Four ways Sainsbury’s is holding firm as it braces for price war

Sainsbury’s has forecast flat retail profits of £1bn for its forthcoming year, down slightly from the £1.036bn it pulled in during the year to 1 March, as chief executive Simon Roberts vowed to defend the supermarket’s “strong competitive position” amid a possible price war in the sector.

“We’re in the strongest place we’ve ever been, and we intend to stay there,” says the boss of the UK’s second-largest grocery chain.

“We’ve spent the last four years resetting our pricing and we’ve learned a huge amount as we’ve done that. The one billion guidance gives us all the capacity we need to make sure that, above all else, we can sustain the strength of our competitive position,” he adds.

Roberts’ comments come after Tesco wiped £400m off its profit expectations last week to give it more wriggle room to cut prices after Asda signalled the start of a potential price war in March.

“This market remains highly competitive, but as we look ahead, we really believe that our winning combination of great value, quality products and the brilliant customer service that our colleagues deliver day in day out […] will keep delivering for us,” notes Roberts.

But what exactly has the Sainsbury’s chief executive feeling so confident that the chain can hold its own in the endlessly competitive UK grocery sector?

Better prices

The grocery giant’s £1bn investment over the last four years on delivering a stronger price proposition has Roberts feeling positive entering its new financial year.

When asked about the burgeoning price war across UK grocery retail, Roberts says: “We’ve not done anything different in recent weeks in response to the noise that’s out there. We’re just seeing our position being really strong against all our competitors,” he says.

Indeed, Sainsbury’s is choosing to hold firm on its pricing for the time being – a sharp contrast to its biggest rival Tesco, which unveiled another set of price cuts at the start of the month in response to Asda adding another 1,500 products to its Rollback proposition weeks earlier.

Roberts explains the business has been focused on “delivering for our customers every day” through “the continued strength” of Nectar prices and its Aldi price match scheme, which launched in Sainsbury’s Local stores last November. In February, Sainsbury’s followed Tesco in rolling back the number of lines included in its Aldi price match range.

The chief executive notes that Nectar Prices has been a “really powerful engine for our growth, playing a key role in winning many customers, particularly those big trolley shops”.

The exclusive pricing for Sainsbury’s loyalty members is now available on over 9,000 products, with users also able to get additional discount through Your Nectar Prices.

Bigger store footprint

Despite increasing market pressures, Sainsbury’s is ploughing ahead with its store opening plans in the forthcoming year in what Roberts described as its “biggest opening in a decade”.

The grocery giant plans to open 15 new supermarkets across the country, many of which will be housed in the former Homebase units it acquired last year.

This will be joined by 20 new Sainsbury’s Local stores – which the grocer says will bring over 700,000 more people within a ten-minute drive of one of its stores.

“We’re really excited about the fact that we’re making our biggest growth in new stores in more than a decade. It just underlines the confidence we have in the strength of the Sainsbury’s food offer, both our value, our availability, our innovation and our quality,” says Roberts.

The supermarket’s brick-and-mortar plans are paired with the expansion of its rapid delivery channel.

Sainsbury’s reported sales via its on-demand channel were up 80% in the year and the service provided by the likes of Deliveroo and UberEats is available in over 1,200 locations.

“It’s an important part of making sure however the customers want to shop with us, they can access the range and in the convenience they want,” Roberts explains.

First choice for food

Improving Sainsbury’s food offer and availability is at the heart of Roberts’ ‘Next Level’ strategy and the retailer’s investments over the past 12 months have been coming to fruition.

The business has spent the year rebalancing the space in its supermarkets to provide shoppers with a larger range of food products.

The retailer added an additional 90,000sq ft of food space last year and plans to match this in the forthcoming year.

Part of the space will materialise from the closure of its patisserie, hot food and pizza counters this summer, as well as the remaining Sainsbury’s Cafés.

This has helped contribute to a 4.5% lift in grocery sales to £24.7bn during the year as well as a 15% increase in the grocer’s premium Taste the Difference line and a “particularly strong performance” in its Fresh categories.

Sainsbury’s launched more than 1,300 new products, 600 of which were Taste the Difference products.

“As we come into this 25th birthday year, we’re going to be really getting behind Taste the Difference with a terrific range of new dishes for Summer and we plan to achieve two billion pounds of sales in TTD this year,” notes Roberts.

Sainsbury’s Local stores have also seen expanded ranges and Aldi price matching introduced, which Roberts says customers have “really responded to”.

Strengthening Argos

Sainsbury’s is also seeing some green shoots with its new strategy for Argos, with the retailer returning to sales growth in the final quarter of the year.

“We’re very focused in Argos at the moment in making sure customers find more and more reasons to shop with us,” Roberts explains.

During the year, the retailer added thousands of new products to extend its assortment and strengthened relationships with suppliers to help drive online sales.

Roberts says he’s “encouraged” by the 1.9% lift in final quarter sales, which helped to soften the 2.7% decline in full-year sales of £4.91bn.

Speaking on whether the fallout of Trump’s tariffs could lead to higher prices, the chief executive says he’s “watching developments closely” as the supermarket looks to absorb any price rises.

“Over the past five years, every single year we’ve had substantial supply chain issues to navigate and clearly this year’s going to be no different,” says Roberts, adding the team will be working closely with suppliers to limit disruption.

Pressure for retailers is coming from all angles this year – and as competition in the rest of the grocery sector heats up, Sainsbury’s is holding firm that its ‘Next Level’ strategy will continue to deliver both efficiencies across the business and provide it with a compelling value offer.

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