Depósitos Tipo Skarn

Chapter 10

J. Sainsbury PLC

10.0 Introduction

Sainsbury was founded in 1869, when John and Mary Sainsbury opened their first outlet in London. The history of the company and its strategies are intimately linked to the Sainsbury family’s philosophy about business. The company was wholly owned by members of the family until 1973 when it was floated on the London Stock Market. Today, members of the Sainsbury family still own 43% of the issued shares and David Sainsbury, a fourth generation descendent of the company’s founders, is the group’s chairman and chief executive. Sainsbury is, with Tesco, a market leader in the UK GRI.

Since the beginning, quality produce and customer service characterised Sainsbury shops. In 1882, a branch in Croydon was opened using advanced design and materials. The walls, floor and counter fronts were tiled, the countertops were marble slabs and customers were seated on bentwood chairs. The stores, nice outfitting, services and quality food attracted prosperous customers. To obtain quality food, Sainsbury established close relationships with suppliers, and controlled and distributed stock from a central depot. The company performed successfully but expansion was slow. By 1940, the company operated 249 shops, mainly in the London area. During the Second World War, several branches were bombed and by the end of the war, sales were half that at the pre-war level. Alan and Robert Sainsbury, grandsons of the founder, started a recovery programme by opening other stores. In 1950, the first self-service shop was opened. During the 1950s and 1960s, the company expanded its operations. The number

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of outlets went down from 244 in 1950 to 225 in 1970, but smaller counter service outlets were replaced by larger self-service supermarkets. At the same time, to support the expansion programme, facilities of central depots were expanded and the distribution system was computerised. By 1970, about half of the 225 Sainsbury’s stores were supermarkets. The slow conversion was mainly due to the high capital investment required. In 1969, John Sainsbury became chairman and chief executive. At the time, Sainsbury was a large regional operator, with only 20% of the population living within an accessible distance from a Sainsbury outlet. However, higher sales per outlet compared to the industry average made Sainsbury one of the largest operators in the industry by sales behind Allied Suppliers and Tesco. In 1973, Sainsbury was floated on the Stock Market. In 1974, during a difficult period for the UK economy, the government put a cap on the company’s gross margin. In the following years, the company started a diversification programme. “This decision was taken at a time when a combination of economic instability and the government’s discriminatory attitude to food retailing threatened to curb the growth of the core business” (Williams 1994: 212). In 1975, Sainsbury and British Home Stores (BHS) formed a 50/50 joint venture, launching Savacentre, a hypermarket chain. Sainsbury retained control of all food- related operations, leaving non-food lines to BHS. The first Savacentre outlet was opened at the end of 1977. In the early years, the venture was very much in an experimental phase. By March 1980, two Savacentres were operating. In 1979, Sainsbury also started a joint venture with GB-Inno-BM (GIB), a Belgian retailer, known for its leadership in merchandising products and ‘Do It Yourself’ (DIY). Sainsbury owned 75% of the new company and GIB the remaining 25%. The objective of the joint venture was to operate a home and garden (DIY) chain in the UK.

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Throughout the 1970s, in the traditional grocery retailing business, the company continued its programme of replacing old smaller stores with larger new ones, while slowly expanding the geographic scope of operations by opening new outlets in other regions. The main obstacles to Sainsbury’s development programme were the difficulties in obtaining planning permission for new town centre stores. In December 1974, partly as a response to planning permission problems, Sainsbury opened its first edge-of-town store. In 1979, John Sainsbury announced that the company had plans to open 15 new supermarkets a year in the following years. By 1980, Sainsbury operated 231 outlets with an average size of 11,975 square feet, compared to 225 with an average size of 4,670 square feet back in 1970. In 1980, Sainsbury also operated outlets in South Wales, Yorkshire and South West.

In the 1970s, Sainsbury also entered the rapidly growing frozen food market. Sainsbury’s chain o f freezer centres operated independently of the main supermarket business. Old counter service branches that were too small for conversion to supermarket trading were used for this purpose. The first freezer centre was opened in 1974. However, one year later, the company decided that when possible it would integrate freezer centres into supermarkets. There were 21 freezer centres in 1980.

Within the GRI, the second part of the 1970s was characterised by strong competition. In June 1977, Tesco dropped trading stamps, first introduced in 1963, and launched one of the most successful retail price promotions under the name ‘Operation Checkout’. Prices of products were cut by three to four percent on average. This was the beginning of a period where competition among grocery firms was mainly based on low prices. All the other main chains reduced prices to maintain customer loyalty. In January 1978,

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Sainsbury launched a price initiative called “Discount ‘78”. Items were reduced in price by as much as 15%. The discount scheme proved very successful and by December 1978, the increase in sales had been in the order of 25%. Many independent stores and small chains, unable to compete on prices, were being either driven out of the market or taken over by larger firms. Over this period, Tesco surpassed Sainsbury to become the largest operator in grocery retailing by sales.

Table 10.1 J. Sainsbury PLC: Financial and Operational Statistics 1980/81 Group Sales (£; 000; after taxes) 1,531,196

Pre-tax Profit (£; 000) ________ 62 025

Number of Outlets 237"

Total Sales Area (sq. ft.) 2,978,000

Average Sales Area per Outlet (sq. ft.) 12,570

Market Position Hiçh

Market Share (1980) 12.5%

Own Label Share of Sales (1981) 54.0%

Information Technology Developed

Centralisée! Distribution Developed

Source Various Documents