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J Sainsbury plc is the parent company of Sainsbury's Supermarkets Ltd, commonly known as Sainsbury's, a chain of supermarkets in the United Kingdom. The group also has interests in property and banking.

Sainsbury's was once the market leader in the UK supermarket sector, but is currently ranked third behind Tesco and ASDA. The company's fortunes have improved since the launch of a recovery programme by CEO Justin King in 2004 and ASDA CEO Andy Bond has suggested Sainsbury's may regain second position, lost in 2003.

History

Sainsbury's was established as a partnership in 1869 when John James Sainsbury and his wife Mary Ann opened a store in Drury Lane in Holborn, London. In 1922 J Sainsbury was incorporated as a private company. In 1973 the company was floated as J Sainsbury plc in what was at the time the largest ever flotation on the London Stock Exchange. Today the family retain approximately 35% of the shares.

In 1975, Sainsbury's launched the "Sainsbury's SavaCentre" hypermarket format as a joint venture with BHS. This was the first attempt to launch supermarkets with a large non-food range in the UK. Savacentre became a wholly owned Sainsbury's subsidiary in 1989. As the hypermarket format became more mainstream, with rivals such as ASDA and Tesco launching ever-larger stores, it was decided that a separate brand was no longer needed and the stores were converted to the regular Sainsbury's superstore format in 1999. This is in direct contrast to rival firms Tesco and ASDA, which have been rapidly expanding their Tesco Extra and ASDA Wal-Mart Supercentre hypermarket formats in recent years.

Sainsbury's founded the Homebase DIY chain in 1979. Homebase was tripled in size in 1995 with the acquisition of the rival Texas Homecare from the Ladbroke Group Plc. Sainsbury's sold the Homebase chain in December 2000 in a two-fold deal worth £969 million. Sales of the chain of stores to venture capitalist Schroder Ventures generated £750 million and sale of 28 development sites, which had been earmarked for future Homebase stores, were sold for £219 million to rival B&Q's parent company, Kingfisher plc. At the time, the chain had 13% of the UK market, behind B&Q and Focus Do It All.

In November 1983 Sainsbury's purchased 21% of Shaw's Supermarkets, the second largest grocery group in the northeast United States. In June of 1987, Sainsbury's acquired a controlling interest. Despite good performance by Shaw's, Sainsbury's sold the group on 30 April 2004.

In 1999 Sainsbury's acquired an 80.1% share of Egyptian Distribution Group SAE, a retailer in Egypt with 100 stores 2,000 employees. However poor profitability lead to the sale of this share in 2001. *

In 2001 Sainsbury's moved into its current headquarters at Holborn, London. Sainsbury's previously occupied Stamford House and 12 other buildings around Southwark. Holborn had been developed on the former Mirror Group site for Andersen Consulting (now Accenture), however Sainsbury's acquired the 25 year lease when Accenture pulled out.

Sainsbury's disposed of its American subsidiary, Shaw's, in 2004.

Management

Sainsbury family involvement

Today there is little or no family (see below) involvement in the company, although they do still control approximately 35% of the shares. David Sainsbury's retirement as Chairman in 1998 brought to an end 129 years of management of the group by the Sainsbury family. As a government minister since 1998, his shares are held in a blind trust.

The family shareholding makes the much rumoured takeover of the group all but impossible. This due to the fact that any buyer would have to have the agreement of the Sainsbury family, i.e. to sell their shares. This may be sentimental or for purely financial reasons, The Sunday Times quoted a former director; "What would motivate them? They did not sell when the company was worth £11 billion, so why sell now when it is worth just over £4 billion?"

Peter Davis

Sir Peter Davis replaced Dino Adriano as CEO in March 2000 in what was seen as an attempt to regain market position. If he is judged on that aim, then he can be said to have failed, as Sainsbury's was demoted to third in the UK grocery market during his term. In his first two years he raised profits above targets, however the decline in performance relative to its competitors would lead the group to make its first ever loss in 2004. Davis also oversaw an almost £3bn upgrade of stores, distribution and IT equipment, but Davis' successor would later reveal that much of this investment was wasted and he failed in his key goal - improving availability.

Philip Hampton

On July 19 2004 Davis' replacement, Philip Hampton, was appointed as chairman. Hampton has previously worked for British Steel, British Gas, BT and Lloyds TSB.

Justin King

At the end of March 2004 Davis was promoted to chairman and was replaced as CEO by Justin King, who joined Sainsbury's from Marks and Spencer plc. King was also previously a managing director at Asda.

In June 2004 Davis was forced to quit in the face of an impending shareholder revolt over his salary and bonuses. Investors were angered by a bonus share award of over £2m despite poor company performance.

King ordered a direct mail campaign to 1 million Sainsbury's customers as part of his 6 month business review asking them what they wanted from the company and where the company could improve. This reaffirmed the commentary of retail analysts - the group is not ensuring that shelves are fully stocked, this due to the failure of the IT systems introduced by Peter Davis.

