Sainsbury's

Origin and growth

Sainsbury's was established as a partnership in 1869, when John James Sainsbury and his wife Mary Ann opened a shop at 173 Drury Lane in Covent Garden, London. Sainsbury started as a retailer of fresh foods and later expanded into packaged groceries such as tea and sugar. His trading philosophy, as stated on a sign outside his first shop was: "Quality perfect, prices lower".Shops started to look similar, so a high cast-iron 'J. SAINSBURY' sign featured on every London shop so that it could be recognised from a distance, and round-the-back deliveries started to add extra convenience and not upset rivals due to Sainsbury's popularity.In 1922, J Sainsbury was incorporated as the private company 'J. Sainsbury Limited'.Groceries were introduced in 1903, when John James purchased a grocer's branch at 12 Kingsland High Street, Dalston. Every shop offered home delivery, as there were fewer cars in those days. Sites were carefully chosen, with a central position in a parade selected in preference to a corner shop. This allowed a larger display of products, which could be kept cooler in summer, which was important as there was no refrigeration.By the time John James Sainsbury died in 1928, there were over 128 shops. He was replaced by his eldest son, John Benjamin Sainsbury, who had gone into partnership with his father in 1915.During the 1930s and 1940s, the company continued to refine its product offerings and maintain its leadership in terms of shop design, convenience, and cleanliness. The company acquired the Midlands-based Thoroughgood chain in 1936.The founder's grandsons Alan Sainsbury and Sir Robert Sainsbury became joint managing directors in 1938, after their father, John Benjamin Sainsbury, had a minor heart attack.

In the Second World War, many of the men who worked for Sainsbury's were called to perform National Service and were replaced by women. The war was a difficult time for Sainsbury's, as most of its shops were trading in the London area and were bombed or damaged. Turnover fell to half the prewar level. Food was rationed, and one particular shop in East Grinstead was so badly damaged on Friday 9 July 1943 that it had to move to the local church, temporarily, while a new one was built. This shop was not completed until 1951.

Self-service and heyday

In 1956, Alan Sainsbury became chairman after the death of his father, John Benjamin Sainsbury. During the 1950s and 1960s, Sainsbury's was a keen early adopter of self-service supermarkets in the United Kingdom. On a trip to the United States, Alan Sainsbury realised the benefits of self-service shops and believed the future of Sainsbury's was self-service supermarkets of 10,000 sq ft , with eventually the added bonus of a car park for extra convenience. The first self-service branch opened in Croydon in 1950.Sainsbury's was a pioneer in the development of own-brand goods; the aim was to offer products that matched the quality of nationally branded goods but at a lower price. It expanded more cautiously than Tesco, shunning acquisitions, and it never offered trading stamps.Until the company went public on 12 July 1973, as J Sainsbury plc, the company was wholly owned by the Sainsbury family. It was at the time the largest ever flotation on the London Stock Exchange; the company rewarded the smaller bids for shares in order to create as many shareholders as possible. A million shares were set aside for staff, which led to many staff members buying shares that shot up in value. Within one minute the list of applications was closed: £495 million had been offered for £14.5 million available shares. The Sainsbury family at the time retained 85% of the firm's shares.

