Analysis: Simon Roberts’ new vision for Sainsbury’s future

After a rocky first half, when Sainsbury’s posted a pre-tax loss of £137m as it shouldered more than £438m worth of Covid-related costs, Roberts has set out the longer-term direction of the retailer including the potential loss of thousands of jobs.

At the heart of the vision, Roberts wants Sainsbury’s to return to its heritage and put “food right back at the heart of what we do” given that it underpins every other part of the group. 

The reason, he says, is this is what customers want: “High quality, delicious and healthy foods and, especially in these challenging economic times, consistently lower prices.”

When pressed on the need for change just over a year on from his predecessor’s last five-year strategy, Roberts insisted Sainsbury’s had not lost its way but that coronavirus had changed customer behaviour so dramatically that new thinking was needed.

“I don’t think it’s been going wrong; it’s about a fundamental change in the way customers are shopping and accelerating some of the changes that we’ve already been making,” he maintained.

“By focusing on food, which is our absolute strength and where our heritage lies, we can and should be Britain’s favourite supermarket. That’s where I want us to get to.”

Back to basics

As Roberts was quick to point out, the food business continues to drive the wider Sainsbury’s group. 

In the first half, group retail sales excluding fuel rose 7.1% or 6.9% on a like-for-like basis. Grocery and general merchandise sales were up 8.2% and 7.4% respectively.

As a result of the strength of its core food proposition, Roberts says in future it will be down to Sainsbury’s other brands, such as its bank, Nectar loyalty scheme, Tu, Habitat and Argos, to effectively support the core operation. 

“The strong, profitable growth of our other brands and businesses will support our focus on food and play a key role in enabling us to invest in lower prices and a better food offer,” he said. 

He also committed to “reigniting food innovation” and promised to triple the number of new lines it launches per year. 

“In the last six weeks, we’ve done a complete reset of the fresh food offer in all of our supermarkets,” he said. “We launched over 200 new products in October. It’s the biggest reset in our fresh food department in terms of the number of new lines in the last 10 years.

”It’s helped us open up the space and ensure we’ve got things like meat-free, organic and dairy alternatives, and we’ve added lots more products in those areas.” 

“We’ve got to be where our customers expect us to be. So expanding the number of orders available online is a key focus in the additional investment in roles”

Simon Roberts, Sainsbury’s

Roberts will expand the grocer’s in-house innovation team, speed up production by a third and focus more on the Taste the Difference range, alongside organic and healthier products. 

With the UK back into lockdown, and economists increasingly worried by the prospect of a double-dip recession before the year’s end, Roberts is convinced that improving Sainsbury’s competitive pricing will also pay long-term dividends. 

Referencing internal customer data, Roberts said that Sainsbury’s was seen by the public as the worst value in terms of pricing of the big four, so delivering better value would be a key focus.

“We’ve lowered prices on around 1,500 everyday food products already and we will cut many more prices over what will be challenging months ahead for our customers,” he said.

Sainsbury’s lowered prices on 300 lines alone in October. On meat, fish and poultry lines where prices had been slashed, he said sales had risen 11%.

Always online

Like every other grocer, Roberts said Sainsbury’s online business had exploded in the first half of the year. 

Since March, Sainsbury’s has more than doubled its online grocery delivery capacity from 350,000 to 736,000 last week. It plans to be able to offer 750,000 slots from next year. However, despite this rapid growth, Roberts believes there is more Sainsbury’s can do, particularly because he says it is increasingly profitable. 

“We’ve doubled volume over the last six months and that’s profitable growth. It’s profitable growth because of the volume that we’ve seen come through. We’ve scaled up 102%,” he said.  

While the rapid growth of the online grocery market has been driven by Covid-19, Roberts believes even as society begins to return to some form of normality in the future, Sainsbury’s can continue to sell groceries online profitably. 

“We’ve improved our drop density; in effect we’ve got 35% more orders travelling on each van. 

”We’ve improved our basket size by 17% over the half. We’ve seen our item pick rates recover broadly to where they were in March, despite the social distancing measures in place. We’ve also improved the efficiency of how we’re getting these products to customers.”

To that end, Roberts said that Sainsbury’s will hire a net 6,000 new full-time staff by the end of this year. The vast majority of roles will be in picking and packing online orders and driving delivery vans.

“We’ve got to be where our customers expect us to be. So having online delivery slots when customers need us to have them, expanding the number of orders available online, is a key focus in the additional investment in roles,” he said.

Less is more

Sainsbury’s revealed that it will shut 450 standalone Argos stores by 2025. 

It will also close all of its deli, meat and fish counters in store. The changes are likely to result in the loss of 3,500 roles across the business, with more staff being offered new roles – sometimes on terms that may be less appealing.

Roberts said the shift ultimately reflected the changing way in which people were shopping at both Sainsbury’s supermarkets and Argos.

Sainsbury’s data showed that in the first half of the 2019/20 financial year, 61% of Argos sales were online. In the first half of this year, that figure jumped to 90% – a number “we don’t see going back”. 

By 2025, Roberts said there will be more than 1,000 Argos locations. There will be about 100 standalone stores serving areas “where there isn’t a Sainsbury’s store nearby” and a further 150 Argos branches will move into supermarkets, bringing the total number of shop-in-shops to 450-460, with the remainder being made up of collection points such as lockers.

Because of the increasing importance of Argos as an online and click-and-collect channel, Roberts said Sainsbury’s would invest over the next three and a half years in building 30 more fulfilment centres.

 “This is about adapting to how customers are changing, bringing food counter products into aisles and driving innovation into the offer”

Simon Roberts, Sainsbury’s

“One of the unique elements of the Argos model is the fast-track collection and delivery within four hours,” he said. 

“That’s driven by where the stock is and why we’re putting these fulfilment centres down, so that we can get products to customers faster and have products in the right place, closer to the point where customers are ordering them from.”

On counters, Roberts said that customer data showed their popularity had been falling “10% or more every year, for a number of years” and that people preferred buying their meat, fish and deli products in the aisles. 

When asked whether an increased focus on price and removing in-store services such as counters meant that Sainsbury’s might be becoming more downmarket, Roberts bridled. 

“Absolutely not,” he argued. “This is about adapting to how customers are changing, bringing those products into aisles and driving innovation into the offer.”

Convenience is king

Another tenet of Sainsbury’s new strategy is an increased focus on convenience. Despite having more than 800 convenience stores, Roberts said there were still “quite a number of places” where Sainsbury’s could successfully open a Local store. 

The retailer plans to double the rate of c-store openings over the next three years, adding 110 altogether by 2025. 

Among them will be 18 new-format ‘neighbourhood hub’ stores. Twice the size of a standard Local store, Roberts described them as “mini supermarkets” with pizza counters and a selection of beauty products, as well as fresh juice and coffee to go.

“Neighbourhood hubs have a larger food offer, combined with an Argos collection point and slightly bigger general merchandise and clothing offer.” 

Roberts said the new format was piloted last year – the most recent of which opened last year in Bishop’s Waltham, Hampshire – and that customers “really like them”.  

He said: “They’ve got a strong trading intensity with them because they are built on the convenience model with high frequency but serving more missions that customers would want to fulfil in one place”.

He may have taken over during the Covid outbreak, but Roberts is determined to adapt to the shifts the crisis has forced without losing sight of what makes for Sainsbury’s fundamental appeal.