Simon Roberts spent his Christmas Eve in a van, helping bring groceries to Sainsbury’s shoppers’ homes as part of an initiative to make festive deliveries as close to the big day as possible.
The chief executive of the UK’s second-largest supermarket chain says the experiment, which involved holding back thousands of turkeys ordered by online shoppers to arrive on Christmas Eve, was part of “thinking differently” as it seeks new ways to succeed in a fiercely competitive sector.
“I don’t think Christmas was easy and I don’t think any [rival] held back from putting their best foot forward,” he says – despite suggestions that its big competitors Morrisons and Asda have been stymied by debt-fuelled private takeovers, which made it harder for them to keep prices down.
Since taking the role in May 2020, at the height of the coronavirus pandemic, the affable former Boots executive has focused a lot more on price than his predecessors. Sainsbury’s now price-matches hundreds of products with the discounter Aldi on main lines such as chicken legs, bananas and milk, and announced cut-price vegetables for Christmas well ahead of Tesco, Asda and Morrisons.
Roberts says the new pricing regime has not been at the expense of the reputation for quality long guarded by the brand and has helped win over shoppers who had switched to the discounters.
While Sainsbury’s does not reveal its trading figures until later this week, the strategy appears to have paid off over Christmas, with sales of groceries, excluding non-food, up 8.3% in December, according to figures from the industry analyst Kantar released last week. This put Sainbury’s ahead of its traditional rivals Tesco, Asda and Morrisons – although still well behind the fast-growing discounters Aldi and Lidl, which racked up growth of close to 30%.
Over the more widely quoted figures covering total grocery sales in the three months to Christmas Day, Sainsbury’s was still ahead of Tesco, Morrisons and Waitrose – but pipped by Asda to fastest growing among the traditional players, as the latter recovered from a tricky 2021. Asda has announced plans to open dozens of convenience stores and introduced new cut-price own-label groceries as part of its attempt to push Sainsbury’s off the podium and take its place as the UK’s second-largest grocer.
Roberts says Sainsbury’s is in the right place to fight back: “We are as competitive as we have ever been.”
He says this Christmas was the culmination of Sainsbury’s three-year battle to offer better value to shoppers “at the centre of the plate” and then tempt them with a wider range of treats not found at supermarkets such as Aldi and Lidl.
Roberts said the availability of turkeys was good despite concerns about supplies being affected by an outbreak of avian flu, although he admits buying more than usual meant they had some left over after Christmas. Eggs were also a concern – and will continue to be – as Roberts says supply of free-range eggs in particular has struggled to keep up with demand and producers have been hit by rising costs and the bird flu outbreak.
The price-matching tactic may have hit profits, costing £550m over two years, but has never been more prescient as rising household costs on everything from energy to petrol, basic clothing and groceries put the squeeze on household budgets.
“We are very aware of how tough it is going to be as bills land after Christmas. Energy bills are a real concern,” Roberts says.
“My biggest hope for this year is that inflation comes down. It is impacting every household and every business. Bringing it under control must be a priority [for the government] and front of mind.”
Despite that hope, Roberts admits that with the war in Ukraine continuing, limiting availability of some key foodstuffs such as grain as well as oil and gas, he expects inflation to fall but not go away this year.
Labour costs are also an issue, with Sainsbury’s last week announcing its third pay rise in a year, taking hourly wages to at least £11, amid fierce competition for shop workers that has also prompted rivals such as Tesco and Aldi to institute multiple pay rises.
“There are pressures coming up with energy costs,” Roberts adds. “In food production there is a lot of energy consumption.”
He says government help with energy bills has helped keep food producers going, especially small and medium-sized companies, and it will continue to be important, but stresses that businesses need to find ways to cut costs now that the government is moving to reduce support.
He says Sainsbury’s has cut its energy use by 23% over three years, thanks to measures such as installing LED bulbs and tweaking heat and ventilation systems, and greater energy efficiency is “now a major focus of what we do” as the company aims for net zero carbon emissions by 2025.
Cost-cutting measures – including closing cafes and fresh food counters – have helped Sainsbury’s keep food prices down. Roberts says the supermarket’s rate of inflation is well below the 13.3% annual industry average for December, according to figures released last week by the British Retail Consortium and the data firm Nielsen.
Shoppers are also dealing with inflation by changing their behaviour – buying more frozen food to save on waste, switching to cheaper own-label brands and dining more at home. There is also a swing back to physical stores, as shoppers try to save on delivery costs and attempt to buy only what they really need in straitened times.
With profits under pressure Roberts will have to convince shareholders – including the Qatar Investment Authority, which owns a 14.3% stake and the “Czech Sphinx”, the billionaire Daniel Křetínský, who holds 10.2% – that his long game is worth it.
“Over time, customers are wanting to save but not wanting to go to more stores than they need to,” he says. No doubt the Sphinx will be waiting to see if he’s right.