After reporting first-half results today, Sainsbury’s chief executive Simon Roberts looked forward to the coming Christmas period, which is set to be more value-led than any in living memory.

“Our absolute focus is on value and the cost of living,” said Roberts.

“As a team, we spend lots of our time in our stores and operations speaking to customers and colleagues, and they’ve told us they really are feeling squeezed.” 

Simon Roberts CEO Sainsburys

Sainsbury’s boss Simon Roberts says: “We think we’re the best value we’ve ever been now”

Inflation and the cost-of-living crisis has been the story of the year, and the bad news for customers and retailers alike is that prices are set to peak in the crucial fourth quarter. 

Almost every day, the economic situation seems to deteriorate. On Thursday, while Roberts was speaking, the Bank of England hiked interest rates to 3% and warned that the UK faces the prospect of its longest-ever recession. 

Sainsbury’s has trimmed fat across the business, cutting £1.3bn in costs, which Roberts says has given the grocer room to invest and react to the environment. Citing the £500m investment in prices Sainsbury’s has made this year, Roberts says: “We think we’re the best value we’ve ever been now.”

With Christmas set to be dominated by a flight to value and Sainsbury’s operationally leaner and more focused on price than ever, Retail Week assesses where the grocer and Roberts have placed their bets.

Head to head

Fresh food inflation hit 13.3% in October, according to the British Retail Consortium, the highest rate on record.

While Roberts would not break out Sainsbury’s overall food inflation figure, he said it is “comfortably in the single digits”. 

This has come about due to investment in price, which Roberts says has squeezed profit margins in the first half. It’s a price he has willingly paid to build customer trust in Sainsbury’s value proposition.

“We’re seeing less switching to Aldi and Lidl than our full-choice competitors. Our basket sizes are holding up”

Simon Roberts, Sainsbury’s

“We’ve guided to our profits being lower this year than last year. One of the reasons we’ve done that is because we really are committed, through this period, to build the long-term loyalty and trust of customers that they can really trust the value in our offer.”

Having improved the grocer’s value bona fides with customers, Roberts believes Sainsbury’s is now in a position to go head-to-head with any of its competitors on price.

“This investment is helping strengthen our value proposition versus competitors,” he says.

“We’re seeing less switching to Aldi and Lidl than our full-choice competitors. Our basket sizes are holding up ahead of all our competitors.”

Sainsbury's value proposition slide

In the first half, Sainsbury’s improved its price indexing versus key rival Tesco by 10 basis points, Asda by 70bps and, most crucially of all, Aldi by 400bps.

Sainsbury’s has also raised prices by less than the market average on a basket of what it calls the top 100 products.

To do this, it has expanded its Aldi Price Match to cover 240 items and its price lock to more than 2,000 products, as well as increasingly offering Nectar customers personalised rewards.

Sainsbury's inflation slide

This focus on price competitiveness means that Sainsbury’s is already benefiting from an industry-wide customer trend: pulling forward Christmas spending to spread the cost.

“One of the key things that we’re clearly seeing is customers wanting to spread out the cost of Christmas and shopping earlier where they can,” he says. “Buying little and often as they plan for Christmas.”

Own-brand focus

Another industry-wide trend that has strengthened throughout the year as inflation has risen is a customer shift away from branded to own-brand products to keep costs down.

Heading into Christmas, Roberts expects this trend to not only continue, but even accelerate. 

“[We’ve seen] customers trading down, customers moving more to own brands and customers looking at different places to shop. 

“Although customers are trading down as inflation goes up, there is less volume going into the basket. Our customers are trading down less than those of our competitors.”

Sainsbury’s has focused on its own-brand offering throughout the year. With Christmas coming and customers still looking to treat themselves and their loved ones, Sainsbury’s is expecting its Taste the Difference own-brand offering to trade well. 

“Going into Christmas, it’s really important to give customers choice and value but, when they want to, the opportunity to trade up as well” 

Simon Roberts, Sainsbury’s

In the first half, Taste the Difference sales were up 14% on a three-year basis. To keep this momentum going, Sainsbury’s is introducing 600 new products for Christmas – 50% of which will be in own-brand and Taste the Difference ranges – and focusing its Christmas marketing on these. 

“Going into Christmas, it’s really important to give customers choice and value but, when they want to, the opportunity to trade up as well,” says Roberts.

He is also expecting more people to entertain at home this Christmas, with the price of eating out surging, which could also be a boon for Taste the Difference sales. 

Argos reborn? 

Since Roberts unveiled his food-first focus in 2020, Argos has taken a backseat to Sainsbury’s core grocery business. As a result, it has experienced a string of disappointing quarters. 

In-store signs for Sainsbury's and Argos

Argos rebounded in the first half of this year, with sales up 1.6%

In the first half of the year, however, Argos rebounded with sales up 1.6% for the period driven by a strong summer. 

The business also rowed back on the planned number of standalone Argos store closures by 60 after negotiating better rental agreements.

While Roberts says customers are increasingly shopping on Argos digitally, he says the goal is for there to be 1,100 physical “points of access” for customers with the brand. 

“We really want to lean into this key point of making Argos the most convenient and the fastest and, as customers are looking for value, we want to make Argos synonymous with that.” 

“[Argos is] definitely in better shape on availability, on where our stock is, on where our operations are than we were this time last year” 

Simon Roberts, Sainsbury’s

While Roberts says it’s “too soon” to know exactly how Argos, and general merchandise more generally, will perform at Christmas, he believes the retailer is in a better position from an availability point of view than it was this time last year.

“If we think about the things that we can control, we’re definitely in better shape on availability, on where our stock is, on where our operations are than we were this time last year,” he says.

“So, on what I’d call the self-help side of things, that’s in much better shape year on year. We’ve seen that play out, for example, in our availability, which has been strong.”

Times are set to be tougher than ever for customers this Christmas. While merriness may be in short supply, Roberts has at least got Sainsbury’s into fighting shape to punch its weight in an intensely competitive market, where the battle will ultimately be won or lost on value for money.

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