re-evaluation.
Adbrands Weekly Update 18th Jan 2017: Ads of the Week: "Food Dancing". Talk about breaking the mould! Wieden & Kennedy London's debut campaign for UK supermarket Sainsbury's couldn't be more different from what has come before; not just from Sainsbury's under previous longtime custodian AMV BBDO but also from any other supermarket. It's certainly going to shake up the sector a bit, and jerk viewers out of their ad break slumber. But will it work? In urban centres, yes, we'd imagine so, but we're not sure how this will play elsewhere. We look forward to finding out. It's a brave experiment certainly. Separately, Sainsbury's marketing chief Sarah Warby is leaving the group on a high note after five years with the chain. She will not be directly replaced; instead Mark Given moves to a new role as commercial leader and director of brand communications, with oversight of the existing team. Helen Hunter becomes marketing innovation director.
Adbrands Weekly Update 12th Jan 2017: Unlike their US counterparts, who mostly suffered a grim holiday trading season, several British physical retailers reported solid performance over Christmas and the New Year. Perhaps the biggest surprise was a rise in apparel sales at Marks & Spencer, for only the second time in 23 quarters. Like for like sales of general merchandise rose 2.3% in the quarter to December, compared to a 5.8% decline in the year-ago period. However M&S warned that the uplift may not hold in the current quarter because of sales and a late Easter. Sainsbury's claimed a "record" Christmas week, helped by the contribution from newly acquired Argos, and better than expected trading over the holiday period. Despite widespread price cuts, its like for like supermarket sales were up marginally, whereas a decline had been forecast. Tesco too was up, by almost 2%, and Morrisons reported its best Christmas for seven years, with a near-3% uplift in November and December. Aldi did even better with a claimed 15% increase in December alone.
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Free for all users | see full profile for current activities: 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. See full profile for current activities
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