sainsburys skus down

Leading suppliers have accused Sainsbury’s of declaring a new war on brands amid fears the retailer plans a “significant” cull on what it called ‘commodity brands’.

Worried suppliers contacted The Grocer following a Sainsbury’s trade briefing, held in conjunction with IGD on Tuesday. A number expressed concerns over elements of the presentations given by senior Sainsbury’s management including director of packaged James Bailey and food commercial director Paul Mills-Hicks.

It is understood Sainsbury’s used the day to outline its new differentiation strategy, which aims to make it stand out from its traditional supermarket rivals and compete harder against Aldi and Lidl as well as high street retailers such as B&M Retail and Home Bargains.

While Sainsbury’s looked to make clear that it was not entering a range rationalisation process such as Tesco’s Reset or Asda’s Project Renewal, the retailer is believed to have indicated there would be a “significant” reduction in the number of SKUs.

“It was all about having an emotional relationship with a brand,” said one supplier. “They said ‘we will be assessing emotional functional qualities of all 34,000 SKUs’, said one supplier. “So if you are a brand it’s a case of ‘do you have an emotional connection with the consumer?’ If you don’t then you are just really a commodity. Sainsbury’s is saying it will drive distinctiveness by removing duplicate products and adding NPD.”

Suppliers were left under the impression that for products to remain on shelf they would have to deliver a 20% reduction in cost of goods sold.

“I don’t think they are looking for a huge reduction in SKUs but they are looking at duplication and this war on brands is something that is in their DNA,” said one supplier who attended the event. “Their food performance is clearly lagging in the market and they are right to try to look to be more intelligent with that strategy.”

Another supplier said: “I think the new strategy might support margin in the short term, but can only increase their respective decline in market share.”

“I think it all plays into the hands of Waitrose, M&S and probably Ocado as no one is going to ‘out-Aldi Aldi’.”

Not all suppliers were concerned by the plans, with particularly challenger brands being excited by what they heard. “This is all part of its value simplicity initiative. Sainsbury’s is looking very closely at what role brands can play and their brand equity, and want to remove duplication,” said one executive from a fast-growing brand. “If shoppers love a brand, they should pay full price for it. Those that stay will have to offer a real underlying value, and will have to be distinctive.”

“We’re having an ongoing conversation with them about this, but actually think it could be good for the category and our brand.”

A Sainsbury’s spokeswoman said: “We have had really positive comments from suppliers on our objective of creating a home for brands at Sainsbury’s. Customers are at the heart of our strategy and this is a great opportunity for brands to differentiate more.

“We believe that, working with suppliers, we can eliminate inefficiency from the value chain. We led the industry on value simplicity, making buying brands at Sainsbury’s simpler for customers and we now want to work with brands to make them more distinctive and rewarding for customers.”