The UK grocery sector is embroiled in something of an existential crisis at the moment as its big names embark on huge deals to keep growth on track.
Shoppers can expect to wheel out a trolley filled with bread, milk, pet insurance, a Harris Tweed suit and a 50 inch television set.
Sainsbury has this month gone as far as launching a range of “own-label” vinyl compilation records. Such a move may play well on social media and help grow its already impressive sales of records – but it just isn’t the bread and butter of what Sainsbury does.
But it does raise the fundamental question of what a supermarket is in 2017.
Mike Coupe is now tasked with finding the sweet spot as weak wage growth and high inflation collides with price increases on imported foods and the meteoric rise of Aldi and Lidl.
These enormous industry-wide challenges perhaps seemed to be under control when Sainsbury reported first quarter growth of 2.3 per cent on a like-for-like basis. But with that falling back to 0.6 per cent in the second quarter, to give interim growth of1.6 per cent, Sainsbury has been left exposed.
Morrisons reported three per cent growth in its interims. Tesco, 2.2 per cent.
All three are currently focussed on reducing prices, while bearing the load of increased costs. All are doing so through diversification and consolidation. Morrisons is now supplying convenience operator McColl’s – a deal which will return the Safeway brand to the high street. It also has a supply deal with Amazon.
Tesco’s pursuit of Booker shows its interests also lie in the growing convenience market. For Sainsbury, after a deal for Nisa fell through, its faith is in Argos, a move which thus is far is playing off, but a major test awaits.
As Christmas preparation gets underway, Sainsbury will be looking to win back grocery share, but also find out a bit more about who it really is in 2017.
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