Comment: Supermarket boss could be King of the hill

Martin Flanagan
Martin Flanagan
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SAINSBURY’S has rung up its 34th consecutive quarter of like-for-like sales growth. It’s beginning to resemble consistency. Chief executive Justin King is too canny a retailer to crow and tempt fate.

But he is surely secretly chuffed that he now has slightly bigger rival, Asda, firmly in his sights as far as Sainsbury’s becoming Britain’s second-biggest food retailing group after Tesco is concerned.

Sainsbury’s has steadily picked up market share since King took the helm in 2004, adding 0.2 of a percentage point to 16.8 per cent in the first quarter of its new financial year.

Asda, owned by US-headquartered behemoth Wal-Mart, has a 17.5 per cent share of the market and deep parental pockets, but it is clearly in the cross-hairs of its high-stepping pursuer and must be looking over its shoulder.

Independent market research says Sainsbury’s is the only one of the big four supermarkets gaining share. And, in the current climate of nervous consumer spending, one wonders why this should necessarily change.

King has benefited from some company-specific headwinds facing Tesco and Morrisons, the number four player. Tesco, apart from its UK stores being widely seen as drab and factory-like, has come unstuck abroad, mainly in its costly exit from the US, but also now with tougher trading in central Europe and Asia.

By contrast, Sainsbury’s has no foreign operations to divert boardroom and operational attention. It has stuck to the UK knitting and the strategy has paid off.

Morrisons, meanwhile, is playing catch-up in two of the fastest growing areas for supermarkets: convenience stores and online.

Sainsbury’s has well-established operations in both these sub-sectors, with sales at its Local stores up 20 per cent and online 16 per cent ahead in the latest three months.

Given the gestation period of turnarounds and new initiatives, Morrisons is unlikely to make real headway in addressing these gaps in its offering for at least 18 months to two years. And Sainsbury’s won’t be standing still while its rival is belatedly getting its act together.

Similarly, Philip Clark, chief executive at Tesco, has thrown a lot of money at revamping his group, but it will take time for changes to bed down, allowing the initiative to rest with King and his colleagues for some time yet.

It is also possible Sainsbury’s has benefited in recent years from the continuity at the top.

King is now the longest-serving UK supermarket boss by a long aisle, while Tesco, Asda and Morrisons have all had new chief executives in the past three years.

It takes a while for a new person to put his or her stamp on an organisation. There are visions to unveil, tactics to adopt and adapt, cultural changes to be inculcated into staff.

King is far further down that route than his opposite numbers. Sainsbury’s, in short, clearly has a competitive edge in the sector and sustained momentum. With the Asda/Sainsbury’s pecking order, it will be extremely ­interesting to see where we are this time next year.

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