Sainsbury’s chief executive Justin King has suggested investment in own label is a key weapon for mainstream grocers as discounters Aldi and Lidl continue to win sales in the UK.
Aldi said this week it enjoyed “record” sales growth in the UK in 2012 and saw increases in footfall, market share and basket size at its stores in the country.
More recent data showed the likes of Aldi and Lidl making more inroads into the UK grocery sector.
Aldi saw its sales grow 32.7% year-on-year in the 12 weeks to 15 September, Kantar Worldpanel said last week. Its market share stood at 3.7%, up from 2.9% in the corresponding period a year earlier.
With another UK discounter, general retailer Poundland, also seeing its sales and profits jump in the its last financial year, the data shows the country’s Big Four – Tesco, Asda, Sainsbury’s and Morrisons, are facing a broader competitive set.
Sainsbury’s today posted a set of quarterly results in which the retailer said it had “outperformed the market”.
Reflecting on the growth of the likes of Aldi, King acknowledged the “underlying like-for-like is strong” but noted “a big part of the discounters growth of course is the new stores they are adding”. He said: A lot of that is plugging gaps left by departure of Netto from the market when it was sold to Asda.”
King said all major grocers were seeing customers shop around but insisted the retailer’s product range compared favourably to the discounters.
“I should think all of our shoppers are also shopping in discounters. That’s the reality of grocery shopping today. Pretty much every customer shops in three or four different locations. We’ve got lots of customers who happily cross-shop between Aldi and Sainsbury’s. In fact some of our best-performing stores have Aldis sitting alongside them,” he said.
“We’re doing everything we’ve always been doing. We think we compete well with [Aldi] and we think we are pretty well differentiated. Aldi is essentially an own-label business and the quality of our own label is a good notch ahead. Maybe the challenges others have been noting they particularly face with discounters is because they haven’t kept investing in the quality of their own brand. When we compare comparable quality with comparable quality on own brand, our pricing is very sharp versus Aldi. I am pretty confident our cust recognise and understand that.”
King said Sainsbury’s second-quarter results represented “a double beat”, as it had outpaced its rivals and was up against “tough comparatives” from the second quarter in its last financial year.
The warm summer weather, he suggested, had boosted sales across the grocery sector. Sainsbury’s online sales were up 15%, slower than the 20% it saw across its last full financial year. However, King insisted Sainsbury’s had grown faster than its competitors online and argued the weather made people less likely to shop online and instead top up at convenience stores. Sainsbury’s c-stores saw sales increase 20% year-on-year.
King said there had been signs the UK economy was improving, which could be helping consumer sentiment. However, he said: “You could only describe that sentiment as being less positive rather than being back to historical highs of optimism. I don’t think even if the reality for customers changes, we are going to see a significant turn away from the behaviour they’ve adopted in the last five or six years. Today the reality of household budgets is that they are under further pressure.”
He added: “The big changes consumers have made to respond to the challenge of the last five, six years are here to stay. People are going to top up more, cook more, waste less, buy more own label. All of these are trends we are comfortable with – indeed we have placed ourselves foursquare at the front of them throughout the consumer downturn. We don’t see even when consumers have more money in their pocket – and they don’t today have more money in their pocket – we don’t see their behaviour changing back.”