King: Sainsbury's has the edge in the grocery market

Sainsbury’s is confident of repelling attempts by rivals to muscle in on some of its key points of difference.

As he unveiled a rise in annual profits, chief executive Justin King said he was not worried Tesco, Asda and Morrisons have all taken strides to improve quality and service.

King said: “We are not complacent, we continue to stretch our legs. If the conversation in this market place is to shift to people arguing over the quality that they sell and quality of service they deliver, then we’re very happy because we believe we have a lot of strength.

“Many of the moves we see others making are in response to us rather than the other way round.”

He highlighted initiatives such as speed of fresh produce to stores, training in skills and service, and improvements to ranges as among the reasons why Sainsbury’s has outperformed rivals.

Sainsbury’s said price perception had improved following the launch of its Brand Match initiative. 

King believes the targeted nature of the Brand Match voucher promotion, combined with data gained from Nectar loyalty cards, had given Sainsbury’s the edge in a grocery market dominated by coupons.

He said: “Vouchers are the most effective way of spending money on promotions because they are the most targeted. There is nothing worse than a voucher that’s not relevant – if you get one that’s £8 off an £80 [shop] then that’s not targeted.”

Tesco ran a £10 off an £80 shop promotion last month while Asda, Iceland and Ocado have also adopted the tactic in recent months.

King took a side swipe at Waitrose, which last week increased its price matching promotion on 7,000 Tesco lines excluding promotions.

He said: “Any price promise that excludes promotions is not a price promise when nearly half of what people buy is on promotion, so you have to take that with a pinch of salt.

“We are happy that people are competing, we’re happy that what we’re doing has real advantage.”

Sainsbury’s is determined to hold on to its best market share since 2005 – at 16.6% – but will face stiff competition from an on-song Asda, a revitalised Tesco and a determined Morrisons.

Sainsbury’s posted underlying pre-tax profits up 7.1% to £712m in the year to March 17, when sales  including VAT rose 6.8% to £24.51bn.

King believes that Sainsbury’s will come out top in the battle for Jubilee spend and that customers will save up for the royal festivities and summer sporting events.

“People know they’re coming so it’s as much about how they save money in advance,” he said.

“You will see people getting circumspect in the run-up to the event during May so they’ve got the money to splash out in June. It’s pretty hard hitting for a while, so September and October will be reasonably flat months until we get to the run-up to Christmas.”