Most of the senior positions were held by family members. John Davan Sainsbury , a member of the fourth generation of the founding family, took over the chairmanship from his uncle Sir Robert Sainsbury in 1969, who had been chairman for two years from 1967 following Alan Sainsbury's retirement.Sainsbury's started to replace its 10,000 sq ft High Street shops with self-service supermarkets above 20,000 sq ft , which were either in out of town locations or in regenerated town centres. Sainsbury's policy was to invest in uniform, well designed shops with a strong emphasis on quality; its slogan was "good food costs less at Sainsbury's". During the 1970s, the average size of Sainsbury's shops rose from 10,000 sq ft to around 18,000 sq ft ; the first edge of town shop, with 24,000 sq ft of selling space, was opened at Coldhams Lane in Cambridge in 1974. The last counter service branch closed in Peckham in 1982. To participate in the hypermarket sector, Sainsbury's formed a joint venture, known as SavaCentre, with British Home Stores. The first SavaCentre shop was opened in Washington, Tyne and Wear, in 1977; nearly half the space, amounting to some 35,000 sq ft , was devoted to textiles, electrical goods and hardware. As the hypermarket format became more mainstream, with rivals such as Asda and Tesco launching ever larger shops, it was decided that a separate brand was no longer needed, and the shops were converted to the regular Sainsbury's supershop format in September 1999.Sainsbury's diversified further in 1979, forming a joint venture with the Belgian retailer, GB-Inno-BM, to set up a chain of do-it-yourself shops under the Homebase name. Sainsbury's also trebled the size of its Homebase do it yourself business during 1996, by merging its business with Texas Homecare, which it acquired in January 1995 from Ladbroke for £290 million. Sainsbury's sold the Homebase chain in December 2000, in a twofold deal worth £969 million. Sales of the stores to Schroder Ventures generated £750 million and sale of 28 development sites, which had been earmarked for future Homebase shops, were sold for £219 million to rival B&Q's parent company, Kingfisher plc. During the 1980s, the company invested in new technology: the proportion of sales passing through EPOS scanning checkouts rose from 1% to 90%.In November 1983, Sainsbury's purchased 21% of Shaw's Supermarkets, the second largest retailer of groceries in the northeastern United States . In June 1987, Sainsbury's acquired the rest of the company.In 1985, the chairman reported that over the preceding 10 years profits had grown from £15 million to over £168 million, a compound annual rise of 30.4% – after allowing for inflation a real annual growth rate of 17.6%. In 1991, the Sainsbury's group boasted a twelve-year record of dividend increases, of 20% or more and earnings per share had risen by as much for nearly as long. Also in 1991, the company raised £489 million, in new equity to fund the expansion of supershops.With the advent of out of town shopping complexes during the 1980s, Sainsbury's was one of the many big retail names to open new shops in such complexes – notably with its shop at the Meadowhall Shopping Centre, Sheffield in 1990, and the Merry Hill Shopping Centre at Brierley Hill in the West Midlands, which opened in September 1989.Sainsbury's expanded into Scotland in 1992 with a shop in Darnley . In June 1995, Sainsbury's announced its intention to move into the Northern Ireland market, until that point dominated by local companies. Between December 1996 and December 1998, the company opened seven shops. Two others at Sprucefield, Lisburn, and Holywood Exchange, Belfast would not open until 2003, due to protracted legal challenges. While Sainsbury's outlets in Northern Ireland were all new developments, Tesco instead purchased existing chains from Associated British Foods .

Decline

In 1992, the long time CEO John Davan Sainsbury retired, and was succeeded as chairman and chief executive by his cousin, David Sainsbury ; this brought about a change in management style – David was more consensual and less hierarchical, but not in strategy or in corporate beliefs about the company's place in the market.Mistakes by David Sainsbury and his successors, Dino Adriano and Peter Davis, included the rejection of loyalty cards, the reluctance to move into non-food retailing, the indecision between whether to go for quality or for value, "the sometimes brutal treatment of suppliers" which led to suppliers favouring Tesco over Sainsbury's, and an unsuccessful advertising campaign fronted by John Cleese.At the end of 1993, it announced price cuts on three hundred of its most popular own label lines. Significantly, this came three months after Tesco had launched its line Tesco Value. A few months later, Sainsbury's announced that margins had fallen, that the pace of new supershops construction would slow down, and that it would write down the value of some of its properties.In 1994, Sainsbury's announced a new town centre format, Sainsbury's Central, again a response to Tesco's Metro, which was already established in five locations. Also in 1994, Sainsbury's lost the takeover battle for William Low . Also that year, David Sainsbury dismissed Tesco's clubcard initiative as 'an electronic version of Green Shield Stamps'; the company was soon forced to backtrack, introducing its own reward card eighteen months later.For much of the 20th century, Sainsbury's had been the market leader in the supermarket sector in the United Kingdom, but in 1995, it lost this position to Tesco. Some new ventures were successful, notably the launch of a retail bank, Sainsbury's Bank, in partnership with Bank of Scotland.In addition to Shaw's, Sainsbury's bought a minority stake in another supermarket group, Giant Food, based in Washington, DC, although this shareholding was subsequently sold when Ahold of the Netherlands made a full bid for the company.An arrangement in late 1995 with Supermarket Direct made Sainsbury's the first major grocery retailer in the UK to offer a home delivery service.In May 1996, the company reported its first fall in profits for 22 years. David Sainsbury announced management changes, involving the appointment of two chief executives, one in charge of supermarkets within the United Kingdom and the other responsible for Homebase, and the United States . Finally, in 1998, David Sainsbury himself resigned from the company to pursue a career in politics. He was succeeded as non executive chairman by George Bull, who had been chairman of Diageo, and Adriano was promoted to be Group Chief Executive.

