Justin King finally bowed out of Sainsbury's after leading the supermarket group through a turbulent 10 years that has seen a transformation in the landscape of the grocery sector.
He handed over to Mike Coupe, his commercial director and right-hand man, at the group's annual meeting in London. King left on a relative high, having revived Sainsbury's to notch up nine years of uninterrupted sales growth until the last few months of his reign.
Over the past decade, the supermarket industry has been buffeted by recession, intense competition, rapid developments in technology and changes to consumer spending habits. King's tenure was during a period of radical change that, according to experts, will continue until the end of the decade at least. In 2004, King had to deal with an internal crisis. In 2014, his successor must navigate an entire sector in flux.
When King took over in March 2004, the grocery sector looked stable. Although Morrisons was stirring things up with its recently completed acquisition of Safeway, the Tesco juggernaut swept all before it. Sainsbury's self-inflicted woes, including billions of pounds wasted on a botched supply chain upgrade and a disastrous ad campaign featuring John Cleese shouting about low prices, were made worse by competition from Asda and Tesco. But there was little sign of a challenge to the new big four.
Edward Garner, director at Kantar Worldpanel, says: "The market was more conventional. The discounters weren't registering the way they are now, Sainsbury's was in a mess and Tesco was rampant."
The UK was in the middle of a consumer boom and moves into general merchandise such as white goods and TVs promised yet another source of revenues for the big chains. The supermarkets built more out-of-town outlets, leading to accusations they were killing high streets and carpeting green space with superstores. Tesco bore the brunt of protests as campaigners drew attention to the quality and provenance of supermarket food. Though the arrival of the German value chains Aldi and Lidl helped to see off the downmarket Kwik Save in 2007, they seemed to pose no threat to the mainstream. Ocado, the online grocer, had launched in 2002 in partnership with Waitrose but internet sales were an exotic niche in a market dominated by the weekly drive to a giant big four store.
King leaves behind a market undergoing what some say is the biggest transformation since Sainsbury's opened the first UK self-service grocery store in 1950. The business models of the big four are under attack from new competition, fast-changing technology and a seemingly irreversible shift in shopping habits. The five years of recession followed by stagnation from 2008 cut consumer confidence and spending while high fuel costs made driving to a giant superstore expensive. People short of cash started shopping around and finding the value they wanted at Aldi and Lidl, sending their sales soaring. Local convenience stores took off as people tried to minimise food waste, while Waitrose thrived as those with cash to spend moved upmarket.
Despite a pick-up in the wider economy, the grocery sector is barely growing, putting pressure on all the established supermarket groups. Clive Black, head of research at Shore Capital Stockbrokers, says: "The British grocery market is facing big challenges. Demand is very weak and the price environment is quite intense."
Tesco, seemingly unstoppable a decade ago, is a wounded giant bruised by profit warnings and falling sales while Morrisons' relative lack of convenience and online shopping has left it most exposed to the discounters.
King navigated this turbulence by striking a successful balance between price and quality and getting into online and convenience shopping early. Sainsbury's had 44 convenience outlets in 2004 and now has 615.
He has dismissed talk of a price war in the sector as a skirmish but in the last few weeks of his reign, Sainsbury's took a half share in the UK relaunch of Denmark's Netto to challenge the Germans without taking its brand downmarket.
Retail experts do not expect any let-up in the sector's transformation over the next decade. Sales at the discounters and online will more than double in that time, according to IGD, the retail research firm. Even King, who likes to play down the significance of the rise of the discounters, has said the value-conscious shopper is here to stay and said Sainsbury's needs to highlight its low prices.
As customers buy more online and a generation weaned on tablets and social media starts purchasing groceries, Britain's thousands of superstores could look more like what retail analyst Nick Bubb calls "the white elephants of retailing". Click and collect, now in its infancy, will become mainstream as retailers dance to the tune of shoppers wanting maximum convenience. Garner at Kantar expects the French "Drive" concept to take off – letting shoppers order on their phone and pick up goods without leaving their car at a drive-through warehouse. The rise of the discounter grocers will also include Poundland, B&M and other cheap chains expanding into food, Nick Gladding at IGD says.
Bubb says discount fever could even bring an end to the big four. "It's possible that Morrisons might be broken up," he says. "They are very, very late to the game in online and convenience and their northern heartland is being invaded, so I wouldn't rule that out."
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