On October 19 2004 King unveiled the results of the business review and his plans to revive the company's fortunes. This was generally well received by both the stock market and the media. Immediate plans included laying off 750 headquarter staff and the recruitment of around 3,000 shopfloor staff to improve the quality of service and the firm's main problem: stock availability. At the same meeting Lawrence Christensen, the newly appointed supply chain director and an expert in logistics, highlighted the reasons for availability issues and his plan to address them. Immediate supply chain improvements included the reactivation of two distribution centres.

Another significant announcement was the halving of the dividend to increase funds available for price cuts and quality.

King has appointed successful industry figures to the company; Lawrence Christensen is formerly from Safeway, Mike Coupe joined from Asda and Tesco as trading director, Gwyn Burr joined as head of customer service, Ken McMeikan joined in 2005 as Retail Director, was a rising star within Tesco.

Since the 2004 business review and the company's first trading report of 2005 King has managed to stem the tide of negative stories in the press. Indeed the press received by the company has been increasingly positive, The Sunday Times noted an appreciable increase in availability in its "Sainsbury looks in store for a recovery" article on March 6 2005. A similarly upbeat article, Sainsbury's strategy begins to deliver appeared in The Guardian on March 10 2005. The stories did note however that Peter Davis seized on similarly upbeat trading figures early in his tenure, but ultimately failed to improve the company's fortunes.

In January 2006 Sainsbury's reported serving 19 million customers in the week before Christmas, the highest ever for a single week. In March 2006 Sainsbury's reported a 5.3% rise in sales, its fifth quarter of growth in a row. The performance of Sainsbury's Bank was poor due to bad debt. *

According to the latest TNS rankings released in June 2006, Sainsbury's remains the UK's third largest supermarket on 16.0% market share (up from 15.8% at the same point in 2005), while ASDA remains second largest at 16.4% (unchanged year on year) and Tesco has increased its share to 31.1%

Financial performance

Year end Sales(£m) Pre tax profit(£m) Profit for year(£m) Basic eps (p)
25 March 2006¹ 16,061 104 58 ³ 3.8
26 March 2005¹ 15,409 15 614 3.5
27 March 2004¹ 17,141 610 396 20.7
29 March 2003¹ 17,079 667 454 23.7
30 March 2002¹ 17,162 571 364 19.1
31 March 2001¹ 17,244 437 276 14.5
1 April 2000¹ 16,271 509 349 18.3
3 April 1999² 16,433 888 598 31.4
7 March 1998¹ 14,500 719 487 26.1
8 March 1997¹ 13,395 609 403 22.0
9 March 1996¹ 12,672 712 488 26.8
11 March 1995¹ 11,357 809 536 29.8
12 March 1994¹ 10,583 369 142 8.0
13 March 1993¹ 9,686 733 503 28.5
14 March 1992¹ 8,696 628 438 25.7
16 March 1991¹ 7,813 518 355 23.6
17 March 1990¹ 6,930 451 314 20.8

  1. denotes 52 weeks
  2. denotes 56 weeks.
  3. "One off operating costs" of £152 million incurred. This includes £63 million to terminate the IT outsourcing contract with Accenture.
  4. £168 million before exceptional costs (cost of "turnaround" plan and write off of excess merchandise etc.)

Sainsbury's Supermarkets

Sainsbury's Supermarkets Ltd. was established as a separate subsidiary of the group in March 1997 and remains the most significant part of J Sainsbury plc, despite diversification over the group's history.

Sainsbury's was for decades the premier supermarket in the UK, it lost this position however in 1995 to Tesco, further slipping to No.3 in 2003 behind Walmart-owned Asda. In 2004 new chief executive Justin King launched a new strategy focused on supply-chain overhaul to tackle stock availability, increased competitiveness on price and improving customer service. In early 2005 Sainsbury's share of the UK grocery market began to increase slightly according to TNS Superpanel. When the company's results were announced in May 2005 King claimed, "We are on track but still in the very early stages of a long-term recovery programme. "*.

In 2003 Wm Morrison Supermarkets made an offer for the Safeway group, prompting a bidding war between the major supermarkets. The Trade and Industry Secretary, Patricia Hewitt, referred the various bids to the Competition Commission which reported its findings on September 26th. The Commission found that all bids, with the exception of Morrisons, would "operate against the public interest". As part of the approval Morrisons was to dispose of 53 of the combined group's stores. In May 2004 Sainsbury's announced that it would acquire 14 of these stores, 13 Safeway stores and 1 Morrison outlet located primarily in the Midlands and the north of England. The first of these new stores opened in August 2004.