Brand relaunch

In June 1999, Sainsbury's unveiled its new corporate identity. This was developed by M&C Saatchi, and included

the current company logo,

new corporate colours of "living orange" and blue,

Interstate as the company's new general use lowercase font, replacing the old all uppercase font, and

the new slogan "Making life taste better", which replaced its old slogan from the 1960s,

and new staff uniforms.The strapline was dropped in May 2005, and replaced in September of that year by "Try something new today." This new brand statement was created by Abbott Mead Vickers BBDO. While the Interstate font was used almost exclusively for many years, the company introduced another informal font in 2005, which is used in a wide range of advertising and literature.In 1999, Sainsbury's acquired an 80.1% share of Egyptian Distribution Group SAE, a retailer in Egypt with one hundred shops and 2,000 employees. However, poor profitability led to the sale of this share in April 2001. On 8 October 1999, the CEO Dino Adriano lost control of the core supermarket business within the United Kingdom, instead assuming responsibility for the rest of the group. David Bremner became head of the supermarkets in the United Kingdom. This was "derided" by the city and described as a "fudge". On 14 January 2000 Sainsbury's reversed this decision by announcing the replacement of Adriano by Sir Peter Davis effective from March. Davis was CEO between 2000 and 2004, with his appointment well received by investors and analysts.In his first two years, he exceeded profit targets, although by 2004 the group had suffered a decline in performance relative to its competitors and was demoted to third in the groceries market within the United Kingdom. Davis also oversaw an almost £3 billion upgrade of shops, distribution and IT equipment, entitled 'Business Transformation Programme', but his successor would later reveal that much of this investment was wasted and he failed in his key goal – improving availability. Part of this investment saw the construction of four fully automated depots, which at £100 million each cost four times more than standard depots.In 2001, Sainsbury's moved into its current headquarters at Holborn, London. Sainsbury's previously occupied Stamford House and twelve other buildings around Southwark. The accounting department remained separate at Streatham. The building was designed by architectural firm Foster and Partners, and had been developed on the former Mirror Group site for Andersen Consulting ; Sainsbury's acquired the 25-year lease when Accenture pulled out.Sainsbury's was a founding member of the Nectar loyalty card scheme, which was launched in September 2002, in conjunction with Debenhams, Barclaycard and BP; Debenhams, Barclaycard and BP have all subsequently left the scheme, although until the chain's demise Nectar points continued to be awarded for online purchases at Debenhams made through the Nectar app. The Nectar scheme replaced the Sainsbury's Reward Card; accrued points were transferred over.In January 2003, Wm Morrison Supermarkets made an offer for the Safeway group, prompting a bidding war between the major supermarkets. The Trade and Industry Secretary, Patricia Hewitt, referred the various bids to the Competition Commission, which reported its findings on 26 September. The Commission found that all bids, with the exception of Morrison's, would "operate against the public interest". As part of the approval Morrison's was to dispose of 53 of the combined group's shops.In May 2004, Sainsbury's announced that it would acquire fourteen of these shops, thirteen Safeway shops and one Morrison's outlet, located primarily in the Midlands and the North of England.

