Sainsbury’s Plays Down Impact Of On-Demand Delivery Services

Amid the significant hype and investment around rapid, on-demand grocery delivery firms, Sainsbury’s has suggested that the actual demand for such services is relatively limited.

Alongside its standard online grocery operation, the supermarket sells its products via Deliveroo, Uber Eats and its own Chop Chop service.

However, Sainsbury’s Chief Executive Simon Roberts revealed yesterday that on-demand doesn’t generate major sales volumes.

He said: “It’s built through the course of the year but in total terms, the size of our on-demand business is a bit more than the equivalent of two of our supermarkets.”

However, Sainsbury’s is now facing competition from a raft of start-ups, including Jiffy, Getir, Gorillas, GoPuff, and Zapp that vying to win on-demand spend by offering deliveries within minutes of ordering.

This has prompted traditional supermarket groups to rethink their business models and team up with the rapid delivery providers.

Roberts said Sainsbury’s was waiting to see how growth progresses in on-demand as consumer shopping behaviour starts to normalise as Covid concerns ease.

However, he insisted he was pleased with how Sainsbury’s own Chop Chop delivery service was performing. “It’s a good way of using our convenience stores to fulfil those missions,” he said.

NamNews Implications:

• Nonetheless, Sainsbury’s have feet under the on-demand delivery table…
• With their own Chop Chop service to gain hands-on sharp-end experience.
• Whilst outsourcing cost via Deliveroo and Uber Eats as pace-setters.
• This combination of delivery options will provide Sainsbury’s with real insights that can optimise potential…
• One to watch and even get on board.

#QuickDelivery #HomeDelivery

Tesco Flags Continuation Of Discounter Price War; Sector Shares Crash On Inflation Hit Warning

Alongside its impressive annual results statement yesterday, the CEO of Tesco vowed to support shoppers “in their hour of greatest need” by continuing its price battle with Aldi, Lidl, and other discounters.

"(Consumers) are already planning changes to the way they shop, and we will make sure that we will be there to support them."

The group noted that the final outcome depends on customer shopping habits, cost inflation levels in the months ahead, and the extent to which rising costs are absorbed or passed on to consumers.

Murphy highlighted that Tesco was managing to keep price inflation in its stores a “bit under the number for the overall market” as it battles the discounters that are gaining share by attracting cash-strapped shoppers.

Tesco have really strong levers through the Aldi price match, low everyday prices and Clubcard prices
He also noted that it was offering competitive prices on thousands of household and beauty items to stop customers from going to fast-growing chains such as Home Bargains and B&M.

“We plan to make sure we stay close to the situation and offer no reason to go anywhere else from a price competition point of view,” Murphy said. “That’s our commitment and that’s unwavering regardless of what happens in the market.”

He declined to say whether the business would be cutting prices further or be forced to increase them.

“We stay close to our suppliers and work with them to manage their input inflation but we are very rigorous about making sure that we don’t accept any cost that would be unnecessary."

The bleak outlook sent shares in all the listed grocery retailers tumbling and comes just a week after Morrisons cautioned that its sales and profits would be affected by geopolitical and inflationary pressures.

Sainsbury’s shares lost 2.5%, whilst Marks & Spencer shares tumbled 2.1% and Ocado’s slipped 2.6%.

Shore Capital retail analyst Clive Black downgraded his recommendation for Tesco from ‘buy’ to ‘hold’, and added that if the supermarket catches a cold he would expect others to catch ‘influenza’.

AJ Bell financial analyst Danni Hewson added: “There is a real risk that cash-strapped families will cut back on their shopping and if this trend does play out as expected, it won’t just be Tesco feeling the pain.”

NamNews Implications:

• Aldi price match, low everyday prices and Clubcard prices will help fight the other mults…
• Meanwhile, Tesco determination to offer no reason to go anywhere else from a price competition point of view…
• …spells continuing price war in 2022…
• …no matter what happens in the market.
• Listed retailers fell approximately 2% yesterday, reflecting inflation and other market factors.
• Meanwhile, little/no mention of discounters’ ability to fund UK price cuts via global businesses to grow share…

#PriceWars #Inflation #DiscounterShare

Owner Of Morrisons Offers To Sell Petrol Stations To Ease Competition Concerns

Clayton, Dubilier & Rice (CD&R) has offered to sell several of its petrol stations to gain final clearance for its acquisition of Morrisons. The Competition and Markets Authority (CMA) launched a Phase 1 investigation into the £7bn private equity deal back in January.

Whilst the takeover has already been completed, the regulator had ordered all parties to remain separate and hold off on integration plans until its probe had taken place.

Concerns centred around CD&R also owning the Motor Fuel Group (MFG), the largest independent operator of petrol stations in the UK with 921 sites under brands such as Esso, BP, Shell, Texaco, Jet and Murco. Meanwhile, Morrisons operates 339 petrol stations, the vast majority of which are located at its supermarkets across the country.

The CMA announced last month that it found the deal raises competition concerns in relation to the supply of petrol and diesel in 121 local areas across England, Scotland and Wales. These are all areas in which MFG and Morrisons both have petrol forecourts and would face only limited competition after the merger, meaning that the deal could lead to an increase in prices.

Facing the prospect of a full Phase 2 investigation, it was announced yesterday that CD&R has now offered to divest a number of the petrol stations to gain approval for the takeover.

While the competition watchdog did not disclose how many sites the private equity firm was offering to sell, it said: “There are reasonable grounds for believing that the undertakings offered by CD&R, or a modified version of them, might be accepted by the CMA”.

Similar concerns were raised when the Issa brothers bought Asda due to their ownership of the EG forecourt empire. The CMA eventually forced them to sell 27 petrol stations to get the Asda deal across the line.

Recent reports have suggested that CD&R wants to sell off the entire MFG business via a £5bn auction, with another private equity firm the likely buyer.

NamNews Implications:

• A no-brainer decision (given the stakes involved…)
• Therefore proactive suppliers (and retail rivals) will have already factored this outcome into their trade strategies…
• …hopefully.
• Meanwhile, a what-if re CD&R selling off the entire MFG business via a £5bn auction is worth conducting.
• NamNews subscribers See 'Moving from Managing a Traditionally Owned to a PE Owned Mult'

#Petrol #Competition #PrivateEquityOwnership