Sainsbury's boss has a message of hope for shoppers feeling the pinch at Christmas: We'll spend £550m to cut prices and take on Aldi

  • Simon Roberts was named CEO of Sainsbury's in January 2020 
  • Supermarkets are facing cost pressures and risk losing trade to discounters
  • Sainsbury's is investing £550m in efforts to keep its prices down  

By Ruth Sunderland, Financial Mail On Sunday

Updated:

Rivals: Simon Roberts¿ focus is on competing with discounters like Aldi

Rivals: Simon Roberts' focus is on competing with discounters like Aldi

'I'm not sure what a normal year is any more,' says Sainsbury's chief executive Simon Roberts, as he surveys the superstore in Richmond, South West London, decked out in full festive fig.

It is not surprising that whatever passes for normality is a distant memory. Roberts was asked to take the top job at Britain's second-largest supermarket in January 2020, just as the first ominous signs of the Covid virus were emerging. 

Although that threat has receded, the cost-of-living crisis means this Christmas will be another difficult one. Bird flu has pushed up the price of fresh turkeys. Food and soft drink inflation was running at 16.4 per cent last month, even higher than the general rate at 10.7 per cent. 

'It is really tough. Customers are watching every penny, every pound,' he says. 

They are reacting to the cost-of-living crisis by trading down to own-brand, he says, pointing out shelves with Sainsbury's wheat biscuits at £2.70 for 48, next to Weetabix costing £5.50. People are doing more cooking and eating at home instead of eating out, and shopping more frequently so as not to waste food. 

An avuncular figure, Roberts says he is pulling out all the stops to try to keep his wares affordable. 

'We are going to invest £550million over two years in being more competitive,' he says, which is retail-speak for trying to keep his prices down. Of that, £15million is for Christmas. 

Profits, he freely admits, will be lower next year as a consequence, so while it may be helpful to customers, it takes a toll on the bottom line. 

How long can he afford to pursue that stance? 'We are looking to improve profits over time,' he says, adding that although below last year's figure, they will be ahead of their pre-pandemic level. 

Sainsbury's traditionally has been associated with quality rather than being the cheapest. But Roberts seems obsessed about competing with the German discounter Aldi, which has overtaken Morrisons to enter the Big Four supermarkets along with Sainsbury's, Tesco and Asda. 

'On a lot of products that people buy every week, we are price matching to Aldi,' he says. 'So they are getting Sainsbury's quality and an Aldi price.'

His Christmas roast dinners, which will appear in Sainsbury's stores tomorrow, are a case in point. They are priced at just under £4 a head to serve six a meal including turkey, carrots, sprouts, parsnips, potatoes, stuffing, pigs in blankets, cranberry sauce and Yorkshire puddings, with sherry trifle for afters. 

Aldi's 'Amazing Value' offering is 7p a person cheaper but doesn't include a trifle. 

The German giant has made huge inroads into the UK market, along with Lidl. Could Aldi overtake Sainsbury's too? Roberts doesn't directly answer. 'I have worked in retail for more than 30 years, and there is zero room for complacency,' he says. 

He argues that while Aldi has a limited range, Sainsbury's offers customers the convenience of being able to buy all their shopping under one roof. 'In this store we have over 30,000 food products,' he says. 'Do you want to go to lots of places for what you need or one place? Time is precious, not just money. 

'We are seeing more customers coming back to us from the discounters,' he adds. 

The Sainsbury's boss started his working life on the shop floor at M&S after A-levels, and worked his way up. 'It was busy work then, but much so more now. The job has got tougher.' 

When asked whether he has a role model among Britain's legendary grocers, the likes of Tesco founder Jack Cohen or Sir Ken Morrison, he says he is inspired by his 171,000 colleagues. 

That might sound cheesy, but as he points out, 'There will be people in this store who arrived around 3am to deal with online orders. They have my utmost respect because they do the real work.' 

The oldest member of staff is 92, he says. Eight have more than 50 years' service and many more have put in several decades. Roberts, a relative new boy having arrived in 2017, took over as chief executive in the aftermath of a failed attempt by his predecessor, Mike Coupe, to merge with Asda. That left him to set a strategy for the supermarket as an independent in a cut-throat market. Sainsbury's occupies uneasy middle ground between the discounters on one side and on the other, the upmarket operators such as Waitrose and M&S, which has a joint venture with Ocado. 

Asda and Morrisons have both been taken over in private equity-backed deals and Sainsbury's has also been tipped as a target. 

The company last year hired leading investment advisers Robey Warshaw to defend against a possible bid, though the appetite for deals at the moment is scant. 

Its two biggest investors are the Qatar Investment Authority and Czech tycoon Daniel Kretinsky, both of whom will want to see an improvement on the share price, which has fallen 20 per cent this year. Roberts' strategy is to focus on food, deliver good value and strip out unnecessary costs. 'We will deliver cost savings of more than £1.3billion over three years and we are reinvesting a lot of that in value for money,' he says. 

As if on cue, a robotic floor cleaner glides down the aisle behind us. 'The robots clean the store in a more efficient way and it costs us less. We'd sooner have a robot cleaner and have staff helping people,' he says. 

He is spending more than £150million a year on improving pay for employees, who, like customers, are also facing higher bills. 

He argues that Sainsbury's inflation index – the average price increase in the year to mid-September of the 100 most popular products – is lower than rivals. 

At Morrisons, now owned by US private equity barons Clayton, Dubilier & Rice following a debt-laden £7billion deal, prices have surged upwards since the summer. 

Does he think heavily-indebted private equity ownership makes it harder for a supermarket to keep a lid on prices, particularly when interest rates are rising? 

Again, he answers indirectly. 'We have brought down the level of borrowing. That is really important – we can't give our customers the best value for money if we are paying a lot of interest costs.' 

Sainsbury's has a portfolio of brands, including Argos, clothing label Tu, Habitat, the famous 70s homeware name, and the Nectar loyalty line. Are they essential to his strategy, or might any be sold? 'Each needs to deliver in their own right. The food business is not there to support the brands,' he says. 

'People come to Sainsbury's for food, but when they are here, there are other things they need to buy, which is why we see the brands as integral.' 

Long-running agendas, including climate change and the battle against unhealthy eating, have not been forgotten. 'We are about to make some big changes to refrigerators to use less carbon,' he says. 

'We are reducing the amount of plastic used on our food and sourcing as sustainably as we can. A third of greenhouse gas emissions globally are caused by the food system. One of our purposes is to help everyone eat better. There are massive societal issues: childhood obesity, eating more healthily, giving families access to great value healthier food.' 

He wants to join forces with other retailers to try to solve problems with food supply, including a shortage of labour, financial pressures on farmers, rising costs of feed, energy and fertiliser.

'I believe in collaboration across the food system. We won't solve issues of sustainability and food supply on our own. 

'I think every day of what Sainsbury's is about. It started in Drury Lane in 1869 because people couldn't trust the quality and safety of their food. There are parallels with the present day, when customers want good value, quality food, availability and service.

'I have been in retail for 30 years and it is unimaginable how much has changed – but those things have not changed at all.'

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