'Making Sainsbury's Great Again'

At the end of March 2004, Davis was promoted to chairman and was replaced as CEO by Justin King. King joined Sainsbury's from Marks & Spencer where he was a director with responsibility for its food division and Kings Super Markets, Inc. subsidiary in the United States. Schooled in Solihull near Birmingham, and a graduate of the University of Bath, where he took a business administration degree, King was also previously a managing director at Asda with responsibility for hypermarkets.In June 2004, Davis was forced to quit in the face of an impending shareholder revolt, over his salary and bonuses. Investors were angered by a bonus share award of over £2 million, despite poor company performance. On 19 July 2004, Davis' replacement Philip Hampton, was appointed as chairman.King ordered a direct mail campaign to one million Sainsbury's customers as part of his six-month business review, asking them what they wanted from the company and where the company could improve. This reaffirmed the commentary of retail analysts: the group was not ensuring that shelves were fully stocked, due to the failure of the IT systems introduced by Peter Davis.On 19 October 2004, King unveiled the results of the business review and his plans to revive the company's fortunes, in a three-year recovery plan entitled 'Making Sainsbury's Great Again'.This was generally well received by both the stock market and the media. Immediate plans included laying off over 750 headquarters staff, and the recruitment of around 3,000 shop floor staff, to improve the quality of service and address the firm's main problem: stock availability. The aim would be to increase sales revenue by £2.5 billion by the financial year ending March 2008. Another significant announcement was the halving of the dividend to increase funds available for price cuts and quality.King hired Lawrence Christensen as supply chain director in 2004. Previously he was an expert in logistics at Safeway, but left following its takeover by Morrisons. Immediate supply chain improvements included the reactivation of two distribution centres. At the time of the business review on 19 October 2004, referring to the availability problems, Justin King said "Lawrence hadn't seen anything that he hadn't seen before. He just hadn't seen them all in the same place at the same time".In 2006, Christensen commented on the four automated depots introduced by Davis, saying "not a single day went by without one, if not all of them, breaking down... The systems were flawed. They have to stop for four hours every day for maintenance. But because they were constantly breaking down you would be playing catch up. It was a vicious circle." Christensen said a fundamental mistake was to build four such depots at once, rather than building one which could be thoroughly tested before progressing with the others.In 2007, Sainsbury's announced a further £12 million investment in its depots to keep pace with sales growth and the removal of the failed automated systems from its depots. In addition, it did a deal with IBM to upgrade its Electronic Point of Sale systems as a result of increased sales.Sainsbury's sold its subsidiary in America, Shaw's, to Albertsons in March 2004. Also in 2004 Sainsbury's expanded its share of the convenience shop market through acquisitions.After the launch of King's recovery programme, the company reported nineteen consecutive quarters of sales growth, most recently in October 2009. Early sales increases were credited to solving problems with the company's distribution system. Later sales improvements were put down to price cuts and the company's focus on fresh and healthy food.

