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J Sainsbury plc

 


Address:
Stamford House
Stamford Street
London SE1 9LL
United Kingdom

Telephone: (44) 1 71 921-6000
Fax: (44) 1 71 921-6132


Statistics:
Public Company
Incorporated: 1922 as J. Sainsbury Ltd.
Employees: 141,000
Sales: £10.6 billion ($18 billion)
Stock Exchanges: London
SICs: 5411 Grocery Stores; 5210 Lumber and Other Building Materials; 5261 Retail Nurseries and Garden Stores; 6552 Subdividers and Developers, Not Elsewhere Classified; 2030 Preserved Fruits and Vegetables


Company History:

Supermarkets, hypermarkets, and other grocery outlets clustered tightly in the south of England form the nucleus of Britain's largest food and wine retailer: J Sainsbury plc, or Sainsbury's, as it is widely known. The company's expansion over a period of 125 years has been cautious but inexorable, accelerating in the latter decades of the century, and reaching overseas in the late 1980s. Unlike many of its competitors--which diversified into other business areas to counter the slow growth expected in the retail food industry--Sainsbury's continued to build the retailing businesses in which it excelled.

By the mid-1990s, that empire encompassed over 1,100 retail locations, including the namesake chain of over 340 supermarkets; a controlling stake in the Homebase chain of 76 do-it-yourself retail centers; ten Savacentre hypermarket stores; and Shaw's Supermarkets, a chain of 87 supermarkets in the northeast United States. Late in 1994, Sainsbury's increased its overseas presence with the purchase of a 50 percent stake in Washington, D.C.'s Giant Food Inc., a 159-store supermarket chain.

Sainsbury's is not only Britain's largest retailer of food and wine but also its most respected, according to nationwide surveys of industry analysts and company directors. The company has earned top or near-top ratings for product and service quality, successful development, profitable pricing, overall financial performance, advertising and marketing, and superior management, as well as recruitment, training, and retention of high-caliber employees. More than one-third of Sainsbury's employees own shares in the company.

Sainsbury's was off to a romantic but practical start in 1869 when two young employees of neighboring London shops met, married, and started a small dairy store in their three-story Drury Lane home. Mary Ann Staples, 19, had grown up in her father's dairy business. John James Sainsbury, 25, had worked for a hardware merchant and grocer. Their shop was a success from the start, as both John and Mary Ann had the business knowledge and capacity for hard work that it took to win the loyalty of the local trade. Their passion for order, cleanliness, and high-quality merchandise made the shop an inviting place, in contrast to the prevalent clutter of many tiny family-owned shops and the insanitary conditions of the street vendors' stalls and carts.

Seven years later the Sainsburys opened a second shop in a newly developed section of town and moved into the upper portion of the building. Within a few years, they had opened several similar branches, planning to have a shop for each of their sons to manage when he grew up. By the time their six sons were adults, the branches far outnumbered them. Yet caution has always been characteristic of Sainsbury expansion; they regularly passed up opportunities to buy groups or chains of stores, preferring to develop each new store independently.

The passion for high quality led them to a turning point in 1882, when they opened a branch in Croydon. They used advanced design and materials that had an elegance not attempted in the other shops and made the store easy to keep clean. The walls, floor, and counter fronts were tiled, the countertops were marble slabs. Customers were seated on bentwood chairs. The store's cleanliness--still a rarity in food shops of that time--and elaborate decor helped attract more prosperous customers; it was an instant success. Several similar shops were added during that decade, while Sainsbury's also developed a less elaborate design for suburban branches opened during those years. In these, business could be done through open windows, as in the common market areas, but the design also attracted customers to come into the store to see a greater variety of food.

In 1891, Sainsbury's moved its headquarters to Blackfriars, where it remained throughout the 20th century. The location provided easy access to wholesale markets and transportation. To obtain the best quality in food, Sainsbury's always kept in close touch with suppliers, and it controlled and distributed stock from a central depot until the 1960s.

By the turn of the century sons John Benjamin, George, and Arthur were working in the family business; they and other company employees were trained with equal care and attention to detail. Alfred and Paul went through the same training when they joined the company in 1906 and 1921 respectively. Frank, the third son, took up poultry and pork farming in 1902 and became a major supplier.

During this time, in terms of numbers, rivals seemed to be outdistancing Sainsbury's. Lipton's, the largest, had 500 stores. It took Sainsbury's another 14 years to open its 115th branch. But Sainsbury's continued to place the highest priority on quality, taking the time to weigh each decision, whether it meant researching suppliers for a new product, assessing the reliability of a new supplier, or measuring the business potential of a new site.

The outbreak of World War I slowed expansion plans even further. Rationing and shortages of food, particularly fresh produce, led to the creation of grocery departments selling jams, spices, potted meat, and flour--all bearing Sainsbury's own label. Women began attending the training classes at the Blackfriars headquarters, to replace the male employees who had left for military service. Some worked in the packing plant for Sainsbury-label foods; others served as salespeople in the stores.

