Sainsbury’s chief executive Justin King believes UK consumers can use own label to offset the pressure of rising inflation – and has insisted the retailer has a competitive advantage over its rivals in non-branded goods.
UK inflation jumped in October, with the country’s consumer price index on Tuesday (13 November) showing prices increased 2.7% last month, up from a rate of 2.2% in September.
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Food prices, particularly of produce after the wet summer and of confectionery after manufacturers reduced pack sizes, was a key factor in the higher inflation rate in October.
Speaking yesterday after Sainsbury’s reported its financial results for the first half of its financial year, King said a “tick up” in inflation could put pressure on household budgets.
However, he said “the winners” in the grocery industry would be those that “help customers with the challenge”. Own label and money-off vouchers were ways of saving customers money, King said. These were two areas in which Sainsbury’s fared better than its rivals, he insisted, reflecting on the retailer’s advertising slogan of Live Well For Less.
“The best way to dial out inflation for customers is to switch into own-label and to use vouchers and coupons to cut the cost of the weekly shop,” he said.
“Live Well For Less is an advertising copy line but it’s what sits behind it that makes it really different, most notably own label. Customers tells us it’s our own brand that really helps them live well for less. That sits alongside [price comparison scheme Brand Match, which has been hugely successful. Those two together, reassurance that they don’t need to spend any more on brands and continuing to drive our quality difference in own label is a winning combination,” he asserted.
Sainsbury’s cited its “continued investment and growth” in own label as it reported higher first-half sales and profits.
Pre-tax profits were up 2.5% to GBP405m in the 28 weeks to 29 September. Revenue grew 4% to GBP12.16bn, excluding VAT and including fuel.
Sainsbury’s said its like-for-like sales, excluding sales at the pumps but including VAT, were up 1.7%.
The retailer said its share of the UK grocery market had reached 16.7%, its highest level for “nearly a decade”.
Sainsbury’s also provided data that it said showed how its own-label products were faring better than its competitors. Citing Kantar Worldpanel data for the 28 weeks to 30 September, it said major UK grocers, excluding Sainsbury’s had increased their own-brand sales by 1.6% year-on-year. Sainsbury’s private-label sales were up 4%, it said. Some 49.7% of Sainsbury’s sales are now in own label, versus 47.1% at its rivals.
King said: “We have the highest proportion of sales for own-label among major grocers and also it is growing fastest. It is the key way customers are living well for less. A key way customers deal with inflation is to trade out of brands and into own label, saving at least 20%, at comparable or better quality.”
There was agreement among analysts that Sainsbury’s had had success with its own label and money-off schemes.
“On the strategy front, Sainsbury’s continues to successfully steer between delivering good quality food and promoting compelling value for money messages. Charting such a course sounds easy in theory but, as both Tesco and more recently Morrisons have found to their cost, it is difficult to execute well. Sainsbury’s has kept both plates spinning with initiatives such as the on-going own label refresh delivering growth and Brand Match helping to increase loyalty and prevent switching,” Conlumino MD Neil Saunders said.
Looking to Christmas, King insisted this year’s festive period would be similar to previous years.
“What our customers are telling us is ‘yes times are tough but family occasions are still there to be enjoyed and celebrated’. As has been true now for the last three years, people will splash out at Christmas, it will absolutely be about quality food and we think own-label will be a key trend,” he said.
