Blog: Dean BestWhy Tesco remains better bet than Sainsbury's

Dean Best | 8 October 2009

Certain sections of the media are making a meal out of the so-called "war of words" between the CEOs of UK retail rivals Tesco and Sainsbury's.

In recent months, as we know, Tesco has seen its market share eroded as near rivals Asda, Sainsbury’s and Morrisons enjoyed buoyant like-for-like sales.

However, on Tuesday (6 October), as Tesco unveiled its half-year numbers, CEO Sir Terry Leahy said the UK's largest retailer had recovered some of that lost ground.

"We're not lagging behind. We're actually ahead of our main competitors. We're growing share in volume and value terms," he insisted.

A day later, Sainsbury's, the UK's third-largest retailer, published its latest sales figures.

While Tesco's and Sainsbury's numbers were not over exactly the same time-frame, Sainsbury's did publish faster growth over its second quarter, prompting its boss Justin King to say he "did not recognise" the assertions made by his Tesco counterpart.

Indeed, a study of Sainsbury's and Tesco's respective performances in recent months suggests that King has had the march on Tesco's knight in most aspects of strategy.

The Sainsbury's business has been revitalised under King, which has managed to maintain his company's stance on values (think Fairtrade bananas) while convincing shoppers it can offer them value.

Tesco, meanwhile, has largely been reacting to rather than leading trends in the market, although, in fairness, its recent heavy investment in Clubcard did prompt Sainsbury's to promote its own loyalty offer.

No, while the media-fuelled "war of words" raises the eyebrows of some, we would do well to remember that Tesco and Sainsbury's are fundamentally two different businesses.

And, given Tesco's ever-expanding international ambitions, it provides the better long-term bet for investors.


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