Takeover bids

On 2 February 2007, after months of speculation about a private equity bid, CVC Capital Partners, Kohlberg Kravis Roberts and Blackstone Group announced that they were considering a bid for Sainsbury's. The consortium grew to include Goldman Sachs and Texas Pacific Group. On 6 March 2007, with a formal bid yet to be tabled, the Takeover Panel issued a bid deadline of 13 April.On 4 April, KKR left the consortium to focus on its bid for Alliance Boots. On 5 April, the consortium submitted an "indicative offer" of 562p a share to the company's board. After discussions between Sir Philip Hampton and the two largest Sainsbury family shareholders Lord Sainsbury of Turville and Lord Sainsbury of Preston Candover the offer was rejected. On 9 April, the indicative offer was raised to 582p a share, however this too was rejected. This meant the consortium could not satisfy its own preconditions for a bid, most importantly 75% shareholder support; the combined Sainsbury family holding at the time was 18%.Lord Sainsbury of Turville, who then held 7.75% of Sainsbury's, stated that he could see no reason why the Sainsbury's board would even consider opening its books for due diligence for anything less than 600p per share. Lord Sainsbury of Preston Candover, with just under 3%, was more extreme than his cousin, and refused to sell at any price. He believed any offer at that stage of Sainsbury's recovery was likely to undervalue the business, and with private equity seeking high returns on their investments, saw no reason to sell, given that the current management, led by Justin King, could deliver the extra profit generated for the benefit of existing investors. He claimed the bid 'brought nothing to the business', and that high levels of debt would significantly weaken the company and its competitive position in the long term, which would have an adverse effect on Sainsbury's stakeholders. On 11 April, the CVC-led consortium abandoned its offer, stating that "it became clear the consortium would be unable to make a proposal that would result in a successful offer."In May 2007, Sainsbury's identified five areas of growth: Growth of non-food ranges; opening of new convenience shops and growth of online home delivery and banking operations; Expansion of supermarket space through new shops and development of the company's "largely underdeveloped shop portfolio"; and "active property management".On 25 April 2007, Delta Two, a Qatari investment company, bought a 14% stake in Sainsbury's causing its share price to rise 7.17%, and then increased its holding to 17.6%. Their interest in Sainsbury's is thought to centre on its property portfolio. They increased their stake to 25% in June 2007. On 18 July 2007, BBC News reported that Delta Two had tabled a conditional bid proposal. Paul Taylor, the principal of Delta Two, flew David and John Sainsbury to Sardinia to reveal and discuss the potential bid which amounted to 600p per share.The family had reservations about the price of the bid. They were also concerned about the proposed structure, which involved splitting the business into an operating company and a highly leveraged property company. They were additionally concerned about adequacy of funding, both for the bid and for the company's pension scheme. On 5 November 2007, it was announced Delta Two had abandoned its takeover bid due to the "deterioration of credit markets" and concerns about funding the company's pension scheme.

Administrative changes

In January 2008, Sainsbury's brought the number of its supermarkets in Northern Ireland to eleven, with the purchase of two Curley's Supermarkets in Dungannon and Belfast.In November 2007, Sainsbury's centralised its HR department, relocating to the 17th and 18th floors of the Manchester Arndale Centre to form a Shared Service Centre, which was initially trialled to deal with Recruitment in Scotland and was later rolled out to the whole of the United Kingdom. July 2009 saw the HR Shared Service Centre in Manchester expand to include most HR Processes in its Colleague Administration Department and Occupational Health enquiries in a dedicated unit.Since April 2012, the centre has begun a gradual relocation to its new offices in the centre of Lincoln, along with a rebrand as Sainsbury's HR Services.

Developing business

In March 2009, Sainsbury's reached an agreement to buy 24 shops from The Co-operative Group, 22 of which were Somerfield shops, which the group were required to sell as a condition of their takeover of Somerfield. A further nine shops were purchased from The Co-operative Group in June 2009. These were concentrated in West Wales, the North of England and Scotland, where Sainsbury's market share is low.In May 2010, Sainsbury's confirmed a multimillion-pound deal with the London Organising Committee of the Olympic and Paralympic Games to be the main sponsor of the 2012 Paralympic Games. Under the deal, Sainsbury's sold Paralympic merchandise and became involved in high-profile events, such as the torch relay. It became one of only two sponsors able to take advantage of the limited branding allowed within the Games. The promotional rights did not extend to the Olympics. After the Paralympic Games, the company decided to sponsor the British Paralympic Association through to Rio 2016.On 30 November 2011, Sainsbury's reached the first milestone in its Vision for 2020, by opening its thousandth self-service shop in Irvine, Scotland. To celebrate this, Sainsbury's doubled its staff discount to 20% for the first four days of December. In January 2014, Sainsbury's completed the purchase of the 50% share in Sainsbury's Bank, owned by Lloyds Banking Group.In July 2014, the company began powering one of its shops by converting food waste into bio methane gas to generate electricity. The group became the first retailer to come off the National Grid by its own means. In July 2016, Arcus FM extended its facilities management contract with Sainsbury's, securing a ten-year renewal. Arcus won the initial contract in 2009, and saw the contract extended in 2011.

