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May 13, 2009

UPDATE: UK: Improved image boosts Sainsbury’s – CEO

Sainsbury's chief executive Justin King claimed today (13 May) that the company's improved image in the eyes of consumers had driven the retailer's robust results in the last 12 months.

Sainsbury’s chief executive Justin King claimed today (13 May) that the company’s improved image in the eyes of consumers had driven the retailer’s robust results in the last 12 months.

King said cash-strapped UK shoppers now saw Sainsbury’s as a place that offered them value, an image that contrasted with the image of the business in the 1990s, when it was seen as relatively upmarket.

“Our price positioning is the best that it has ever been,” King told analysts today after the retailer announced an 11% rise in annual underlying profits.

“It’s the core reason why we’ve continued to trade strongly in the last 12 months. Customers can do the shopping that they want to do with us; they don’t need to go anywhere else.”

The Sainsbury’s boss pointed to a series of marketing campaigns used by the company this year to promote an image of value-for-money.

King pointed to the ‘Love Your Leftovers’ initiative and said Sainsbury’s ‘Feed Your Family for a Fiver’ had been the “most mimicked” campaign in the UK grocery sector.

The retailer’s ‘Switch and Save’ campaign – which highlights the difference in price between Sainsbury’s own-label lines and branded stock – has helped the company’s Basics range grow to account for 3% of group sales.

Basics sales jumped by 60% during the last three months of Sainsbury’s fiscal year and the line proved the retailer’s fastest-growing “sub-brand” over the last 12 months.

King said: “One of the most important things that have changed about customers’ perception in Sainsbury’s over the last 12 months is that they are in a very different place in terms of their beliefs in our price perception.”

However, King added that Sainsbury’s had continued to invest on the “ethical, value and quality” agenda. “We still see strong growth in high-welfare and Fairtrade,” he said.

The Sainsbury’s boss said the retailer had the product “hierarchy” to match consumer demand once the economy recovers, pointing to the company’s upmarket, own-label Taste The Difference range, which accounts for 7% of sales.

King also argued that Sainsbury’s “core” own-label products would also give the company an advantage when the economy bounces back.

“Our core own-label is better quality. It has a higher proportion of Freedom Foods, a higher proportion of Fairtrade, a higher proportion of high ethical sourcing more generally than any of our competitors,” King said.

“As those trends grow again – and they haven’t gone away, that’s the fascinating thing about the downturn – we’re just uniquely well placed.”

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