Sainsbury's use NCR checkout or Point of Sale equipment operating Retalix "Storeline" software. This replaces their previous Fujitsu-ICL POS equipment that Sainsbury's used during the 1990s. Sainsbury's is a founding member of the Nectar loyalty card scheme, which was launched in autumn 2002 in conjunction with Debenhams, Barclaycard and BP. The Nectar scheme replaced the Sainsbury's Reward Card, accrued points were transferred over.

Store Formats

The supermarket chain operates three main store formats; regular Sainsbury's stores, Sainsbury's Local (convenience stores) and Sainsbury's Central (smaller supermarkets in urban loactions) stores. At the end of its 2005/06 financial year Sainsbury's store portfolio was as follows. *

Format Number Area (ft²) Area (m²) Percentage of space
Supermarkets 455 15,916,000 1,467,000 95.1%
Convenience stores 297 821,000 76,000 4.9%
Total 752 16,737,000 1,543,000 100.0%

Convenience stores

Sainsbury's and Tesco are the only two major chains to operate convenience stores, Asda and Morrisons do not currently have presence in this area of the market. As well as its own Local and Central stores Sainsbury's has expanded through acquisition of existing chains. Bell's Stores, a 54 store chain based in north east England was acquired in February 2004. Jackson's Stores, a chain of 114 stores based in Yorkshire and the North Midlands, was purchased in August 2004. JB Beaumont, a chain of 6 stores in the East midlands was acquired in November 2004. SL Shaw Ltd, which owned six stores was acquired on 28 April 2005 for £6 million.

Sainsbury's has retained the strong Bells and Jacksons brands. For example, refurbished stores would be called Sainsbury's at Bells or Sainsbury's at Jacksons. These are effectively Sainsbury's Local stores with a revised facia, retaining some features of the former local chain. Unrefurbished stores retain the original brand and logo, but still offer Sainsbury's own brand products, pricing and some point of sale, without accepting Nectar cards. The old websites are also retained with some Sainsbury's branding. This is still an experimental format and may become Sainsbury's Local if it is ever felt that the old brands are no longer an asset.

Product ranges

A large store typically stocks around 50,000 lines of which around 50% are "own-label" as opposed to branded goods. These own-brand lines include:
  • Basics: an economy range of around 500 lines, mainly food but also including other areas including toiletries and stationery. The Basics range uses minimal packaging with simple orange and white designs, to keep the price as low as possible. Equivalent to Tesco's Value range and ASDA's Smartprice.
  • Taste the Difference: around 800 premium food lines, including many processed foods (such as ready meals and premium bakery lines. Similar to Tesco Finest and Morrison's The Best".
  • Kids: these lines are for children. In 2006 these lines replaced the Blue Parrot Café range.
  • Be Good To Yourself: products with reduced calorific or fat content.
  • Free From: Around 150 product lines, These products are suitable towards those allergic to dairy products. (The majority of these are dairy and gluten/wheat free)

Advertising

Since 2000 Jamie Oliver has been the public face of Sainsbury's, appearing on television and radio advertisements and in-store promotional material. The deal earns him an estimated £1.2 million every year. In the first two years these advertisements are estimated to have given Sainsbury's an extra £1 billion of sales or £200 million gross profit. * By 2004 the company had made 65 adverts with Oliver.

Sainsbury's currently uses the "Try something new today" slogan which was launched in an effort to make consumers venture into purchasing more varied goods.

Over the years, Sainsbury's has used many slogans:

  • "Good Food Cost Less At Sainsbury's" — Used from the 1960s to the 1990s. Described by BBC News as "probably the best-known advertising slogan in retailing." *
  • "Sainsbury's - Everyone's Favourite Ingredient" — Used in a series of TV commercials in the 1990s which featured celebrities cooking Sainsbury's food.
  • "Fresh food, fresh ideas"
  • "Value to shout about" — A 1998/1999 campaign fronted by John Cleese which was widely claimed to have been a major mistake. Sainsbury's said it actually depressed sales, however, the company had been losing sales for years before because of the rise of rival Tesco. *
  • "Making Life Taste Better" — Axed in May 2005. Replaced on carrier bags, till receipts etc in September 2005 by "Try something new today".

Sainsbury's Bank

In 1997 Sainsbury's Bank was established - a joint venture between J Sainsbury plc. and the Bank of Scotland. Services offered include car, life, home, pet and travel insurance as well as health cover, loans, credit cards, savings accounts and ISAs.

Property

J Sainsbury's property interests are large, with a separate company within the group responsible for managing the company's existing property assets and the development of new ones (including new stores and other commercial properties).

Sainsbury family

Several members of the Sainsbury family have been prominent in British public life:

See also

External links

Companies listed on the London Stock Exchange | Supermarkets of the United Kingdom | Nectar loyalty card | Companies based in London | 1869 establishments

 

This article is licensed under the GNU Free Documentation License. It uses material from the "J Sainsbury".

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