Last week Tesco disappointed the City with its first-quarter performance, but in light of this week’s results from Sainsbury’s perhaps critics were a little harsh.
While Sainsbury’s still outpaced its rival, delivering like-for-likes excluding petrol of 0.8% versus Tesco’s like-for-likes excluding VAT and petrol down 1% - albeit for slightly different periods - the performance disappointed some, and shows tough grocery conditions.
While the quarterly comparatives are difficult as Sainsbury’s lapped some of it strongest performance last year when we had the Queen’s Diamond Jubilee, the grocer also pointed out that the consumer environment is still tough and it expects the challenging economic environment to continue for the rest of its financial year.
It seems then that, while Sainsbury’s emerged unscathed from the horse meat crisis and has gained market share, it still faces the same pressures as the rest of the big four. Competition is coming from both ends of the market - Aldi and Waitrose - and the grocers are fighting for every penny.
One bright spot for Sainsbury’s and Tesco, and the wider market, is own-brand sales. Both have been investing in own-brand and are feeling the benefit. That is where many retailers can make a difference to top-line growth.
Sainsbury’s has completed the relaunch of its By Sainsbury’s range, and reported sales are up nearly 7%, while the top-end Taste the Difference line is growing at over 10% and has reached sales of £1bn.
Boss Justin King said own-label is a key part of its point of difference, and By Sainsbury’s and Taste the Difference accounted for all of its growth - everything else was flat.
Own-brand enables retailers to differentiate and many are achieving growth as a result. For the grocers, own-brand is a weapon in the constant price wars and helps them stand out from the competition. And for retailers such as House of Fraser and Debenhams, own-brand gives them an edge against both bricks-and-mortar and, notably, online rivals.
It gives customers exclusivity, something they can’t get anywhere else.
So while Sainsbury’s may be feeling the strain of the tough environment alongside everyone else, it has led the way among its peers with investment in own-brand and that is helping growth.
For the wider retail industry the same applies.
Those that distinguish themselves stand a better chance of growth.