Group chief executive Sir Peter Davis told suppliers at its annual conference that recent sales performance had been disappointing. But he insisted the business would “hold its nerve” as it entered the final year of its transformation plan.
In particular, Sainsbury would not get diverted into aggressive price campaigns. “Those analysts who say we should cut prices and the volume will go up forget John Cleese and the Value to Shout About campaign,” said Sir
Peter. “That lost us 10% of customers in a year.”
He added: “We are very sensitive that we don’t get too far away from the competition. If we
deliver on choice and service there’s permission to be dearer so long as we don’t go too far. It’s a very difficult balance.”
New trading director Stephen Nelson said Sainsbury’s growth would come through a stronger focus on customers, making ranges balanced and more relevant to changing needs.
And quality would remain the vital differentiator for Sainsbury, particularly in what Nelson called its “standard and standard plus” ranges.
But Sainsbury would not tolerate quality for quality’s sake. “We need the right quality at the right price,” he said. “We will not indulge ourselves on behalf of the consumer. And we have found examples where we were over-engineering.”
Nelson told suppliers that Sainsbury would not take its foot off the pedal when it came to driving efficiency through its business, but he added: “The time is right to change the language from cost to growth.”
Sainsbury would reduce its promotions by 25% as part of its efforts to rebuild sales growth, he said, running fewer, better promotions. The multiple needed to take action to address the “horrifying” amount of poorly performing activity in its stores.
Christmas will be a key test for Sainsbury and its new trading strategy. But MD Stuart Mitchell promised its best plan for three years was in place, with the right pricing structure, ranges that were not too esoteric, advertising that focused on quality, plus clear and robust promotional plans.
>>p44 The great non-food gamble