Strong financial position
Sainsbury’s balance sheet is well supported by significant property assets and long-dated debt. Retaining ownership of appropriate property assets is an important part of the Company’s strategy and the estimated market value of these assets at the year-end was circa £7.5 billion, including the share of joint venture properties. In March 2006, Sainsbury’s refinanced its debt book with low-cost long-term property-backed finance. The Company does not require any significant refinancing until 2018 and in addition to this funding has undrawn committed facilities which allows flexibility for working capital management and investment flows.
Great food at fair prices
Great food at fair prices is integral to our approach to innovating and leading on ingredient standards and product quality while also offering competitive prices. This month Sainsbury’s celebrates its 140th anniversary. The ‘Quality perfect, prices lower’ strapline was on the front of the first store and has remained a guiding principle throughout Sainsbury’s history. The first store stocked just butter, eggs and milk but provided these at a time when affordable quality food was scarce.
The Company pioneered the introduction of own-label lines in 1882 and our extensive heritage provides customers today with a unique proposition in Sainsbury’s own-brand products. Over the years we have led the way on ingredient standards and product innovation and the quality of Sainsbury’s own-brand products is widely recognised. Red Label tea is the oldest own-brand product still sold today and became Fairtrade in 2007. Customers have increasingly looked to own-brand products during the year to help them save money and they have unrivalled trust in Sainsbury’s own-brand products.
Within our own-brand product ranges three tiers defined as ‘good, better, best’ are offered via the ‘basics’, standard Sainsbury’s and ‘Taste the difference’ sub-brands. All tiers must adhere to Sainsbury’s stringent policies concerning ingredients and sourcing so customers can be confident of the Company’s attention to quality while ensuring products are tasty and as healthy as they can be. Sainsbury’s front of pack multiple traffic light nutritional labelling is also applied to all relevant products, including ‘basics’, to help customers make easy, healthy and affordable choices at a glance. Sainsbury’s has been advocating and supporting the use of colour and guideline daily amounts for four years as recommended by the Food Standard Agency, after extensive research, in April 2009.
Our attention to quality within own-brand product ranges is supported by competitive pricing. Prices are constantly benchmarked against key competitors. Over £450 million was invested during our MSGA programme and investment is ongoing. Promotions also play an important role in helping to reduce customer’s overall spend on everyday items. In April 2008 we refocused our promotional programme with simple, more family-oriented deals. New point-of-sale materials changed the look and feel of stores highlighting key offers to customers and a number of market-leading promotions were run over the year.
Advertising campaigns communicating value and quality have helped customers save money without compromising quality. ‘Feed your Family for a Fiver’, one of our most successful campaigns, uses a mix of ‘Taste the difference’, standard and ‘basics’ products in meal ideas. It helps customers manage tighter budgets as they make their own choices to substitute individual ingredients to get significantly below the £5 threshold or add more premium products if they wish.
In September 2008, we relaunched our standard own-brand range, which accounts for
over
40 per cent of sales, with our ‘Switch and Save’ campaign. This
offered savings of at least
20 per cent when selecting Sainsbury’s equivalent
product over the leading brand and followed a comprehensive appraisal and development
programme for the top 200 products. In January the campaign focused on ‘basics’.
Growth during the four-week campaign was up nearly 80 per cent year-on-year. All
these activities have significantly improved customers’ price perception of
Sainsbury’s.
‘Taste the difference’ remains an important part of the product offer. In the current economic environment the range allows ‘savvy shoppers’ to make conscious decisions about the quality they want for different ingredients and meal occasions. In particular ‘Taste the difference’ ready meals are fulfilling a trend towards customers treating themselves at home rather than eating out or buying more expensive takeaways to eat at home.
Sainsbury’s is committed to sourcing British products and we converted a number of own-brand ranges such as sandwiches and chilled ready meals to 100 per cent British during the year, with the exception of products used for authenticity reasons. We have also continued to innovate. ‘Milk in a Bag’ reduced packaging by 75 per cent compared to the two-pint plastic bottle and is now available in 126 stores. We also secured the first shipment into the UK of responsibly sourced palm oil (“RSPO”) and have converted our entire frozen fish range to RSPO certified.
We strive to further animal husbandry standards and introduced a range of higher welfare meat, fish and poultry products during the year. In June 2008 we launched responsibly-sourced fresh and smoked salmon, and in September 2008 a new range of Freedom Food endorsed outdoor-bred pork was introduced and Freedom Food approval was granted for farms supplying ‘Taste the difference’ outdoor reared pork. In August 2008 we launched indoor-reared Freedom Food accredited chicken and in January 2009 ‘Taste the difference’ Woodland Chicken. All birds are reared in a natural woodland environment and the range is independently audited to RSPCA-approved standards. Sales of RSPCA Freedom Food chicken are up 130 per cent year-on-year.
In February 2009 we became the first major retailer to stop selling eggs laid by battery hens. Two pence from every Woodland chicken and box of Woodland eggs sold is paid to Woodland producers to help promote sustainable free-range farming. Over £300,000 has already been donated to the Woodland Trust via this initiative. Sainsbury’s was awarded the 2008 Compassion in World Farming Good Egg Award, the second year in a row, for our work in this area.