Sainsbury profits slip by pounds 97m

Click to follow
The Independent Online
Sainsbury's is to follow Tesco and Safeway with the launch of a nationwide loyalty card in a bid to revive its flagging fortunes and declining market share.

The decision marks a U-turn by the company, whose chairman, David Sainsbury, dismissed loyalty cards as "electronic Green Shield stamps" when Tesco launched its Clubcard scheme a year ago. The card now has more than 5 million members and has helped Tesco replace Sainsbury as Britain's largest supermarket chain.

Sainsbury's announced the plans yesterday along with its financial results for last year which showed that profits fell for the first time in its 22 years on the stock market. Profits fell from pounds 809m to pounds 712m and its sales increases are continuing to lag behind arch-rival Tesco and the much-improved Asda.

The latest market share figures show Tesco pulling further ahead with a UK share of 21.2 per cent, compared with Sainsbury's 18.5 per cent.

The discount card will be launched in the next two months but the company has not yet released any details on how it will operate. It is also planning a Sainsbury's credit card and other financial services which could include deposit accounts, pensions and Personal Equity Plans. Budgens launched its own Visa card earlier this year and Tesco is working with NatWest bank on the launch of a branded credit card and deposit account.

The card war is the latest in a string of initiatives that the supermarket groups are using in an increasingly bitter battle for market share. However, analysts feel Sainsbury's may be too late to reap the benefits of a new card. Tony MacNeary, food retail analyst at NatWest Securities, said: "Coming third behind Tesco and Safeway, one has to wonder how much bang for their buck they are going to get."

The company blamed the slump on a more competitive retail environment, the cost of price-cutting campaigns and fewer store openings. Other costs have included trading losses of pounds 10m at Texas Homecare, the DIY chain that Sainsbury's bought last year. The BSE scare on beef will cost the company a further pounds 8m this year on marked down stock and supplier support. Beef sales are now up to 70 per cent of their level before the scare.

Mr Sainsbury admitted that the figures were a disappointment. "We don't think it has been a satisfactory performance and we haven't done as well as we should. We have lost the marketing battle." He pledged to be "more aggressive" with a combination of price campaigns and customer service measures.

Mr Sainsbury denied that the launch of a nationwide loyalty card represented a personal climb-down. "We've never been against loyalty cards in principal. What we were concerned about is that any card should offer real benefits to customers. We think we have found a way to do that."

Sainsbury's has operated a Saver Card in some stores since 1992. Its Homebase card has more than 5 million members.

News analysis, page13

Profits slump, page 16

Comment, page 17

How supermarket advertising campaigns compare as superstore plays loyalty card

Advertising is an "absolutely vital" weapon in the battle for customer loyalty currently being waged among Britain's supermarket giants. Stefano Hatfield, editor of the advertising industry magazine Campaign assesses their efforts.


Slogan - "Everyone's Favourite Ingredient", "Good Food Costs Less". Stars include Lauren Bacall and Ian McShane.

"The celebrity recipe campaign worked in that sales of the items mentioned rose, but it also had the same effect in rival stores. It was very classily done and if there is a criticism, it is that it reinforced the middle- class image when people were looking for value-for-money."


Slogan - "Every Little Helps". Stars - Prunella Scales and Jane Horrocks.

"Since the Dudley Moore campaign, Tesco has really led the way. It managed to change from its 'pile it high, sell it cheap' image to a company with quality connotations, which it had previously lacked.

"'Every Little Helps' is the campaign that has set the agenda.And of course the Clubcard has been very successful."


Slogan - "Lightening the Load". Stars - "Harry" the winsome toddler.

"Safeway has come from absolutely nowhere with Harry. He is everybody's favourite little boy. The British public love all things sentimental, schmaltzy and cute. I have to admit, I cannot remember much about the advertisement except that Harry is in it. But it is definitely working, especially in targeting young couples."


Slogan - "Pocket the Difference". Stars - None.

"It's all about price at Asda with 'Pocket the Difference' and the pat on the bum. It's OK, but it's what I would call annoyingly memorable. It's one of those ads which is so bad that it becomes impossible not to watch. And there's that annoying little jingle too. The use of northern accents on some adverts is also intended to convey value for money."