MARKETS reward original thinking, not those who follow the herd. Sainsbury proved that yesterday with a trading update for the 10 weeks to 16 March that beat expectations. Total sales were up 6.3 per cent excluding fuel; like-for-like sales were up 3.6 per cent excluding fuel. There were several reasons for Sainsbury’s outperformance of the retail market, but the key was its survival largely unscathed through the horsemeat scandal that engulfed Tesco and others earlier this year.
Justin King, Sainsbury’s chief executive, gave a simple reason for his firm’s clean bill of health: it has tested DNA for the last ten years. That has proved the smart choice.
Sainsbury understood what the other retailers apparently chose to ignore: with the higher margins available for own-brand products comes greater responsibility for the quality of those products. By making a strategic decision that Sainsbury’s own-brand shouldn’t mean maximum revenue at the expense of quality, the grocer stole a march on its competitors.
That was clear, for instance, in King’s boast that Sainsbury’s chicken has been 100 per cent British since 2003. Ten years behind the curve, Tesco vowed in February to buy all its fresh chicken from the UK by July, with frozen and ready meals to follow later.
Horsegate has put supermarkets’ brands on trial, offering King the chance yesterday to put Tesco’s new price comparison service, which includes own-brand items, in the dock. By questioning how comparable Tesco own-brand and Sainsbury own-brand products really are, King turned Tesco’s lower prices into a liability. That’s the sort of thinking that keeps you ahead of the pack.