JUSTIN King leaves Sainsbury’s on a high note. The supermarket major had drifted in the nineties, quailing before the all-terrain food retailing vehicle that was Tesco under Sir Terry Leahy.
Sir Peter Davis, formerly of insurance company Prudential, tried unsuccessfully to stop the rot at Sainsbury’s early in the millennium with a turnaround plan.
But Davis’s mistake was to focus too much for too long on back office systems and supply chains, while the offer in the aisles did not improve much. Footfall did not improve and the hoped-for recovery ran into the sand.
King did not make the same mistake when he took over the Sainsbury’s helm in 2004. Virtually from the off, he decided to refashion the business as a food retailer that could satisfy the varying tastes and wallets of consumers.
For customers not so financially hard-pressed and wishing to buy upmarket food and more expensive treats, he launched the Taste the Difference brand.
In the middle range there were the Buy Sainsbury’s and Healthy Eating branded products, the latter benefiting as the momentum in society for food provenance and calorie count has built up over several years.
And, at the value-end of the market, there was Sainsbury’s Basics.
It was not that King ignored issues like supply chains, distribution, IT systems and property portfolios.
He just never took his eye off the ball of what customers wanted to see in the aisles while sorting out the off-stage stuff.
The varied price offer worked well because it made Sainsbury’s highly resilient against the ritzier supermarket players like Waitrose and Marks & Spencer, the middle of the road “value” rivals such as Tesco and Asda, and the upstart and now highly influential discount operators typified by Lidl and Aldi.
King was also early into a good internet offering, quickly realised that Sainsbury’s smaller convenience shops were a prime engine for sales growth, and boosted non-food sales, an area where the company had been traditionally weak.
Meanwhile, he has been helped by Tesco’s mis-steps, including a costly and abortive foray into America, and Morrisons being slow off the mark in launching both convenience stores and digital retailing. King also wisely resisted any hubristic temptation to take Sainsbury’s overseas.
Nectar point strategies on sales have proved popular with customers, as has the price guarantee that they get money off their next visit if their shopping could have been purchased cheaper at rivals.
The overall result of the strategy has been that Sainsbury’s is virtually the only player in the supermarket sector to gain market share in recent years. Like-for-like sales at the group have risen with metronomic regularity.
King’s exit timing might also be good. Grocery retailing is a mature market, with wholesale food price rises now virtually assured due to a vast rising middle class in emerging nations.
The best of times in the sector might be past, which is always a good time to quit. King, at 52, is young enough to have at least one chief executive job in him, but I suspect speculation that it might be with Morrisons is wide of the mark.
You don’t normally spend a decade rejuvenating a retailing team to then join a rival team with the aim of clawing back Sainsbury’s superiority.
It is said he might get a job with Formula 1 – his son is a racing driver – or perhaps politics beckons. King has certainly set the bar high for his successor at Sainsbury’s, the group’s long-standing and well-regarded commercial director Mike Coupe.
Profits not Mulberry’s bag
HERE we go round the Mulberry bag. The luxury goods retailer with unfathomably big handbags saw its shares slump about 27 per cent yesterday after issuing its third profit warning under boss Bruno Guillon.
Mulberry blamed heavy discounting in the UK by rivals over Christmas, which it resisted in order to prevent the stitching coming out of its profit margins.
Brave, but risky, in a retail climate where customers want class at budget prices.