Eldest son John Benjamin took much of the initiative in the interwar years, adding new grocery lines while retaining his father's insistence on high quality. By 1922 there were 136 branches, many of them along the new suburban rail lines, and the firm was incorporated. Mary Ann died in 1927 and her husband in 1928, leaving John Benjamin in charge. By this time, so much public attention accompanied branch openings that when Sainsbury's opened a branch in Cambridge, it published an apology in the local newspaper for the impact of a huge opening day crowd. Altogether, 57 new branches were opened between 1919 and 1929, and the gilded glass Sainsbury sign had become a universal symbol of a spacious, orderly interior displaying foods of the finest quality.

There was an apparent break with tradition in 1936 when Sainsbury's bought the Thoroughgood stores, a chain of nine shops in Britain's Midlands. But the purchase was made with the same care and emphasis on quality that had distinguished all other Sainsbury branches. Stamford House, which had been built in 1912 as an extension of the headquarters at Blackfriars, was extended to provide more space for the centralized supply procurement and distribution that maintained quality control for all branches, which by this time numbered 244. Specially designed lightweight vans had replaced horse-drawn vehicles, further speeding deliveries.

World War II not only slowed Sainsbury's growth, through shortages of food and labor, but also brought the stores into the line of fire. Some branches were totally destroyed; others were extensively damaged. Vehicles carrying mobile shops carried on trade as far as possible in the areas affected by the Blitz. But the evacuation of bomb-damaged areas made it impossible to carry on the centralized procurement and distribution operation that had provided efficiency, economy, and standardization of products and services. Along with other wartime restrictions, this caused sales to dwindle to half the prewar level.

John Benjamin's sons Alan and Robert, who had shared the general manager's post since their father's retirement in 1938, became aware of the crucial role of communications during the trying days of this wartime decentralization. The JS Journal, begun in 1946 (and its sister publication, the Employee Report, begun in the late 1970s) exemplified the thorough job of reporting that kept staff members abreast of company developments and business conditions. Both publications have won national awards for excellence.

Long before the last of the wartime restrictions were lifted in 1954, the brothers had begun an aggressive recovery program. Basic operations were recentralized to regain the economies of scale that kept prices down while retaining a substantial profit margin. Alan studied America's burgeoning supermarkets and opened the first self-service Sainsbury's in June, 1950 in Croydon, where his grandfather had opened his "turning point" store nearly 70 years earlier.

Expansion in the 1950s often meant converting existing stores to supermarkets in addition to adding new outlets. In 1955, the 7,500-square-foot Sainsbury's at Lewisham was considered the largest supermarket in Europe. By 1969, Sainsbury supermarkets had an average of 10,000 square feet of space. Supermarkets and hypermarkets in the 1980s would triple that amount.

John Benjamin and Arthur were the only two of the founders' sons whose own sons joined the family business. Arthur's son James, who had joined the company in 1926, was named Commander of the Order of the British Empire for his accomplishments. He created new factory facilities at Sainsbury's headquarters in 1936 and also set up the Haverhill line of meat products.

John Benjamin's sons Alan and Robert, and Alan's son John, were also honored for their work. Alan was made Baron Sainsbury of Drury Lane in 1962, and his son John was made Baron Sainsbury of Preston Candover in 1989. Robert was knighted in 1967. Alan and Robert shared the presidency of Sainsbury's, John was chairman, and Robert's son David was deputy chairman through the 1980s.

With typical caution, Sainsbury's did not actually use the word supermarket in its own communications until the late 1960s, even though it owned almost 100. Nonetheless, the company was at the forefront of new technology. In 1961, for example, Sainsbury's became Britain's first food retailer to computerize its distribution system. In the late 1980s, electronic cash registers at the checkout counter were replaced by scanners. Multibuy, a special feature of the scanning system, automatically applied a discount to multiple purchases of certain designated items. Spaceman, a microcomputer planning system, used on-screen graphics to plot the allocation of merchandise to specific shelf space in the stores. Electric funds transferred at the point of sale (EFTPOS), allowed customers to use debit cards to make purchases.

Sainsbury's centenary, 1969, sparked a series of rapid changes. Alan's son, John, became chairman of a new management tier, which reported directly to the board of directors. Departmental directors were given greater responsibility for operating functions to strengthen the centralized control that had always been company policy. With ordering, warehousing, and distribution computerized, strict controls on the speeded-up activity were vital. Sainsbury's became a public company in 1973, two years after making a name change: the period after the initial J was dropped.

Personnel policies at Sainsbury's adhered closely to the principles established at its founding: thorough training, open communication, and continuing training on the job. The company recruited actively at schools and universities, preferring to "grow its own talent," but holding employees to high standards of performance. Along with other leading companies and the City University Business School, Sainsbury's conducted a practical management course, the Management MBA. Sainsbury's employees participated in profit sharing and share option schemes.

The company's community involvement was also active, taking many forms. John Sainsbury addressed the London Conference on saving the ozone layer early in 1989. The only retailer invited to take part in the conference and the associated exhibition, he presented details of the technological changes made in Sainsbury's aerosol products and plant operations to eliminate chlorofluorocarbons from their operations. Incubation of small start-up businesses, arts sponsorships, and grand-scale charity drives were other ongoing projects.

