View from City Road: Good ideas come thick and fast at Sainsbury's

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The Independent Online
HOW do you get to be the richest family in Britain? Herewith a mugs' guide to emulating the Sainsburys.

1. Begin early, preferably several generations back. David Sainsbury's great-grandfather started the business with a single grocery shop in Drury Lane in London in 1869. His cousin John shifted the business into overdrive in the 1970s and 1980s.

2. Keep it in the family and marry well. An alliance at the turn of the century with the Van Den Bergh margarine heiress did no harm. Despite dilution from the flotation and rights issues, the Sainsbury family still controls two-fifths of the shares. The third generation - which traditionally squanders the family fortune - did exactly the opposite.

3. Pick a reliable industry and establish a reputation for value and quality. Keep it simple. Don't try tricksy marketing. 'Good food costs less at Sainsbury's' may be a dull slogan and trading philosophy but - profiteering or no profiteering - 10 million customers a week believe it.

4. Don't be tempted to diversify. Grow organically rather than by acquisition. Even Sainsbury is not perfect here: its purchase of the Shaw's supermarket chain in the US is producing a poor return on capital, but is small.

5. Invest. Sainsbury pumps pounds 800m into the business each year, not just on new stores but also into computer and distribution systems and developing new products: 1,400 new lines were introduced last year and 1,000 lines redesigned or reformulated.

6. Anticipate changing tastes, habits and technology. Rising car ownership made out-of-town superstores viable; increased overseas travel widened tastes for exotic lines; more working women boosted demand for high-margin, ready-made meals. Sainsbury, despite its goody-goody image, was the first of the big three to opt for nationwide (and illegal) Sunday opening.

7. Exploit the brand. Two-thirds of Sainsbury lines are now own-label and growing. These earn much higher margins than bought-in brands. The latest coup is its own- label detergents range Novon, which has doubled Sainsbury's market share in a sector notoriously dominated by the likes of Procter & Gamble and Lever Brothers.