How Sainsbury’s plans to build on FY2020’s momentum

Date : 28 April 2021

Nick Gladding

Senior Retail Analyst

As Sainsbury’s reveals a strong operating performance in its full year 2020 results, we explore the retailer’s priorities for as it progresses its Food First strategy.

Key numbers for 52 weeks to 6 March 2021

  • Grocery sales +7.8% and total ex fuel retail sales +7.3%
  • Strong Q4 LFL growth of +11.3%
  • Online grocery sales +119.6%, with capacity reaching 850,000 slots per week by year end and click & collect orders up 850% in the year
  • Supermarket sales exc. online +2.5%, including sales from an Argos stores within Sainsbury’s
  • Convenience sales -9.4% with many urban sites impacted by reduced footfall
  • General merchandise sales +8.3%, with strong Argos sales offset by a decline in Sainsbury’s non-food sales, particularly in H1 when stores focussed on food replenishment
  • Underlying profit before tax down 39% to £356m with strong ex fuel sales growth more than offset by direct COVID costs
  • Retail underlying operating profit down 22.2% to £730m

Delivering better value to customers

A key focus for Sainsbury’s in the year ahead will be to further improve its reputation for value and three elements will be crucial here. Firstly, Sainsbury’s Price Lock activity which now extends to over 2,500 lines will provide primary customers with assurances on the stability of everyday prices. Secondly and again aimed at core customers, Sainsburys is targeting price investment at the centre of the plate, especially in high volume, fresh own brand lines. Thirdly, Sainsbury’s has its new Aldi Price Match mechanic which applies to over 250 lines. With a focus on lower process fresh SKUs it is deigned to engage secondary customers with the promise of offering Sainsbury’s quality at Aldi prices. To date Sainsbury’s has seen a strong customer response from these price investments, with a 15% increase in meat fish and poultry volumes, post investments.

Step up food innovation

With a more stable operating environment post pandemic, Sainsbury’s will more than triple new product development this year. 1,900 new own brand SKUs are planned across different tiers of the offer. While some will encourage trade up, others will provide new value options, such as the Imperfectly Tasty range. Innovative products such as expanding the Plant Pioneers range will also play a part in helping Sainsbury’s to meet its net zero commitments. Stronger partnerships with suppliers and a more pro-NPD ethos at Sainsbury’s will also fuel this investment.

Growing online momentum profitably

After the huge growth of online through the pandemic, Sainsbury’s is keen to improve the profitability of the channel. Last year online grocery sales reached £3.6bn with sales growth building through the year to reach 147% in Q4. As online takes a greater share of sales, its profit contribution has quadrupled but Sainsbury’s is targeting further improvements so it does not dilute overall profitability as e-commerce takes share from stores.  At the same time Sainsbury’s is also broadening online grocery options for customers with more focus on click & collect, further development of Chop Chop rapid delivery (which now operated in 16 cities beyond London) and the expansion of partnerships with Deliveroo and Uber Eats to offer 1,000 lines within 30 minutes. Rapid delivery now amounts to a £50m business for Sainsbury’s.

‘Help everyone to eat better’

With food at the heart of Sainsbury’s, will replace its longstanding Live Well for Less strapline with ‘Help Everyone Eat Better’ later this year. The shift will provide a platform for Sainsbury’s to broaden its messaging beyond price, allowing it for instance to talk more about healthy eating, sustainability and enjoying food together. The move will also link better with the Net Zero targets that Sainsbury’s launched last year ahead of the COP26 Glasgow climate change conference in November at which Sainsbury’s is the principal supermarket partner.

Extending the reach of Nectar

Sainsbury’s will continue to invest in Nectar, particularly to develop the scheme’s digital capabilities. 7m of its 18m scheme’s members now use the Nectar app, providing suppliers with a way to connect with engaged customers and covert reach into sales, for instance through more personalised content. Sainsbury’s is keen to collaborate more with suppliers to develop Nectar further as Sainsbury’s looks to boost app usage to 10 million customers.

More insight for Retail Analysis subscribers

Sainsbury’s Trade Briefing 2021 – 30 June 2021

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