During the global downturn, value for money has proved the most important weapon for supermarkets striving to inspire consumer confidence. The UK’s supermarket sector has a wide range of premium food and budget food chains, all of which have had varying levels of success and failure throughout the course of 2008 as the credit crunch bit. Below are three brands which cater towards different consumer groups, illustrating which strategies have proven beneficial.

Marks & Spencer

Despite recently celebrating its 125th year in business, it seems UK retailer Marks & Spencer (M&S) has little else to be joyous about after announcing that UK profits were down by 33% in the year leading up to 28 March 2009. In order to regenerate growth and reinvigorate the brand, group finance and operations director Ian Dyson is leading a change programme. Although this strategy is likely to prove Dyson’s credentials as a successor to Sir Stuart Rose, he faces considerable challenges.

M&S’s results for the year to 28 March 2009 were in line with expectations. Group sales grew by a marginal 0.4%, to £9.062m, buoyed by international growth of 25.9%. However, UK sales were down 1.7%, to £8.184m, despite a 5.6% increase in space. Group operating profits dropped by 29.4% to £768.9m (in the UK by 32.9% to £652.8m). In addition, markdowns caused gross margin to decline by 1.7%, and UK operating costs to increase by 4.3%.

The M&S food brand falls into the premium category and therefore some of this decline can be laid at the door of the downturn. Within the food division, the focus has been to rebuild the brand’s value credentials, resulting in substantial investment in margin and a stronger promotional stance.

However, overall food sales are down as consumers migrate to cheaper rivals such as Sainsbury’s. On a positive note, M&S’s online channel, M&S Direct, reported strong growth, with sales up 34% despite tough comparatives from 2007.

“Sainsbury’s innovative campaigns and range architecture are catering well for the frugal consumer.”

Looking at how it can generate sustainable growth, M&S reviewed its strategies to prepare more adequately for the future. Although there is little difference in overall business objectives, the emphasis is on accelerating the pace of change through focusing on achieving operational excellence, speeding up the transition to becoming a multichannel retailer, driving the international business forward and reinvigorating the brand through better communication with customers. These objectives were highlighted in an M&S change programme called ‘2020 – Doing the Right Thing’.


Business is looking positive for Sainsbury’s. For the 52 weeks leading up to 21 March 2009, the supermarket chain’s total sales have increased to £20.4bn, up 5.7% compared to 2008, and 4.5% on a like-for-like basis. Sainsbury’s innovative campaigns and range architecture are catering well for the frugal consumer, while long-term plans are laying solid foundations for future growth.

The hard work done by Sainsbury’s to enhance its universal appeal and price perception is clearly paying off. In addition to the £450m invested in price positioning, much of Sainsbury’s success must be credited to the enhancements made to its range architecture which, capitalising on its strong quality proposition and the high levels of trust in its own label products, continues to strengthen its universal customer appeal and cater well for all consumer budgets.

While the company’s Basics range has been expanded and now accounts for 3% of total sales, Sainsbury’s recent success is not purely down to offering value for money during a period of low trading. The retailer has launched innovative campaigns such as ‘Shop and Save’, ‘Switch and Save’ and ‘Cook and Save’, which have been extremely successful in meeting the demands of the frugal consumer who is looking to save money without sacrificing quality or their core values. In addition, Sainsbury’s recognises that ethics remain important and is reinforcing welfare, fair trade and environmental issues.

The competitive environment is set to intensify but Sainsbury’s growth strategy is still to look at both the short and long term. In the short term, its broad appeal – its ability to cater for all consumer budgets – and renewed value credentials make it well positioned to continue achieving strong growth in what will be a challenging year. Further ahead, concentrating on enhancing channels and physical expansion, while remaining focused on consumer psyche, will ensure that long-term growth can be built on the solid foundations laid down by the ‘Making Sainsbury’s Great Again’ strategy.


ASDA has also delivered impressive results in the recession. The UK grocer achieved a 12th successive quarter of market out-performance in the first quarter of 2009, with like-for-like sales increasing by 8.4%. While ASDA’s strong price proposition is attractive to the current frugal consumer, therefore boosting growth, the retailer must continue to improve its quality perception to ensure that this performance is maintained in the long term.

ASDA beat both its sales and profit targets for the quarter and grew profits ahead of sales through clearly appealing to the more frugal and price conscious consumer. The brand is continuing to gain customers from its rivals and, more crucially, retaining existing ones. Indeed, the growth achieved is comfortably ahead of the most recent performance reported by both Sainsbury’s and Tesco.

Three key elements are behind ASDA’s recent success: a strong price proposition, an increased focus on quality and a swift response to the demands of its customers. On top of this, ASDA has also continued to develop its online operation, which is currently growing by 50% year-on-year, and is planning to re-launch its food website in June, with an enhanced capacity and improved navigation. Despite its online capabilities reaching over 90% of UK households, the grocer intends to increase its geographical penetration – meaning its online grocery sales are expected to grow by 11.7% in 2009 and be worth 4.4% of total grocery sales

However, ASDA still needs to improve its quality perception, and although it is working hard to achieve this, much remains to be done. In the short term, with price remaining the main battleground, ASDA is clearly emerging the winner. However, this is only one battle, and to win the war ASDA must remain focused on improving quality, especially if it is to retain its newly found customers once their spending ability allows them to return to their primary choice of supermarket.

A version of this article first appeared on our sister publication Food Business Review.