Multi-channel retailer and restructuring

After a four-month pursuit, in April 2016 Home Retail Group agreed to be taken over by Sainsbury's for £1.4bn. Sainsbury's completed the acquisition in September 2016. The deal included catalogue chain Argos and furnishing retailer Habitat. As a result, the new Sainsbury's group was organised into four divisions: the core Sainsbury's food retail business; General Merchandising & TU Clothing; Financial Services ; and various property investments.Throughout 2016 and 2017 Sainsbury's pursued expansion of its multi-channel strategy, increasing the number of groceries Click and Collect points and online fulfilment locations to serve its online delivery network including opening a dark store in Bromley by Bow to serve the London area, increasing geographical coverage of its same-day groceries delivery network and integrating concessions into its shops such as Argos, Habitat, Timpson's and Starbucks.In November 2016, Sainsbury's announced its intention to cut £500 million of costs from its business. In March 2017 400 jobs were cut and 4000 jobs were re-organized, mainly affecting employees in night shift and commercial operation roles.In August 2017, 1000 jobs were cut throughout all of its Head Office and support centres, affecting a variety of functions.In October 2017, changes to security contracts meant that provider Mitie reduced the number of security officers within shops. In the same month Sainsbury's announced plans to axe all shop-based Human Resource employees, including HR managers, payroll clerks, administration clerks and Learning and Development managers, overall affecting 1400 jobs. Additionally another 600 jobs at its Head Offices were cut.In January 2018, Sainsbury's announced proposals to overhaul shop management structures which would result in job losses 'in the thousands'.On 1 February 2018, Sainsbury's announced the purchase of Nectar from Aimia for £60 million; this gave full control of all Nectar data to Sainsbury's.In March 2018, Sainsbury's announced that it would be increasing the base rate of pay for its staff to retain the best workers. It said it would increase pay by 15% in the year, spending an extra £100 million on a plan that would also simplify the number of job roles.In April 2018, Sainsbury's entered talks with Walmart about a proposed merger with Asda, which, if approved, could have formed the largest UK supermarket company. Under the proposal, Walmart would have owned 42% of the group, with day-to-day operations being led by the chief executive of Sainsbury's at the time, Mike Coupe. The group also outlined plans to open branches of Argos within Asda shops. However, the Competition and Markets Authority said in February 2019 that it could block the merger. On 25 April 2019, the Competition and Markets Authority blocked the merger and it was abandoned by Sainsbury's.In November 2020, Sainsbury's stated that up to 3,500 jobs were at risk due to the closure of supermarket counters and the closure of further Argos standalone stores. In March 2021, the group announced further restructuring with the loss of 1150 head office and warehousing roles. Office sites Victoria and Saffron House in London, as well as Walsgrave in Coventry, were closed; office space was reduced at other sites at Milton Keynes, Coventry, London and Manchester. The restructure also included the closure of the company's only online fulfilment centre in Bromley-by-Bow, London; with online orders instead being fulfilled by nearby stores with online fulfilment capabilities The group reported a £261 million loss in April 2021, citing £485 million of investment in 'additional safety measures' in response to the Coronavirus pandemic, additional staffing costs and additional staff bonuses. The group's financial results included the one-off costs of announced restructuring as well as writedowns of its estate valuations and banking assets. The group's new CEO Simon Roberts has started to focus the grocery business on a 'food first strategy'; the company's slogan changed in May 2021 and an advertising campaign followed promoting healthier eating choices and sustainable food, designed to complement the company's partnership of the 2021 UN Climate Change Conference being held in the UK.