Forces within the grocery industry compelled Sainsbury's to begin a program of diversification within the retail category. Increased competition from discounters threatened to squeeze profit margins. Creeping market saturation and flat population growth combined to intensify competition as well. Sainsbury's began to make significant additions to its nonfood merchandise for the first time. The company's first petrol station, a convenience for shoppers, was opened in 1974 at a Cambridge store. To gain the economies of direct supplier-to-store deliveries, Sainsbury's formed a joint venture with British Home Stores in 1975, launching a chain of hypermarkets--huge stores combining grocery items and hard goods--called Savacentre. Sainsbury's retained control of all food-related operations, leaving nonfood lines to its partner until 1988, when Savacentre became a wholly owned subsidiary of Sainsbury's.

Homebase, a chain of upscale do-it-yourself stores, was in the planning stage by 1979. Sainsbury's owned 75 percent of this joint venture, and Grand Bazaar Innovations Bon Marché, Belgium's largest retailer, owned the remaining 25 percent. The partners opened their first Homebase home and garden center in 1981, and had expanded the chain to 76 locations by the mid-1990s.

Sainsbury's looked to overseas markets for growth opportunities as well. In 1983, the company began to amass shares in Shaw's Supermarkets, a New England supermarket chain. Founded in 1860, Shaw's heritage of carrying high-quality food at the lowest prices meshed well with the ideals of the British firm. And like Sainsbury's, Shaw's has also been at the forefront of computer technology. By 1987, Sainsbury's had completed the purchase of 100 percent of the 60 stores in Massachusetts, Maine, and New Hampshire, and had plans to open additional stores in that area. The company boosted its holdings in the United States with the 1994 acquisition of 50 percent of Giant Food Inc., a Washington, D.C.-area chain. Sainsbury's was expected to purchase the remaining shares of the 159-store chain by the end of the decade. Closer to home, Sainsbury's opened a Savacentre hypermarket in Scotland in 1984.

Sainsbury's also developed a powerful private-label program. By the mid-1990s, its own-label products generated 66 percent of total sales. Three of the company's proprietary products in particular made headlines in the early 1990s. Novon, a laundry detergent introduced in 1992, marked Sainsbury's move into head-to-head competition with national brands. Within just six weeks of Novon's launch, the company's share of the detergents market doubled to 20 percent. In 1994, Sainsbury's changed the formulation and packaging of its own cola beverage, reintroducing it as "Classic Cola." The budget-priced cola featured red cans with italicized letters and a stripe; ads promoted the drink's "Original American Taste." Within just a few weeks, Classic Cola won 13 percent of Britain's total cola market, while sales of both Coca-Cola and Pepsi at Sainsbury stores plummeted. Not surprisingly, an incensed Coca-Cola demanded that Sainsbury's modify its packaging, claiming that the brands' similarity prevented customers from discerning between them. The supermarket chain acquiesced, but significantly decreased the rival brand's share of shelf space in stores.

Another highly successful, but less confrontational, private-label product also broke new ground for the category. In 1993, the company launched its own periodical, Sainsbury's: The Magazine. Like the publications it competed with, Sainsbury's: The Magazine featured illustrated pieces on fashion, health, and cooking, as well as national brand advertising. Sold only in Sainsbury's supermarkets, the magazine became "the most successful new magazine venture in Britain in many years," according to a November 1994 Forbes article.

While other family-run firms have encountered problems with succession or overly conservative management, Sainsbury's innovative marketing, aggressive international expansion, and cautious borrowing seemed to portend a promising future for the company. Under the leadership of Chairman, CEO, and great grandson of the founders David Sainsbury in the early 1990s, sales had tripled from £3 billion in 1985 to £10.6 billion in 1994. Net income more than quintupled from £108 million in 1985 to £503 million in 1993, then plunged to £142 million the following year.

Principal Subsidiaries: Homebase Ltd. (75%); J Sainsbury Developments Ltd.; J Sainsbury (Channel Islands) Ltd.; Savacentre Ltd.; Shaw's Supermarkets, Inc. (U.S.); Giant Foods Inc. (50%) (U.S.).





Further Reading:


The First 120 Years of Sainsbury's, 1869-1989, London: Sainsbury's, 1989.
JS 100: The Story of Sainsbury's, London: Sainsbury's, 1969.
Nicholas, Ruth, "Sainsbury Cola Gives in to Coke," Marketing, May 12, 1994. p. 1.
Rogers, David, "Britain's Supermarkets: An Industry in Turmoil," Supermarket Business, August 1989, p. 37.
Stogel, Chuck, "The Once and Future King?," Brandweek, May 8, 1995, p. 34.
Williams, B. R., The Best Butter in the World: A History of Sainsbury's, London: Ebury, 1994.
Wilsher, Peer. "Housekeeping?," Management Today, December 1993, p. 38.
Zwiebach, Elliot, "Sainsbury to Buy 50 percent of Giant's Voting Stock," Supermarket News, October 10, 1994, p. 1.

Source: International Directory of Company Histories, Vol. 13. St. James Press, 1996.




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