Sainsbury's - Marked Aggression
16 December 2019
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We are back this week with numerous bitesize emails to keep you posted on the sector and the activity within, it feels like the best way to approach the busiest time of the year and there is a time for longer, thought leadership style pieces and that's January 2020.
With the election now done and certainty (to an extent) promised by Boris Johnson of all people, there is a hope that the customers will now release the shackles and start spending. There are still numerous sales around the non-food / clothing world, some of which are still running from Black Friday which is almost beyond belief.
Are prices too high in the first instance? Driving Black Friday style sales from 3rd week in November until Christmas, with further discounts in January?
Food has had their margins pressed hard since the discounters took a firm grip in 2009 onwards and there was a large scale reset of margin, property writedowns and a row back on expansion of new space and the like.
This is known news of course, as retailers grappled with the loss of sales, they reacted by offering more deals, despite the fact that discounters were pushing hard on EDLP (everyday low price) and having great success with this strategy.
Indeed, Christmas 2011 was characterised by every single retailer in the sector offering £5 off £40 for no discernible reason, other than everyone else doing so. Voucher central. No loyalty. Crazy.
We haven't seen a return to those days at all, certainly not from the big four and bar the odd discounter push via a daily newspaper for a voucher, it's not happened again.
Fast forward to recent times - the currency in 2019 (and back end of 2018) appears to be both Wines (25% off 6 bottles) and 10p off a litre of fuel on a £60 spend.
Indeed, Sainsbury's, who shy away from multibuys but made a point of avoiding this strategy on the Buy 6 / 25% off Wines deal that they pushed hard last year.
On fuel, the noteworthy element is that post the Asda merger abandonment, Sainsbury's adopted a tactic to grow sales that centred on 10p off a litre of fuel, they had the deal on for around 6-7 weeks out of a possible 12/13 in the quarter.
Real aggression in the sector and we saw some form of retaliation from the market but Sainsbury's were pushing hard, regardless and continued to push fuel alongside numerous other deals, including the 25% off 6 bottles of Wine.
We haven't seen this level of aggression in the market at Christmas before, Sainsbury's had both fuel and wines running last week (ends tomorrow I believe) with Morrisons running 10p off a litre of fuel for around 2 weeks since the start of December.
Of course, these deals are nothing new, but the frequency in which they are running is something else. Sainsbury's had a chart at their half-year that showcased that the number of days that fuel was running on deal, still tracked behind both Tesco and Morrisons.
Perhaps fair, but in terms of new activity, Sainsbury's were miles out in front, having run the promotion so often it was nearly all new activity. Indeed, both Morrisons and Tesco have run some form of fuel deal around Black Friday (Halloween / Half term for Tesco) for the past 2/3 years.
But new activity is notable and it will boost Sainsbury's, but are sales behind the curve given this new activity in December? Or are they making up for lost time, after a missed Christmas in 2018?
It's very aggressive and fair play to them for having a go, but it definitely makes those annualised sales figures hard to beat next year.
The absence of £5 off £40 coupons doesn't mean they are gone forever. That 'hidden currency' of direct mail coupons via Clubcard, Nectar and the rest means that sales can be boosted in this way too, especially at Christmas.
However, Asda doesn't have a loyalty card, so no coupons and reacted to the latest fuel salvo from Morrisons and Sainsbury's by dropping the price of fuel by 3ppl. Noble EDLP work!
That said, Asda does run the Buy 6 / Save Wines deal but have sidestepped the rest of the activity and you have to tip your hat to them for that.
Their premium work is very strong whilst being affordable and they look in good form in the run-up to Christmas.
From the Grocery Insight newsletter archive, first sent to subscribers on 16 December 2019. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.