In this section
Our Sustainability Plan
Annual Report 2016
We are focused on maximising the strength of our food and non-food businesses. As well as being the grocer of choice, we also aim to be the clothing, general merchandise and financial services brand of choice and to expand our existing offer in these areas.
Providing great food is Sainsbury’s core purpose. Customers continue to rate us above our main supermarket peers on product quality and this is key to winning customer loyalty. We are making good progress in our programme to improve the quality of 3,000 own-brand products, investing in the products that matter most to our customers. For example, we improved the quality of our Taste the Difference burgers, our by Sainsbury’s cheesecake and, our by Sainsbury’s all-in-one dishwasher tablets recently won Which? Best Buy 2015. The rate at which we launch these new products will increase at pace over the next 12 months.
Own-brand products account for 49 per cent of our food sales, a small decline year-on-year. However, Taste the Difference outperformed the premium market and delivered growth of nearly five per cent and annualised sales of £1.1 billion. Despite the decline in own-brand sales, over 95 per cent of our customers choose by Sainsbury’s products.
Our focus on quality, provenance and sustainability differentiates us from our competitors. Our British sourcing credentials are an important part of our customer proposition. We sell over 1,900 own-brand products sourced from the UK and we are always looking to increase the number of British lines we sell. This year we developed our game range, including new venison lines, and we promoted lesser-known species of fish such as sustainably-caught coley and responsibly-sourced river cobbler, giving our customers greater variety and choice. For a number of years all our fresh, breaded and cooked chicken has come from the UK, as does fresh pork and fresh lamb in the main season. Our fresh and frozen beef is British or Irish. We continue to work with our long-standing Development Groups of farmers and growers to share best practice and develop more efficient and sustainable ways of working. This year, our Love your Freezer campaign inspired customers with practical advice on minimising waste and saving money, to make their lives easier.
We were named Drinks and Seafood Retailer of the Year at the Retail Industry Awards, Fish Retailer of the Year by the Marine Stewardship Council and in-store Bakery Retailer of the Year at the Bakery Industry Awards.
For our customers, quality and price are both important in the value proposition. Our new pricing strategy of regular lower prices reassures customers that they can always get a good price at Sainsbury’s. Customers have responded positively to clearer, simpler pricing as we continue to adopt lower base prices for products not on promotion.
We are investing in lowering the prices of the everyday products that matter to our customers. This will be paid for through value chain efficiencies in future years. We have lowered the prices of over 1,100 products, including responsibly-sourced Scottish salmon, British bacon and lamb.
We have never been more competitive on price than we are today. We will continue to invest in lowering prices and improving quality to ensure that we are well-positioned to meet the challenges of an increasingly competitive marketplace.
Our clothing, general merchandise and financial services businesses are profitable, well established and continue to show excellent growth and strong potential. We see a firm correlation between increased loyalty and spend across our whole offer when customers buy into these categories.
Non food– Clothing and general merchandise grew sales by over nine per cent last year. Our strategy for growth focuses on increasing our non-food presence in stores, changing the visual merchandising more frequently and emphasising our quality and design-led approach in clothing, cookware, homeware and seasonal products - categories that customers tell us matter most to them. The ranges are currently stocked in nearly 430 of our supermarkets.
We have seen Tu clothing sales grow to over £800 million this year and we are currently the UK’s seventh largest clothing retailer by volume and tenth largest by value. We bring our customers new Tu collections every six weeks and our focus on being a destination for ‘high street style at supermarket prices’ and our successful partnership with Gok Wan have helped us increase market share and drive double-digit sales growth. We marked Tu’s tenth birthday in September with our largest-ever fashion collection, and we launched our 16th collection with Gok in February.
Customers are shopping our childrenswear ranges more frequently than ever before and we remain the sixth largest childrenswear retailer by volume and eighth by value.
Our trial of selling clothing online has been extended to a number of regions across the UK, including London and the South East, and we continue to evaluate the results. We anticipate a full roll-out of our clothing online offer this year.
Our general merchandise business grew by over seven per cent last year from a relatively low market share base. We increasingly source directly from the Far East and gross margins have improved as our scale has grown. Events such as Halloween and Valentine’s Day continue to be successful, with our customers buying into a full selection of seasonal products.
Financial services - We took 100 per cent ownership of Sainsbury’s Bank in January 2014 and are part way through our transition to become a standalone bank. We see significant growth opportunities for Sainsbury’s Bank, in particular capitalising on the brand loyalty effect we see from our customers. Last year we saw a 13 per cent increase in the number of Sainsbury's Bank credit cards being used within our stores. Whilst reduced advertising activity has resulted in overall customer awareness of the Bank declining slightly during the year, the number of active accounts held by customers has now reached 1.7 million, an increase of six per cent.
In a challenging marketplace, we have continued to see sales and profit growth, with operating profit up 17 per cent to £62 million and total income up over 13 per cent to £260 million. In 2014, we grew credit card sales volumes by 50 per cent year-on-year. Our loans business had another very successful year with a 13 per cent year-on-year increase in sales volumes as we continue to provide competitive, best buy table loan rates. Sainsbury’s Bank Travel Money saw like-for-like growth in turnover of 24 per cent. In March, we welcomed 574 Travelex colleagues over to Sainsbury’s Bank, a key milestone in our transition strategy to become a standalone bank and opened our 168th Travel Money Bureau.
Despite insurance sales volumes and income declining year-on-year due to increased competition in the car and home markets, new business volumes in pet insurance grew by 64 per cent year-on-year. The Bank’s ATM estate grew nearly seven per cent to 1,575 free-to-use ATMs, seeing over 236 million transactions in 2014/15. Sainsbury’s Bank’s website visitors have also grown by over 12 per cent year-on-year to over two million visits each month.
Whilst we have made good progress in certain areas of the transition programme in terms of building our new banking platform and planning customer migration, a complex project of this size always brings challenge and we have faced into a number of issues that are likely to impact the end costs. Although our transition plans remain on time and in line with budget to date, we see total costs (capital and revenue) for the project going forward rising by between £80 million and £120 million, taking our overall spend to between £340 million and £380 million. The smooth migration of savings customers in winter 2015 remains our primary near term objective.
New services - We continue to develop other services through Mobile by Sainsbury’s, Sainsbury’s Energy and Sainsbury’s Entertainment. These investments take time and carry added risk and they remain a small loss making part of our overall business.
Our Sustainability Plan shows our journey addressing the challenges and opportunities not only relevant to our business but also to the world.
Our values guide us in everything we do - from key decisions to day-today activities.
© J Sainsbury plc 2016