Sainsbury’s invests in marketing capability and agency relationships as it eyes growth

Sainsbury’s reported higher than expected profit growth and increased optimism for its Nectar loyalty proposition, which it says is strengthening its retail media offer.

sainsbury'sSainsbury’s claims the strong performance and reach of Nectar over the last 12 months means it can “punch well above” its weight with its retail media proposition.

The supermarket’s chief executive Simon Roberts said this has been helped by the fact it has gained 5 million new digital customers since launching Nectar Prices last April, taking its total to 70 million.

Roberts said the UK’s second-largest grocer plans to “keep innovating” in the retail media space and is focused on generating a “high return on advertising spend” for brand clients.

As part of this, Sainsbury’s is investing in its “people capabilities” across its media and agency relationships, he said on a call with investors this morning (25 April).

In February, Sainsbury’s director of brands, strategy and creative planning Radha Davies told Marketing Week she hopes the expansion of the brand’s in-house agency will help the business drive effectiveness as part of its £1bn cost saving mission.

Sainsbury’s expands in-house agency with goal of driving more efficient workIn the next three years, Sainsbury’s expects to deliver “at least” £100m in incremental profit contribution from Nectar360, its retail media proposition.

The business is also investing in its digital capabilities to drive online growth for Argos, which Roberts described as a “key focus”. This includes enhancing its SEO activity and introducing new CRM capabilities to grow online traffic.

Market share growth

Overall, Sainsbury’s recorded an underlying profit of £701m in the 52 weeks to 2 March, up 1.6% on the last financial year’s £690m and ahead of the company’s forecast of between £670m and £700m.

The grocer claims it is taking market share from budget retailers Lidl and Aldi, the latter of which it doubled the number of products it price matches against. Roberts also claimed customers are beginning to “trade up” to Sainsbury’s more premium products.

Sainsbury’s has a market share of 15.3%, which grew by 0.4 percentage points in the 12 weeks to 14 April, according to the latest Kantar data. It was also the fastest growing of the traditional ‘big four’ over the period. “We’re also gaining more volume from premium competitors than all other full-choice grocers by continuing to be bold and ambitious on innovation,” Roberts said.

Total sales for the 12 months to the end of March were £36.3bn, a 3.4% increase year-on-year.

These gains come following a change in strategy for the supermarket. In February, it announced it would be focusing on improving its food offer. In the last year, it grew its volume sales in each quarter. Overall, Sainsbury’s invested £220m in the last year – and £780m in the last three – to keep its prices “low” and pass on less inflation costs to customers.